Intel CEO throws down gauntlet to AMD

The chipmaker has a couple of tricks up its sleeve that should help it regain ground lost to its rival, Paul Otellini says.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
SAN FRANCISCO--Intel is not taking the recent gains made by chip rival Advanced Micro Devices lightly, according to CEO Paul Otellini.

Otellini, in an interview with reporters at the Intel Developer Forum here on Tuesday, said that the company's manufacturing capabilities and new chips coming later in the year will put it in a position to regain some of the market share recently ceded to AMD.

"The No. 1 competitive asset is the sheer scale of the 65-nanometer, 300-millimeter manufacturing capacity," he said. By the end of the year, Intel plans to have four of these factories running, and its 90-nanometer factories, currently used to produce many chips, will start making chipsets.

Paul Otellini
CEO, Intel

AMD is expected to begin 65-nanometer manufacturing in the second half of 2006. The shift to 65-nanometers should enable both companies to produce faster chips at less cost.

Intel additionally will start to come out with families of chips based on a new architecture that should let it open up a performance gap. "The products, in some cases, take the lead we have in mobility and expand it," he said. In other markets, "it gets us from being head to head to having a leadership product," he added.

Conroe, the desktop chip based on the new architecture, is set to come out in the third quarter. Merom (for notebooks) and Woodcrest (for servers) are timed for release in the second half.

While Otellini refrained from making predictions about market share, Intel historically tends to make gains when it launches a chip architecture and ramps up a new manufacturing process. That happened in the transition from the 486 to the Pentium, and in the transition from the Pentium III to the Pentium 4.

Henri Richard, the executive vice president of worldwide sales and marketing at AMD, said in an interview on Monday evening that the chipmaker had made some gains because Intel had become a bit complacent and was concerned about protecting its gross margins.

"Let him believe that...to his peril," Otellini replied.

Growing new markets
To boost PC demand, Intel plans to work with computer manufacturers to push the envelope on design and new uses for computers. Early examples of this are the prototype ultramobile PC devices being shown at IDF. (Another Intel executive said that some of the first versions of the pocket-size computers will hit store shelves in the next few weeks.)

Similarly, Intel will work with computer makers to popularize its Viiv, a home entertainment PC that people will use in conjunction with TVs and stereos. The Viiv team has a goal of getting more Viiv PCs into the market this year, the first year of shipments, than Centrino notebooks shipped the first year that platform came out, Otellini said. Viiv has already been launched in eight countries.

IDF Spring 2006

"As we create these new markets, everyone has the opportunity to play in them," he said.

Otellini touched on a range of other topics:

• The Intel CEO complimented Apple Computer, which started putting Intel chips into its computers this year, on bringing a greater emphasis on design into the market. "Apple has shown that people will pay slightly more for good design," he said.

He added that "Intel did not spend money" on advertisements in which Apple says that non-Apple PCs with Intel processors are boring.

• PCs designed for emerging markets will begin to crop up soon, Otellini predicted. Intel will make announcements in Brazil and Mexico in about a month or so about PCs for those markets, he said.

• Intel won't likely be naming a chief operating officer anytime soon. Only 24 percent of companies have a dedicated COO, he noted: "It is not the norm by any standard." Typically, the COO at Intel becomes the heir apparent to the CEO.

Otellini noted that although Intel's bylaws currently state that he must step down as CEO in 2011, the board has amended the bylaws in the past.

• The increase in 65-nanometer manufacturing will help Intel overcome the chipset shortage that crimped sales in 2005. With processors moving to 65-nanometer factories, chipsets can now start being produced out of 90-nanometer factories. "We couldn't build them (chipsets) fast enough," he said. "Our platform strategy requires that chipsets are available for all of the processors."

• Patent law must be reformed, he said. Intel is currently championing a change in the law that would prevent some patent litigants from obtaining an injunction. If a plaintiff obtained a patent against Intel, it could completely freeze up the PC industry, Otellini said.

Otellini also called for better support for the U.S. Patent and Trademark Office. "The whole notion of giving the patent office more assets to vet patents or do a better search for prior art is something we, as a nation, need," he said.

Speaking of patents, Otellini added that Research In Motion is buying lots of Intel's chips. "We are really flogging wafer starts to meet their needs," he said.