Intel chief Craig Barrett talks strategy

Chip maker chief says business is strong and the component shortage is easing -- but that Intel is transforming into a new company

It may be riding a strong wave of chip demand today, but Intel's top executive says the company is preparing to diversify as growth in its traditional PC business slows.

In a wide-ranging interview at the Autumn Intel Developer Forum Tuesday, chief executive Craig Barrett told ZDNet News:

  • PCs will remain Intel's bread-and-butter business, at least for the next few years. The demand remains robust.

  • In ten years, Intel will be a more "balanced" company with an increased percentage of sales coming from networking, Net infrastructure and communications technologies, as well as services.

  • The component shortage that has plagued many computer companies this year is easing, but at least spot shortages will continue.

Barrett said that over the next five years it is likely that Intel's business of selling processors and other chips to computer companies will continue. "Our core business is still growing," Barrett said.

But even though Barrett, 60, expects a sales boost from the Itanium chip, "it is pretty clear that the growth rate in the business isn't going to be our traditional 30 percent," he said. "I think 15 or 20 percent is a more appropriate number."

So Intel is turning to new markets to generate revenue. These markets -- networking, Net infrastructure, communications and services -- are growth businesses, putting up revenue growth numbers north of 50 percent.

"They'll eat into the base [Intel Architecture business]," Barrett said. But he said that's his plan.

Over the next decade, Intel will become a very different company.

"It's headed towards a much more diversified building block supplier," Barrett said. "I see a much more balanced company than today ten years from today."

One growth area is optical networking, he said. But there is another area that is less obvious.

"One thing that doesn't get written about a lot is the interface between the wireless world and the PC world."

The technology that connects wireless technology to the PC is still in its infancy. Technology such as Bluetooth, a wireless connectivity technology, comes into play, but Barrett indicated he was thinking more about 3G, or third-generation, wireless networks.

"It makes a lot of sense for the PC people and the mobile people to work together," he said. "I think the major companies are in communication about it."

Supply has been a major issue for Intel and its customers this year. The company continues to experience shortages of certain chips, unable to meet unexpectedly high demand. One of Intel's top server business executives, Mike Fister, told reporters at the IDF that Pentium III Xeon chips, particularly the 700MHz Pentium III Xeon, are in tight supply.

Barrett said supply is improving even as demand is spiking in anticipation of the holiday buying season.

"We're in quite a lot better balance than we were in the first half of the year," Barrett said.

However, there will still be "some spot shortages", he said. "I think it's going to depend on how accurate [customer] forecasts are going to be."

Intel learned a lesson during its manufacturing transition from the 0.25-micron to the 0.18-micron process technology, when it did not build in enough extra capacity to meet a spike in customer demand. The company said it won't cut it so close next time, when it shifts from 0.18 to 0.13-micron technology starting in mid-2001.

With several fabrication plants coming online next year, including two dedicated to 0.13-micron manufacturing, "we're bringing on a lot of [extra] capacity with this transition," Barrett said.

However, some analysts have said the addition of capacity could lead to a supply glut over time. Barrett disagreed.

"What I know is what I see. Almost across out entire product line, we're seeing strong demand," he said.

That includes strong demand for mobile processors, as well as networking and communications chips.

"If that translates into a downturn in the semiconductor industry, I haven't figured out the equation yet," he said.

See Chips Central for daily hardware news, including an interactive timeline of AMD and Intel's upcoming product launches.

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