Craig Barrett's exclusive interview with ZDNet: Part 2

The discussion turns to the probable effect of Merced's arrival in the marketplace, the attitudes of national governments to the use of encryption technology, and questions of over capacity in chip manufacturing...
Written by Richard Barry, Contributor

Richard Barry: So, say the arrival of Merced, a ways off yet but that will be a big boost [to the industry]?

Craig Barrett: (Interrupts) No.

Richard Barry: Are we going to have to wait that long do you think?

Craig Barrett: Merced is mid 2000 and it's a relatively low volume market. What will drive the industry will in fact be the mainstream PC industry. The number of clients that are sold that along with new developments in DRAM, this stuff, that stuff and this stuff. That'll drive the industry when we go to higher bandwidth DRAM whether its RAMBUS DRAM or some other, that'll drive the next generation of technology. That'll drive the industry.

Frankly the guys I'm more worried about are the semiconductor guys because just about everyone other than Intel has cut back on their capital spending to a large extent and they're kind of like at the tail end of the dog. They can really get swung about in the supply and demand thing.

Richard Barry: So if I tried to pin you down to a timeframe for recovery-

Craig Barrett: (Interrupts) You won't.

Richard Barry: Well come on, when do you see a light at the end of the proverbial tunnel? I mean you're in a unique position here -- you're the boss of Intel...

Craig Barrett: Ha! (Laughs) Y'know there are a bunch of industry forecasts that DRAM supply and demand gets back under control around about mid '99. But hey, that's not my forecast (Laughs) that's just a general industry view.

Richard Barry: One you share?

Craig Barrett: (grins)

Richard Barry: That noted, and in that time frame, are your fabs going to be running at full capacity or will some be running below what they're capable of?

Craig Barrett: Well as I've said the fact that we're adding $4.5bn of capacity this year, some of it you know is being upgraded to the next generation of technology. We'll be attempting to modulate how much capacity we bring on stream to be consistent with demands. We were initially going to spend over $5bn this year but we've modulated that down somewhat because the industry didn't grow as fast. We're not putting factories in place to keep them running at half speed. We try to add capacity to keep factories at high utilisation rate across the country.

Richard Barry: We've less than ten minutes to go, so: I'm intrigued by your position on France and encryption.

Craig Barrett: Why are you intrigued?

Richard Barry: I'm intrigued because there is a clear message from the government of France and the US, that the reason they take this position on strong encryption is because they are concerned, for example, about terrorist activity. Should they be?

Craig Barrett: You know this is the most ridiculous contention in the world. Anyone who wants to buy strong encryption technology can go to the street corner and buy it. They buy it over the Internet. What the governments are trying to do is control law abiding citizens with encryption technology. And terrorists want to encrypt their messages? They go buy encryption. I mean who controls it? You buy it off the Internet!

You don't even buy it you download it.

Richard Barry: But you would say that because it's in your interests to have people [use encryption].

(Intel has said it intends to embrace e-commerce aggressively because it will demand high processor performance thus driving the market.)

Craig Barrett: No, I'm saying that because it's a ridiculous position for the governments to take. A similar position was taken by some of the developed nations so they could limit computers going to unfriendly governments. At that time there were 60, 70, 80 million computers a year sold, somehow by making an official dictate when these microprocessors and computers are flying off all over the universe they weren't going to make their way to China or N. Korea or something like that.

Y'know you can sit in Washington DC, or in London, or in Paris and you can make an official dictate. You have to be pragmatic and whether it makes any sense and whether it's enforceable. You know [prohibiting use of] encryption is not enforceable.

Richard Barry: Are the politicians out of touch?

Craig Barrett: I would contend as much! (Laughs)

Richard Barry: (Laughs) I'll take that as a yes.

Craig Barrett: (Laughs)

Richard Barry: OK, I think we have a little time to go back to Celeron.

A common question from our readers concentrates on the decision to move Celeron back to the socket architecture Intel was so eager to dismiss as 'old technology' back when CeBit was going on in Germany. Can you just explain why you have decided to go back to the socket architecture? Can you make it clear for our readers.

Craig Barrett: Well we went to the Slot1 architecture before we wanted in order to get the second level cache we wanted. To get that much cache on board (and we couldn't integrate it into the processor) we had a production passage so we went to the Slot1 architecture so we could have a reasonably high backside bus speed. Eh voila: you ended up with the Slot1 architecture. What's happened since then is two things. One is we are continuing with the Slot1, Slot2, SlotX architecture with full-speed backside buses for big cache in some configurations -- especially workstation, [and] server environments. But if you look at what's happened in the low-end, in the sub-$1000 category you want to strip out every shilling, every dollar, every penny so you want to carve out some cost out if you wanna participate in the sub-$1000 market place where average microprocessor parts are less, therefore margin dollars are less you wanna get as high a margin percentage are less. You can't get as much margin out of those spaces. So you look for ways to carve cost out. It's cheaper to go with an integrate cache than it is to carry Slot1. So cost, cost and cost are the three reasons.

Richard Barry: But what about upgrade path? I mean people just aren't going to be able to embrace the Slot architecture if they're landed with a Socket design which Intel has said can only go so far.

Craig Barrett: You know what? We've introduced our last upgrade product. The upgrade market? People just buy new PCs rather than upgrade.

Richard Barry: So it's a negligible piece of the market, but for Socket owners they can't...

Craig Barrett: (Interrupts) It's negligible and if you wanna upgrade your processor power you are better off going out and rather than buying a processor, buying a fully configured system which has upgraded memory upgraded processor, upgraded graphics -- whatever.

Click here for part 3 of ZDNet's exclusive interview with Intel CEO Craig Barrett.

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