Intel thumbs its nose at economy's downturn

CEO Craig Barrett says the company will plow $12 billion into capital expansion and research and development this year.

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
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Barrett: Intel prepared for economic upturn
Craig Barrett, CEO, Intel
SAN JOSE, Calif.--Although high-tech demand is slow, Intel will continue to invest heavily in development and new products, CEO Craig Barrett vowed Tuesday.

"You never save your way out of a recession," Barrett told the audience at the Intel Developer Forum here. "The slowdowns are going to end, and you need to prepare for the upswing...the build-out of the Internet, the build-out of this digital world is still in its infancy."

To that end, the company will plow about $12 billion into capital expansion and research and development in 2001, Barrett said. The list includes preparing the "McKinley" processor for servers, retrofitting factories for churning out chips made with copper wires, and developing a fairly extensive line of chips for notebooks and handheld devices.

If there was a theme to Barrett's speech, it was back to the future.

A year ago, the company touted how it planned to move into a wider variety of markets such as the server appliance and Web-hosting markets. Many of these efforts have floundered. And like other tech companies, Intel has announced cutbacks.

So now, the message is silicon, silicon, silicon.

Barrett and Paul Otellini, general manager of the Intel Architecture Group, also outlined a number of products and initiatives coming in 2001 and early 2002. These include:

 The processor that is code-named "McKinley." The successor to the long-delayed Itanium chip, McKinley will begin pilot production at the end of the year. The chip will have a much larger integrated cache for better performance than the Itanium and three times the bandwidth, or data throughput power. The chip will provide eight times the performance of an equivalent UltraSparc chip from Sun Microsystems on some benchmarks, Otellini said.

Barrett demonstrated the chip, which came out in samples only three weeks ago.

"That's great progress for them to make after three weeks of silicon," said Linley Gwennap, principal analyst at the Linley Group.

 Strong emphasis on the "extended PC." Intel and Microsoft will aggressively market the idea of the PC as the nerve center of the home entertainment network. Pentium 4 computers and Windows XP, Microsoft's upcoming operating system, are ideally suited for manipulating or delivering video, audio, photographs and other media, the companies assert.

 Mobile Pentium III chips. A 700MHz Pentium III came out Tuesday morning. Later in the quarter, the 1GHz mobile Pentium III will be released. In the second half, Intel will begin to make notebook chips on the 0.13-micron manufacturing process. These chips will use copper wires, rather than aluminum ones. Consumers will also see better integration of Bluetooth and 802.11b wireless technologies in notebooks.

 Mobile Pentium 4 chips. Otellini said the company's latest desktop chip will hit portables in 2002, with sources putting the release date in the second quarter. In 2003, the company will come out with a brand-new mobile chip architecture designed for power-efficiency and wireless connectivity.

Apple Computer has a similar effort afoot that, Barrett pointed out, followed Intel's kickoff at the Consumer Electronics Show in January. "Perhaps this is one of the few times that (Apple CEO) Steve Jobs followed us in the marketplace."

 Networking and communications will expand. "We're going to produce at least 35 new IXA (Intel Exchange Architecture) products this year," Barrett said. These chips go into telecommunications equipment and networking gear.

 Itanium server chips. The long-delayed server chip and the precursor to McKinley will come out in the second quarter.

"The sheer complexity of the task--the number of variables--was really more work than any of us in the company imagined," Otellini said, explaining why the chip was delayed so many times. "We had to debug it. We have to develop a new chipset. We were working with four (operating systems), one of which was a stable platform."

 New technologies for interconnecting servers. Intel is preparing a competitor to Lightning Data Transport from Advanced Micro Devices, Otellini said. It will be unveiled Thursday.

Intel's expansive product plans are based on a massive investment in infrastructure, Barrett said. The company is investing in machinery to make copper chips on the 0.13-micron process. In addition, Intel is investing to manufacture chips from 300-millimeter wafers, rather than 200-millimeter ones. Through the magic of geometry, the larger diameter increases the number of chips that can be produced per wafer by 225 percent. That will result in a 35 percent reduction in costs.

"I think the investment will pay for itself in lower costs," Barrett said. "It is new technology and products that let you walk out of a recession."

Barrett, though, added that the economic picture could change. "There is absolutely a slowdown in U.S. manufacturing. It hasn't spread to other markets yet," he said. If the malaise does move overseas, a wider recession could hit.

"There's a potentially bigger problem that hasn't hit yet," he said. However, the international markets haven't synchronized downward in a long time. "That hasn't happened in nearly 30 years."