Barrett: Intel will ride economic storm

Faced with an uncertain economic climate, Intel Corp. president and CEO Craig Barrett sought to deliver a strong message Tuesday that the chip giant can ride out the current economic downturn on the strength of its broad product offerings and by continuing to invest heavily in new technologies.

“Even though we’re at a slowdown today, as you look forward the build-out of the Internet, the building of this digital world, is really in its infancy,” Barrett said, speaking at the start of the Intel Developer Forum in San Jose Calif. “New products and industry innovation will drive us out of the recession.”

The Internet is in its infancy, and Intel aims to profit by providing “silicon building blocks” for each aspect of its growth, Barrett said. For consumers that means faster chips for handheld computers, Web-enabled cell phones and PCs, which he confidently predicted will remain at the centre of the consumer lifestyle. For big business and service providers, Intel will offer ever more powerful processors for running large servers and networking equipment, he said.

Despite the “rollercoatser ride” presented by the current U.S. economy, Intel will continue to invest heavily, spending $7.5 billion on capital equipment and $4.3 billion on research and development in the coming year, he said. As an example of its commitment to keep releasing new products, Barrett said Intel will release 35 new silicon products this year in the area of networking alone.

“This is what I think every one of us has to do,” Barrett told his industry counterparts gathered here. “Never save your way our of a recession.”

The Intel chief hosted a series of demonstrations intended to show off the breadth of Intel’s product arsenal. Over the next four days, Intel executives here are expected to shed more light on each area.

Most notably, Intel showed three servers running prototypes of McKinley, a 64-bit processor designed to help it compete in the lucrative, high-end server market where chips from Sun Microsystems Inc., IBM Corp. and others dominate today. Simply put, 64-bit chips will process data in larger chunks than Intel’s current, 32-bit offerings, allowing for better performance.

The McKinley systems were shown running Hewlett-Packard Co.’s HP-UX operating system and 64-bit versions of Microsoft Windows and Linux. Intel has provided sample McKinley chips to three server manufacturers in the past three weeks. Pilot systems will be rolled out later this year, with commercial systems available in 2002, said Paul Otellini, executive vice president and general manager of the Intel Architecture Group, who took the stage after Barrett.

McKinley improves on the bus speed of a Pentium III Xeon processor by a factor of three, allowing it to exchange data more quickly with other parts of a server, Otellini said. McKinley also integrates a Level 3 memory cache on the same silicon as the processor itself. The result should be a five-fold performance improvement over the fastest Pentium III Xeon processor available today, he said.

Otellini also touted Itanium, Intel’s first 64-bit processor, which has come under fire for suffering repeated delays. Three hundred software applications have been readied to take advantage of the Itanium design, and pilot systems have been delivered to 500 small businesses. The processor is running today on HP-UX, Windows 2000, Linux and IBM’s AIX operating system, Otellini said.

Intel will continue to evolve its 32-bit server chips and expects to introduce a 900MHz version of its Pentium III Xeon server this quarter, Otellini said. Foster, the server version of Intel’s Pentium 4 processor, will arrive in the second quarter at a clock speed of about 1.4GHz, Otellini said.

Earlier, Barrett was joined on stage by Jim Allchin, Microsoft Corp. group vice president in charge of platform products, who demonstrated Microsoft’s new Windows XP operating system running on a Pentium 4 PC. The demo was designed to show off how the PC could run three or more demanding applications at one time – a software code compiler, a computer game and a stream of digital video.

“We still have a little ways to go,” Allchin admitted. The point of Windows XP is that provides a simpler computing environment for users, he said.

Intel will roll out a new chipset later this year that will help bring the high-end Pentium 4 processor to PCs at all price levels, Otellini said. Today, the Pentium 4 works only with the fast but relatively expensive RDRAM (Rambus dynamic random access memory) memory chips. The new chip set, called Brookdale, will allow it to work with standard SDRAM (synchronous DRAM) and DDR SDRAM (double data rate SDRAM) chips, which should allow the Pentium 4 to be offered in PC systems at all price points, Otellini said.

For notebook users – an area where Intel has been threatened of late by rival start-up Transmeta Corp. – Intel will continue to drive down the amount of power its chips consume to improve battery life. The company announced the availability of a low-power version of its mobile Pentium III processor at 700MHz, and demonstrated a notebook computer running on a 1GHz prototype version of the same chip.

The demonstration was the first public outing of a chip manufactured using Intel’s 0.13 micron process, which will be introduced later this year. The 0.13 micron refers to the width of circuits that can be etched on the surface of a chip, and shrinking those lines plays a big part in helping chip makers boost performance and reduce power consumption.

“We are working towards nothing less than an all-day, eight-to-10-hour type of machine,” Otellini said.

To help reduce costs further, Intel will move from today’s standard 8-inch silicon wafers to manufacturing 12-inch silicon wafers by the end of the year, Barrett said. Wafers are basically round platters of silicon with hundreds of computer chips printed on them. The larger wafers, each of which pack as many as 20 billion transistors onto its surface, will help Intel reduce the cost of manufacturing each chip by 30 per cent to 35 per cent, Barrett said in a question and answer session with press following his speech.

Barret found time to answer critics who proclaim the death of the PC. The PC will remain at the center of the “digital universe,” acting as a hub that can manage access to Web screens, music players and other digital appliances around the home.

“If you accept that model, then the PC is hardly dead,” he said. “The PC is at the center of the digital world as far as the consumer is concerned.”

Even so, Intel is investing heavily in a new chip called XScale, which is aimed at cellular telephones, handheld computers and other portable gadgets. XScale provides a flexible architecture that can be adapted to suit the levels of power and performance required by a particular device or application, he said. Gadgets like handheld computers aren’t competitors to the PC, they are “adjuncts,” he said.

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