Nanotech - The Circuits Blog

Updated on September 23 at 12:30 a.m. PDT: adding information about the Atom Developer Program.

SAN FRANCISCO--In his keynote at the Intel Developer Forum on Tuesday, Intel CEO Paul Otellini focused on moving beyond the PC while introducing a new processor technology and a new development platform for the Atom processor.

"We're moving from personal computers to personal computing," Otellini said.

Intel CEO Paul Otellini shows a next, next-generation wafer containing 22-nanometer chips

(Credit: Stephen Shankland, CNET News)

He called this a transition to a continuum. "The same experience on any device. How we build this continuum out. That's the theme," he said. "Moore's Law, platform architecture, and software--the combination of these three will allow us to build the continuum."

Otellini also had a surprise. He introduced the company's next, next-generation technology, based on a 22-nanometer process. Intel currently makes chips based on 45-nanometer technology and will move to 32-nanometer by the fourth quarter of this year. After that comes 22-nanometer chips.

Generally, the smaller the chip's geometry, the faster and more power efficient the chip is.

"The world's first working 22-nanometer silicon technology," Otellini said. He showed a wafer containing SRAM memory chips that each contained 2.9 billion transistors. "This is on track for for second half 2011."

In the more immediate future are the 32-nanometer processors. "Thirty-two-nanometer enables us to build a billion transistors in high volume. Started production on Westmere (the 32-nanometer technology) for shipment to customers in Q4." Otellini demonstrated the upcoming 32-nanometer mobile "Arrandale" processor--which integrates graphics silicon with the main processor--in a laptop.

The Intel CEO also introduced a new Intel developer program for the Atom processor in order to boost software adoption on Netbooks and expand the development of software beyond those devices. Asus, Acer, and Dell are supporting the program, Otellini said.

The program provides a framework for developers to create and sell software applications for netbooks with support for handhelds and smart phones available in the future. "We want to fuel the growth of Intel Atom-based products designed for the mobile lifestyle," said Renee James, corporate vice president and general manager, Intel Software and Services Group, in a statement.

As another example of where Atom will be used, Otellini said that automakers Daimler and BMW will use in-vehicle Atom-based infotainment systems from Harmon International in future vehicles.

Otellini also addressed the European Commission's publication on Monday of antitrust allegations against Intel. "They consistently ignored information," Otellini said. He added that customers such as Dell will come forward to state that some of the information was "wrong." In a statement, Intel said Monday that "the Commission relied heavily on speculation found in e-mails from lower level employees that did not participate in the negotiation of the relevant agreements."

Addressing the PC market, Otellini said that he expects "significant growth in 2010." This year he sees "units flat to slightly up," he said, but next year "I think the market is poised for a resurgence."

During Intel's earnings conference call Tuesday, CEO Paul Otellini said inexpensive "ultra-thins" will give users what they're missing in Netbooks, a theme that the chipmaker has been reiterating in various forums lately.

Acer Aspire Timeline ultra-thin laptop

(Credit: Acer)

Intel continues to try to maneuver this new and more profitable category of laptops into territory where Netbooks continue to hold mindshare. Ultra-thins are low-cost laptops, typically with 13-inch screens, based on Intel's ultra-low-power (ULV) chips. Netbooks have screens usually no larger than 11 inches and use Intel's lower-cost, lower-performance Atom processor.

Echoing prior comments by other executives, Otellini said that ultra-thins address the Netbook's shortcomings. "When people try to do 3D games on these things (Netbooks) or try to run their office applications on them, they tend to think it's a bit slow and that isn't just the processor, it's the entire architecture," he said in response to analyst's question during the conference call, which was streamed on Intel's Web site.

"Now, if you want a thin and light notebook, you don't have to just pick a Netbook. You can pick an affordable notebook that has more functionality," Otellini said.

Well-established consumer perceptions of Netbooks and the higher prices of ultra-thins, such as the $699 Acer Aspire Timeline, makes the latter a challenge to position in the marketplace.

"When we first released our ultraportable (ultra-thin) a lot of people looked at it and said, 'oh it's Netbook,'" said Kelt Reeves, president of enthusiast PC maker Falcon Northwest. "No, it's close to a Netbook in size but it's much, much more capable," Reeves said, addressing user misconceptions.

Windows 7 may not go very far in correcting all the confusion. "Windows 7 runs well even on a $199 Netbook," said Ashok Kumar, an analyst at investment bank Collins Stewart. Kumar said Intel may continue to have trouble managing consumer perceptions of Netbooks and ultra-thins.

Otellini also revisited the subject of cannibalization--that is, the tendency for Netbooks to take market share from more mainstream laptops. "We're talking about a total cannibalization that's probably no more than 20 percent," Otellini said, in response to another analyst question.

The Intel CEO also said that Netbooks may become increasingly popular as a wireless 3G device sold by telecommunications companies. "I think in 2010 that's likely to be a large part of the business...There was a Best Buy, Sprint Netbook ad last week at $0.99 if you signed up for two years...And you'll start seeing more of that," he said.

Intel said Netbook cannibalization of notebook PC sales is about 20 percent in Europe, according to a news report Wednesday. But this trend may ebb later this year when the "affordable" ultra-thin laptop category takes off, leading to a cannibalization reversal of sorts.

Christian Morales, Intel's European sales chief, said Netbook sales were about 16 percent of all notebook sales globally, and a little higher in Western Europe, according to Reuters. "In Britain and Italy they may account for as much as a quarter of all notebook sales," he told Reuters.

Netbooks are small, inexpensive laptops--typically below $500--designed for Web browsing, email, and less-demanding media applications.

Intel Netbook share was about 16 percent in March of this year.

(Credit: Intel)

Intel's marketing chief, Sean Maloney, presenting at the company's investor meeting on May 12, said that the share of Atom processor-based Netbooks out of the total mobile PC market was about 16 percent in March. (See "Netbooks Mix of Mobile PCs" chart.) And he showed that the market share for Netbooks--month to month--hovers around 15 percent.

"The market has not all lept over to Netbooks," Maloney said at the meeting. "We're very comfortable with having established the (Netbook) category. We believe now that Netbooks are an under-distributed product line." Cannibalization, when it occurs, tends to affect low-end laptops based on Celeron processors, he said. "Atom is eating into Celeron. And we're quite fine with this," Maloney said.

Intel's ramp of inexpensive ultra-thin "CULV" laptops may eat into Netbook sales

(Credit: Intel)

Then later in his presentation, alluding to Intel Consumer Ultra-Low-Voltage (CULV) chips due to appear in inexpensive laptops starting in June, he said that this is "an opportunity for upsell. We don't need to give this stuff away. The industry doesn't need to give this stuff away. We can reach new price points and we can also get paid for it." CULV processors will be based, to a large extent, on Intel's Core 2 architecture, which offers better performance than the Atom chips used in Netbooks.

Maloney's comments imply that CULV-based laptops will offer stiff competition for Netbooks, especially high-end Netbooks priced above $400. Many CULV notebooks should fall into the $599 to $799 price range--the upper range of Netbooks--according to Ashok Kumar, an analyst at investment bank Collins Stewart. And some major PC makers expect CULV to become one third of total latop sales by next year, Kumar said.

Though no one can forecast how popular these new inexpensive thin laptops (think: MSI X-Slim series or a hypothetical $800-$900 Apple MacBook Air) will be, Intel is obviously expecting the category to take off. (See "Ultra-Thin Affordable Volume Ramp" chart.)

Maloney said growth markets for Netbooks are children--he said this market is still under-served--as well as Netbook bundles with telecommunications service providers. Verizon, for example, is now offering Hewlett-Packard Netbooks with 3G functionality built in.

Netbooks had a rocky start last year in some markets, Intel's marketing chief said at the Intel investor meeting Tuesday.

"In the first period--June, July, August of last year--there were some in the retail channels that were shipping (Netbooks) as notebooks," Sean Maloney said in a question-and-answer session that was streamed over the Web. "They were running ads that had a continuum of notebooks and had this Netbooky thing in there--it was called a notebook. They had very high return rates and a couple of these guys had return rates in the 30 percent range, which is a disaster."

Maloney continued. "So we gently went back to some of those chains and said if you segment them differently and state up front what they do and don't do, things will be healthier. You've seen some of the European channels saying this (Netbook) product does not do X and being very black and white and very clear."

Intel's marketing chief Sean Maloney showed this slide Tuesday and did a live demonstration showing what a Netbook can't do.

(Credit: Intel)

At the investor meeting, Intel demonstrated on stage the performance gap between a Netbook and a mainstream notebook. In the demonstration, a Netbook and a notebook ran the same high-definition video of the NBA basketball playoffs. The video on the Atom processor-powered Netbook was jerky and dropped frames, while the Core 2 chip-based notebook's video was smooth.

The point was obvious: the Netbook's Atom silicon falls short in performing some tasks that a mainstream notebook handles with relative ease.

Along these lines, it also became clear at the meeting that there is a struggle brewing to clearly define to consumers the difference between Netbooks and upcoming ultra-thin notebooks, also referred to as the Consumer Ultra-Low-Voltage or CULV category of laptops. CULV notebooks--due in June--are expected to be priced in a market segment just above Netbooks.

Intel executives were peppered with questions from the audience--mostly representatives from Wall Street firms--about Netbooks. One audience member wondered whether Intel "had considered doing an informational advertising campaign" and asked: "Do you find that at all necessary to clear up some of the misapprehensions about what you can and cannot do with these devices (Netbooks)?" This question elicited the response from Maloney quoted above.

At Intel's investor meeting Tuesday, CEO Paul Otellini discussed how the company is moving to system-on-chip technology in a big way.

Otellini began by saying that the market outlook remains positive. "A little better than we expected. So far, so good." He said he was "more firm in my belief that we will see seasonality in the second half," alluding to Intel's expectation that the PC market should pick up in the second half of the year. Otellini added that Gartner's forecast of a PC sales decline between 9 and 10 percent in 2009 may be too pessimistic.

Intel CEO Paul Otellini answers a question during the Intel investor meeting Tuesday

System-on-chip (SOC) opportunities will be driven by Intel's upcoming 32-nanometer technology. "All that you're doing is reducing (a computer) system to a single chip," he said. Market segments that will benefit from this technology are Netbooks, smartphones, and embedded devices, he said, adding that Netbooks and smartphones each represent a $10 billion market opportunity by 2011.

Otellini talked up Intel's new relationship with Taiwan Semiconductor Manufacturing Co., which involves "deep collaboration" on the Atom SOC chips used in smartphones. It means, he said, "taking Atom and porting it over to the TSMC process, to help further Intel architecture into those new markets."

Traditional PC markets will give way to "targeted micro-segments" such as the high-end desktop gaming segment, exemplified by PCs from Voodoo and Alienware, Otellini said. "The old big, beige, boring desktop is dead." Intel's upcoming Larrabee graphics chip will address this market, in addition to standard multicore processors.

The consumer desktop market will be transitioning to iMac-style all-in-one systems, Otellini said. There will be Atom-based "Nettops," small entry-level computers priced at a couple hundred dollars, he said. The desktop market will see "small growth" as people incrementally replace the 800 million units in use.

Otellini said Intel will mix and match technology across different product segments very quickly now--the number of cores and the type of graphics, for example, will be quickly rejiggered across different product categories.

Intel views its fab (factory) strategy as extremely important. Otellini said that Intel is one of the few companies that has committed to a next-generation 22-nanometer manufacturing process. "Intel was able to create a market for Netbooks faster than the (Nintendo) Wii and iPhone...Only Intel has the (manufacturing) scale to do this," he said.

Intel CEO Paul Otellini commented on competition with Nvidia, the economy, and the possible fate of its flash memory factories on Wednesday at a tech conference in San Francisco.

Otellini began by speaking to the fact that the global economic downturn has depleted inventories of chips. "I don't think there's much inventory out there. It's hard to imagine that there's a significant drop below this." He made his remarks at the Goldman Sachs Technology and Internet Conference 2009, which was streamed live.

Intel CEO Paul Otellini

(Credit: Intel )

And moving quickly to the next generation of chip technology is critical to get Intel through the downturn. "One of the reasons you saw us be so bold as to make an announcement on 32-nanometer (manufacturing technology) two weeks ago is that we are quite confident in the benefit of the technology. It will lower our cost. We'll have a lower cost structure by moving our product line to the technology. That gives us comfort and will allow us to do well when the market recovers."

Otellini said that Nvidia is not in a strong competitive position. "If you don't have a microprocessor, what else do you have to sell?" he said, countering Nvidia's claims that the industry is becoming more centered on graphics chips. "The graphics subsystem for most machines will be subsumed into the microprocessor. So what Nvidia is doing is making an argument to defend the status quo," he said. He said if you want higher performance you can buy a discrete graphics chip. "You can buy it from them or you can buy it from us," he said, referring to Intel's upcoming Larrabee graphics chip.

And what about Intel's flash memory strategy? "It may not be essential for us to have our own NAND factories to build (flash memory). We could probably specify the product that we want and buy it from third parties," he said.

Speaking about Atom he said the "shortest time to money" is Atom in the embedded market place. As Intel moves to a system-on-chip (SOC) design it will become more profitable. "With north of a billion-dollar business there, that should triple in the next few years," he said. Embedded chips are used in cars, consumer electronics, and industrial applications, among other areas.

About Netbooks he said: "We lit a fuse. It's the only bright spot in the PC industry at this point in time." But he added: "Atom is still less than half the performance of our entry-level Celeron product. It wasn't designed to be a notebook replacement part." He added the Microsoft will limit the starter edition of Windows 7--that will be used for future Netbooks--to three applications running at once. "You'll be underwhelmed," he said, relative to mainstream notebooks

He also addressed smartphones and the future Moorestown Atom chip. "You saw some announcements last week with LG (Electronics). You'll see some announcements in the next month or so from some other major handset manufacturers. Watch that space." He also added that Intel, with its 32-nanometer technology, is trying to move from the MID (mobile Internet device) design to true smartphones. "System-on-chip allows us to get down to a single chip...so we can get the MID form factor--which is sort of an ultra-mobile PC-- into the mobile handset form factor. That's critical for us."

Advanced Micro Devices' chief executive predicts that Netbooks will eventually disappear. This thinking, though obviously favorable to AMD's strategy, isn't completely at odds with Intel's.

The lightweight HP Pavilion dv2, which uses the AMD Neo processor, is marketed as a notebook

(Credit: Hewlett-Packard)

"The distinction between what is a Netbook and what is a notebook is going to go away," AMD CEO Dirk Meyer said Thursday in the company's earnings conference call.

"There will be a continuum of price points and form factors," he said.

"Given the way Netbooks are configured today, consumers who want a notebook at those kind of (low) price points have to compromise and as a result don't enjoy a full PC experience, particularly around the graphics and media capability of the machine," Meyer said. "And likewise people who wanted a thin and light machine had to pay a lot of money, typically well over a thousand dollars."

Upcoming inexpensive ultra-thin notebooks will meet the need for a small, thin, lightweight laptop that is more powerful than a Netbook, Meyer said.

This sentiment is actually backed up to some extent by Intel's recent behavior. Intel CEO Paul Otellini, in that company's earnings conference call last week, spoke oddly of Netbooks in the past tense. He said the buzz around Netbooks at the Consumer Electronics Show "validates our view that (the market) had a high potential for growth and it was an exciting segment, in particular in this kind of economic environment." (Emphasis added.) Otellini did add, however, that he expected Intel "would do very well in the Netbook market in the course of the next couple of years."

Whether his use of tense is just a way to refer to the Netbook market to date or a Freudian slip tied to Intel's intention to bring out new mainstream Core architecture chips for inexpensive thin notebooks later in the year, is not clear. This chip platform could potentially suck a lot of the enthusiasm out of the Netbook market.

And Intel has small plans for its Atom processor in 2009. Aside from a tiny increase in processor speed and a slight improvement in graphics, nothing big is slated for the platform. Is the demise of the Netbook market as we know it today something both AMD and Intel agree on? We'll see.

Intel is seeing solid results for the Atom processor--possibly giving the first significant evidence of Intel's likely future as a bigger provider of low-cost processors.

Intel confirmed on Tuesday that Atom is hot. CEO Paul Otellini said that Intel didn't meet demand in the third quarter and still can't meet demand. "We did not meed demand in Q3 for the product. We are up again substantially in the fourth quarter. Our expectation is that we will meet demand by the end of the year," Otellini said.

And many of the questions from analysts in Tuesday's earnings conference call revolved around Atom as it delivered $200 million in revenue to Intel in the quarter. "Between the microprocessor and the chipset, we did have a couple hundred million dollars of revenue from Atom in the third quarter," Chief Financial Officer Stacy Smith said. "We do expect that to grow rapidly in the fourth quarter."

What Intel appears to like most about Atom is what it calls "margin characteristics." In other words, it's a low-cost processor, but it yields better margins than typical inexpensive chips like the Celeron. "What we've seen in the third quarter is a very healthy product margin," Smith said.

"On a dollar basis it's equivalent to what we see in Celeron and on a product margin percent it's higher. So if you look at it relative to our low-end mainstream stack, it's generating nice product characteristics," Smith added.

Here's the question: if more and more consumers--particularly in places like China and India--opt for Netbooks with the Atom processor rather than traditional notebooks with standard Intel mobile processors, what kind of an impact will this have on Intel's profits?

Intel claims cannibalization of (higher-margin) mainstream mobile processors is not taking place. "To date we haven't seen any evidence of cannibalization. And believe me we're looking. It's something we watch very carefully," Otellini said. "And one of the best pieces of evidence that we have is the strength in the core mobile business independent of Atom," he added.

But tighter consumer budgets worldwide could push more people toward Netbooks. A Gartner report came out Tuesday that said third-quarter PC shipment growth was driven by sales of sub-$500 notebooks. Netbooks typically sell for less than $500.

Other notable comments in the earnings conference call:
• Inventories: Taiwan and channel customers cutting back, consumer traffic overall is light--Otellini
• Intel-Micron: Joint Singapore flash memory chip fab now on hold
• Corporate segment: In Q4, corporations to show softness as IT gets rationalized in macro environment
• Nehalem processor: Intel started shipping Nehalem processor, announcement coming in November

Intel CEO Paul Otellini had mostly upbeat news on Tuesday when the world's largest chipmaker reported solid earnings, but Atom processor issues and weakness in the flash memory business were recurring themes in the earnings conference call.

One of the most interesting comments made during the conference call on Tuesday by Otellini was about the Atom processor. "(Atom) is less than a third the performance of our Centrino (processor). You're dealing with something that most of us wouldn't use," he said.

Though he qualified this by repeating the mantra that Atom is "principally designed for Web access" and not something to do photo editing on, the comment crystallizes the challenge Atom presents for Intel. That is, the processor offers only mediocre performance and potentially cannibalizes a market that the longstanding--and higher-performance--Celeron processor has thrived in.

The cannibalization question was brought up by two analysts during the conference call, and Otellini responded this way: "We do not see (Atom) replacing Celeron. If you look at the Netbook products being built around Atom, they're all lower-priced, lower features, smaller screen size notebooks aimed at first-time buyers or second, third, or fourth machine in a household. We don't see any cannibalization."

Another challenge: Intel doesn't have a handle on the Atom market yet. In short, Atom is still a work in progress and it is not yet clear how big the market will be and how it will develop. Otellini said that he believes Atom is creating a new segment. But Atom plays in a very low-cost market segment that has the potential to drag down Intel earnings in the future. At least that was the tenor of many of the questions posed by analysts during the earnings conference call.

Intel has said from the beginning that Atom was designed to make money in low-cost segments, and CFO Stacy Smith repeated several times during the conference call that Atom has been factored into its forecast for better gross margins in the third quarter. "(Atom) is in the 58 percent gross margin that I've forecast for Q3," Smith said.

Otellini and Smith also addressed Atom shortages. "The supply constraints we're seeing with Atom are specifically the back end, the test constraints. We have plenty of die (chips). As demand's going up, kind of month by month, we're jumping to keep enough test capacity in place," Smith said.

"The other part of that is to make sure we have enough chipsets," Otellini added. And he went on to say that Intel has "been increasing planned production of Atom for this year and next (year) every forty days since last November. Not just in Netbook segments but also in embedded and consumer electronics segments."

Flash supply and upcoming Larrabee for workstations

Profit shortfalls in the NAND flash memory business have been weighing on Intel earnings for many quarters. Intel is trying to address this through supply constraints. "Taking some actions to limit the amount of supply growth in this environment. As you know the NAND pricing continues to be very weak, " Otellini said.

Responding to questions about DreamWorks Animation choosing Intel chips over those from Advance Micro Devices, Otellini said this is "reflective of a very competitive roadmap we have, not just in servers but also in workstations as Larrabee comes on."

Larrabee is a high-end graphics chip due in 2009 or 2010 and is expected to offer as many as 32 cores.