SANTA CLARA, CALIF.--Intel CEO Paul Otellini sought to reassure major investors Wednesday that the world's largest chip maker is still poised for strong growth into new areas like mobile computers, and can maintain its current lead in PC technology.
Otellini reiterated much of Intel's pitch from the last six months that the world of handheld mobile computers and low-cost PCs can supplement the slowing-but-steady growth of the PC market. Intel is investing new products like its Atom processor and attempting to break into these new markets by reminding software developers and device makers that Intel's chips are used to run today's PC-based Internet, and are ideal for allowing tomorrow's mobile devices to access that Internet.
Intel CEO Paul Otellini laid out Intel's plans for growth in front of investors Wednesday.
(Credit: Tom Krazit/CNET News.com)Investors from major financial institutions might be forgiven for being a bit skeptical coming off Intel's news this week that its gross margins would sag this quarter on falling flash memory pricing. But Otellini promised "this is a business that will not be a drag on Intel," and that the company was finding ways to make sure the volatile flash memory market does not hurt its bottom line.
Instead, Intel's CEO wants investors to focus on the potential for Intel's large bet on mobile devices. The company has been on a evangelical push for the last six months touting the virtues of the x86 instruction set in the world of mobile devices. The idea is that anything that can run on a PC--take Adobe's Flash, for example--would be able to run on a handheld device with one of Intel's Atom processors.
To break into this market, Intel is reducing the time between when an idea gets approved to production starting with the new Atom generation of products, Otellini said. The goal is to get from idea to prototype in six months, and then from prototype to production in another six months. PC processor designs take much longer, several years, from idea to production.
Intel also thinks it will benefit as people start owing and using more than one sophisticated computer, whether that's a home desktop, a work laptop, a smartphone, or something else we haven't even thought of yet.
Sean Maloney, Intel's sales chief, took the idea further as he talked about Intel's Netbooks project to build low-cost notebooks based on the Diamondville derivative of the Silverthorne processor. Intel sees Netbooks as almost "starter PCs," borrowing that time-honored marketing tradition of getting young kids hooked on a basic inexpensive computer and then sticking with them as their tastes mature and their demands grow more intense.
Intel is at a very interesting time in its history. PC and server growth has slowed, although it continues along at a "low-double digit" growth pace, Otellini said. That's not the kind of growth that gets investors all excited, however, they like the kind of growth more in the 20 percent range.
Having seen these trends a while ago, Intel has been searching for its next big thing for several years. But while it does that, and tries to build a business around handheld mobile computers and low-cost PCs, it has to keep an eye on its main markets.
One major area sorely in need of improvement is Intel's graphics tehcnology, currently built on outdated manufacturing equipment as a way of wringing productivity out of older factories. That is going to change, said Otellini, as Intel starts moving more and more of its chipset production to newer factories using the latest manufacturing equipment.
This will have a few benefits, he said. It will allow Intel to build chipsets with more transistors dedicated to graphics, since it will no longer have to use older technology that can't build transistors as small as its latest and greatest stuff. It will also help Intel reduce expenses as it moves toward "fewer, larger factories," Otellini said.
And Intel remains hard at work on Larrabee, its "many-core" programmable chip that appears to be designed for a variety of tasks that could well include graphics acceleration. By 2010, Intel hopes to have shipped Larrabee and moved all of its graphics transistor production to its leading-edge manufacturing technology, so that the same equipment is used for both CPUs and graphics, Otellini said.
Intel is in pretty good competitive shape at this point, with AMD still working to get into the quad-core era. But Intel has had trouble breaking into new markets outside the PC or server in the past, which is why investors will be watching closely over the next two years to see what Intel's talking about at that point.
Conspicuously missing from the spotlight during Intel's presentation this year? Viiv digital-home PCs, UMPCs, and cell phone processors, which have played prominent roles in past Intel investor rallies. There may very well be a market for starter PCs and x86 smartphones, but if history is any guide, Intel will strike out on at least one of those efforts.
With the next two generations of Intel's chips set in place, the company is looking forward to a low-power future.
So said Intel CEO Paul Otellini in his keynote address kicking off the Intel Developer Forum at San Francisco's Moscone Center on Tuesday. Intel will launch the server and high-end desktop versions of its Penryn generation of chips on November 12, in line with previous reports to expect those chips before the Thanksgiving holiday. And Intel has also completed the design for Nehalem, a more radical overhaul of the company's chip blueprints.
The more interesting news was Otellini's goals for Intel over the rest of the decade. The company plans to ship a generation of processors on its 45-nanometer manufacturing technology by 2009 that come with graphics integrated right onto the processor, similar to what rival Advanced Micro Devices has planned for its Fusion chips. Intel will be investing in a joint venture with KDDI, a Japanese telecom company, with plans to build a WiMax network in Japan. And as expected, Intel talked up its low-power chips for MIDs (Mobile Internet Devices), with plans to reduce the power consumption of its handheld computer chips by a factor of 10 compared with the Silverthorne processor, expected next year.
This is all part of Intel's search for growth, which has meandered a bit this decade. Still, you've got to have a strategy for the future, especially as the PC market matures over the next five to 10 years. That appears to have three legs: first of all, don't squander the base market of PC and server processors.
To accomplish that, Otellini has implemented a more gradual series of manufacturing transitions that makes sure the company doesn't try to introduce a new architecture with a new manufacturing technology, and that it doesn't go too long in between revisions to its chips. The hope is that this prevents AMD from catching it napping and losing significant chunks of market share, which is probably the best description of the years from 2002 to 2006.
Intel CEO Paul Otellini addresses hardware developers and the media to kick off the 2007 Intel Developer Forum.
(Credit: Tom Krazit/CNET News.com)The second is graphics. AMD is forcing Intel's hand a bit in this area, with its purchase of ATI Technologies last year and the resulting plans for Fusion. Intel ships more graphics technology than anybody else on the planet, but that's only because it ships so many low-cost integrated graphics chipsets in desktops and notebooks, not because that graphics technology is extremely compelling. But the company wants to improve its performance in that area, hiring engineers and purchasing companies like Havok to improve its hardware and software expertise in graphics technology.
And in the long term, Intel will attack the graphics market by accelerating the pace at which it develops graphics technology by using its most advanced manufacturing processes. Historically, Intel's integrated graphics products used older manufacturing technology too antiquated for cutting-edge processors, but that's changing.
In 2009 Intel will ship a processor that has 45nm graphics technology built onto the chip, and in 2010 it will introduce a chip for which both the CPU and the graphics technology were designed for the 32nm manufacturing technology slated for production during that timeframe, Otellini said. And for the high end of the market, and possibly the discrete graphics market currently owned by Nvidia and ATI, Intel will produce a processor called Larrabee with many configurable cores and a shared cache memory. Otellini said Intel will demonstrate Larabee in 2008, but didn't share launch plans.
The third area of focus is mobility. Intel wants to be part of whatever design becomes the most popular mobile device. Having shed its ambitions for mobile phones, it now plans to compete directly against the smart phone industry with the MID, sort of a handheld notebook PC that hasn't really attracted much interest as of yet.
In 2008 Intel will introduce Silverthorne, and beyond that an x86 processor called Moorestown for low-power devices like MIDs. There's no evidence at all that people want MIDs right now, but Otellini thinks that if Intel continues to reduce the power consumption of its chips, the designs and software for MIDs will continue to improve.
Those devices will have to connect to the Internet somehow to compete against smart phones that use cellular networks for voice and data. And Intel thinks that network will be WiMax. The company is working with Sprint and Clearwire to get WiMax service going in the U.S., and it will hit Japan with WiMax as part of its joint venture with KDDI.
So that's what Otellini said. As always, it's interesting to note what he didn't say. He didn't mention Microsoft once during his presentation, at least that I noticed. He didn't mention Viiv or any of Intel's previous efforts to develop PCs for the living room. And Itanium seems to have finally crawled offstage, at least as far as the CEO is concerned. Keynote speeches later today from Pat Gelsinger and tomorrow from Dadi Perlmutter and Anand Chandrasekher might clear up some of those questions, but it's always interesting to see what the CEO's priorities are during one of his biggest speeches of the year.
Stay tuned for more coverage of IDF, including a talk later today with Intel co-founder Gordon Moore, and much more on the future of mobile devices tomorrow.
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