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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.

The ongoing tussle between Intel and AMD has dominated the news in recent weeks, but there's another potential battleground shaping up for Intel that could have a huge impact on personal computing.

A major topic I want to cover over the next several months is the looming showdown as the smart phone industry tries to develop more powerful computers, and the PC industry tries to build smaller and smaller computers. This week has provided a decent glimpse of Intel's vision of where it thinks the industry needs to go with its Silverthorne processor, designed for a new concept of computer called the Mobile Internet Device.

This is a concept Mobile Internet Device that Intel thinks people will be able to build with its Moorestown technology. It folds in the middle, like a book.

(Credit: Tom Krazit/CNET News.com)

We're looking at a major architectural battle over the next three years or so: the ARM instruction set, which dominates mobile phones, versus the x86 instruction set (Intel, please stop calling it Our Architecture). ARM isn't widely known outside the industry, but it designs processor cores for chips that power more than 90 percent of the mobile phones on the planet. Intel, you've probably heard of at one time or another.

Both companies and their partners will be aggressively courting computer users and software developers over the next several years. Intel is trying to find its next big source of growth by scaling down into power-sensitive areas such as MIDs, which are basically minitablet computers. ARM wants chip makers to use its cores in more powerful smart phones, such as Apple's iPhone, which uses an ARM-based chip made by Samsung. Both companies need the support of software developers who will be developing applications for their devices, and whoever has the best combination of compelling design and need-to-have applications will have the early lead as the first quarter of the computer industry winds to a close.

I'll get ARM's side of the story in more detail over the coming days. But Intel is contending that it has a major advantage in that all the software developed on and for PCs will run on its Silverthorne chips for MIDs, said Anand Chandrasekher, senior vice president and general manager of Intel's ultra mobility group.

Chandrasekher asserted that software developed for chips based on ARM cores aren't necessarily compatible. He said that's because ARM's licensees implement slightly different combinations of ARM technology, and there are no APIs (application programming interfaces) that lets application developers write an application that will run across those many different implementations. "If a smart phone is going to become more of a data oriented device, then it's going to have to run applications, then compatibility matters," he said.

Is that an upside-down iPhone? Nope, it's an upside-down shot of another Moorestown concept device.

(Credit: Tom Krazit/CNET News.com)

Intel is promising that any and all software written for PCs will run on MIDs. This does appear to be a more compelling argument for a software developer trying to decide where to place its bets. However, that's hardly a stamp of approval for the MID project at large.

If we've learned one thing this summer, it's that people are finally ready to start figuring out what they want on a mobile handheld device. The physical design matters, the user interface matters, and the applications matter. The key question is in what proportions. Intel might have an advantage when it comes to application development (although ARM probably has a retort), but will that matter in a world where more and more applications are probably going to delivered over the Internet?

I'd like to try and figure this out. Watch our site for a longer piece examining the two chip instruction sets and what they bring to the fight. This will take years to evolve, with things probably starting to heat up around the time Intel releases Moorestown, the successor to Silverthorne. Chandrasekher isn't saying much about Moorestown, but Intel is showing off these concept devices as a preview of what it thinks will be possible with that chip. One of them looks awfully familiar.

AMD is asking software developers to consider its new x86 instructions when developing games and media applications in upcoming years.

Intel and AMD keep adding to the venerable x86 instruction set with new instructions that anticipate the performance of future applications. Intel will release SSE4 extensions later this year with the Penryn chips, and now AMD has proposed adding SSE5 instructions to its processors around the time the Fusion chips are released.

The proposal would add almost 50 new instructions that give software developers more tools to work with in designing next-generation applications. More details can be found on AMD's developer Web site, but a few computer science classes are recommended before wading through the details.

Intel and AMD have an extensive cross-licensing agreement for the x86 architecture in order to preserve software compatibility between their chips, so it's likely that each would eventually wind up using both SSE4 and SSE5 in future processors. But they don't have to share them prior to launching the chip, so it gives each chipmaker a temporary performance advantage on software built to see those instructions.

SUNNYVALE, Calif.--AMD's Fusion chip will come in two varieties, one for PCs and servers and another for consumer electronics devices.

Bulldozer is the code name for the Fusion chip that will be designed for everything from servers to handhelds, said Phil Hester, AMD's chief technology officer. Bobcat is the name for a sub 10-watt x86 chip that AMD believes can power ultramobile PCs, cell phones and existing consumer electronics chips using the ARM or MIPS architectures.

You call in a bulldozer when you need a lot of earth moved in a short amount of time, Hester said. That's the idea for Bulldozer, in that it's the design that AMD wants to form the basis of its server and PC chips by the end of the decade. Bulldozer will be part of the "Falcon" PC platform that also includes an integrated memory controller, a graphics processor, cache memory and a PCI Express controller.

Bobcats, however, can be found in back yards and smaller spaces where you don't want to use a shovel, but you can't get away with a bulldozer. (I've always wanted to tool around in a Bobcat for a few hours.) These chips represent AMD's hope for getting x86 chips into handheld devices.

While x86 chips rule the PC market, it's really hard to find one in a smart phone. Both Intel and AMD are very interested in figuring out how to get their silicon inside this fast-growing part of the tech industry, and Hester thinks x86's time will come as software for handsets grows more powerful and the chips themselves become more power-efficient.

Hester also revealed a few more details about Sandtiger, the code name for AMD's 2009 server chip disclosed earlier in the morning. Sandtiger will use between 8 and 16 Bulldozer cores, but AMD might build smaller versions to take advantage of certain cases in which 4 cores make more sense, he said.