Intel’s Barrett optimistic amid turmoil

Intel Corp.’s chief executive Tuesday looked beyond the flagging economy and the “horrible events” of Sept. 11 to predict that the Internet will continue to drive growth for the industry and bring positive change for those who use it.

“For those of us who’ve been in the industry for 30 years, this is the biggest slowdown we’ve ever seen,” Craig Barrett, Intel’s president and chief executive officer, said during a Webcast for press and analysts. The dot-com collapse and over-investments by telecommunication companies have also fueled the economic slump, he said.

But the Internet’s continued growth – particularly outside of North America – combined with the rise of gadgets such as smart phones that let people surf the Web on the road, will mean steady growth for the industry and bring new ways for users to shop, find information, communicate and entertain themselves, he said.

The message was an optimistic one that contradicts the current downward trends. PC sales in 2001, for example, are likely to be flat or slightly down from the previous year for the first time in the industry’s history, according to research firms Gartner Inc. and International Data Corp. (IDC).

Revenue from chips sold to computer makers is expected to drop 25 per cent in 2001 from the previous year, while semiconductor revenue from the communications industry dropped 30 per cent over the same period, Barrett said, citing Gartner and IDC.

Intel itself has been forced to dump businesses that looked “very good” as recently as last year, including streaming media products, Intel-branded server appliances, and branded consumer goods such as MP3 players and toys.

“All of these, I think, we were technically capable of bringing to market, but in this difficult time they were distracting us from our core mission,” he said. That mission is to capitalize on Intel’s key strength in making and selling chips for use in computers, networking gear and mobile devices, Barrett said.

But he insisted that a period of “stable” and “sustained” growth lies ahead. The number of people connected to the Web is expected to climb from about 500 million today to 1 billion in 2005, he said, while the amount of data running through the Internet backbone is expected to quadruple between the start of 2001 and the end of the year – “an acceleration even in this turbulent time.”

“We think that the Internet is the embodiment of computing going forward; it’s where we’re putting the entirety of our strategy,” Barrett said.

To help it keep making faster chips, Intel will introduce its most up-to-date, 0.09-micron manufacturing process in the first half of 2003, he said, while its 0.13-micron process will be up and running in six factories by mid-2002. The new manufacturing techniques help Intel make smaller transistors and pack more of them onto more powerful chips.

The company isn’t cutting back on research and development, Barrett said, and has plans to spend about US$3.9 billion in 2001. About a quarter of that will go to emerging areas such as networking processors, wireless and optical networking, and the rest will go to improving existing types of products.

For growth, Intel will look beyond North America, where its business has been shrinking, to emerging markets such as Asia, which provide an increasingly large chunk of its revenue.

“Increasingly our customer base is around the world, not just the four per cent of the world’s population that lives in the U.S.,” Barrett said.

Also during the Webcast, Paul Otellini, executive vice president and general manager of the Intel Architecture Group, detailed the roadmap for Intel’s 32-bit Xeon server processor.

The next member of the Xeon family, code-named “Prestonia,” is expected to be introduced in the first quarter of next year, followed by “Foster,” in the second quarter. Foster is a multiprocessor-enabled chip based on the same core as the Pentium 4. Otellini also made the first mention of “Gallatin,” another multiprocessor-enabled chip that will follow Foster in the fourth quarter of next year.