Intel's Barrett: This year, we'll be mostly doing chips...

And - whisper it - could Intel be seeing the green shoots of an economic recovery?

Intel this year will focus on what it does best: crank out chips and expand factory capacity. The chipmaker will produce new families of chips for desktops, notebooks and mobile phones this year, chief executive Craig Barrett said in a speech at this week's Intel Developer Forum in San Jose. Additionally, the company will continue to invest in fabrication plants, the billion-dollar factories that pump out millions of chips. On Tuesday, Intel announced it will convert Fab 12 in Chandler, Arizona, from processing wafers with 200-millimeter diametres to a facility that can process 300-millimetre wafers. The conversion - which will give Intel five 300mm fabs when completed in 2005 - will cost about $2bn but will pay dividends in higher productivity. Chips produced on these larger wafers cost about 30 per cent less to make and more than twice as many can be produced at once. "Our future is built around new technology and having the (manufacturing) volume in place to serve the growth that the industry will demand," Barrett said at a press conference before his speech. "We always try to position ourselves with capacity to grow faster than the industry." Barrett also indicated that business conditions appear to be picking up slightly, at least for Intel's computing divisions. Some research firms are anticipating that IT spending may grow five per cent to seven per cent this year, in part because many of the PCs bought during the 1998-99 sales bulge will need updating. Intel itself will buy 35,000 new desktops while Lucent, the troubled developer of telecommunications gear, has said it will refresh its corporate desktops. "We are seeing a variety of companies choosing to upgrade," Barrett said. Sales of communications chips, however, are likely to remain lacklustre. "The over-buildout, the over-investment in wireless is still working itself out. We hope the second half of 2003 (for communications) will be better than the first half," he said. "Computing will probably recover faster than communications." Consumer demand for wireless and broadband products could compensate for weak corporate sales. DSL (digital subscriber line) and home fibre optics are on the rise in Japan, Barrett said. In a recent business trip to Tokyo, he noted how Yahoo! representatives were giving away DSL modems to shoppers along the street to encourage them to sign up for service. Yahoo! now has two million DSL customers in the country, he said. Barrett added that Intel's product lines will undergo changes. Chips for desktops, such as Intel's Prescott, and notebooks, such as Banias, will continue to diverge in their capabilities because of the different demands of their buyers. "Mobile (chips) will increasingly have more wireless and power-saving technology. (A) desktop will have more power built into it," he said. "You will see them probably distance themselves a bit more." Chips that integrate several functions - such as the Manitoba chip that contains a processor, a digital signal processor and flash memory - will become more prevalent. An integrated chip for handhelds, code-named Bulverde, is expected next year, sources said. Integration makes the manufacturing process more efficient. As an example, Barrett said, "We're seeing... optical technology get coupled with silicon technology." Optical chips pass data at faster rates than silicon chips and use less energy, but are more costly to build.