Barrett: Intel still investing in R&D

Intel Corp. President and CEO Craig Barrett this morning said that despite the economic downturn, Intel continues to invest heavily in new technology.

Lake Buena Vista, Fla.—Intel Corp. President and CEO Craig Barrett this morning said that despite the economic downturn, Intel continues to invest heavily in new technology.

At the Gartner Symposium Mastermind Interview here, Barrett said that the competitive nature of the cyclical semiconductor industry requires continued investment in research and development.

"On an annual basis we invest an average of $4 billion. This year were investing $7.5 billion in new manufacturing technology [as a part of its transition to new architectures]," said Barrett.

As an example, he said that Intel is moving from 8-inch wafers to 12-inch wafers, which provides a 30 percent cost reduction. The value such investing brings to customers is in improved price/performance ratios for desktops, servers and other computing devices, he said.

But Intel is also investing in technology to improve e-business. When the semiconductor giant began its e-business initiatives, it initially set out to book $1 million per month in business over the Web. "Now 95 percent of our business is booked over the Internet," said Barrett.

And Intel uses the Internet to communicate with employees for benefit information, as well as with customers, vendors and business partners. Customers can order Intel goods over the Internet 24 hours a day, seven days a week, he said. Intel also has moved to the transmittal of confidential documents over the Internet, thereby cutting down the time it takes to gather signatures from weeks down to seconds.

In its e-business initiatives, Intel set up a separate e-business organization operating in parallel with IT. The group was chartered to look at all the business aspects associated with ebusiness. "We gave them a couple of years to drive Intel to e-business, with the goal of reducing costs, headcount, inventory" and more, said Barrett. When the downturn hit, Intels efforts paid off in that it was able to save $500 million in inventory write offs, he added.

Intel chose to create a separate e-business organization because Intel believed its e-business initiatives were more reliant on the corporate vision. "We wanted a separate organization with an overload of business expertise," he said.

In the downturn, Intel has not scrapped its home PC program for Intel employees, although deployments have been suspended. But some 30,000 home PCs have already been deployed—with a particular emphasis on international employees. Intel intends to resume the program and hopes to deploy as many at 50,000 under the program.

When asked about the pressure IT managers feel when it comes to refreshing desktops roughly every year or so, Barrett quipped, "I blame it on Gordon Moore." Barrett believes that the semiconductor industry is driven by Moores Law. "We fel if we dont follow it, well be trounced by our competition. If you look at a three-year cycle, the performance differences are astounding. Thats why Intel upgrades desktops every three years."

Barrett doesnt believe that the downturn will extend the cycle of semiconductor innovation. "The risk is from a revenue standpoint. Technology continues to move forward, whether its connectivity, storage, processing or multimedia capabilities. You risk losing competitiveness or personal user benefit." But the cycle for servers is longer, he added.

Intels long term vision for its Itanium 64-bit processor is to bring the same economics to servers that Intel brought to PCs. "We see ourselves continuing to push that [high volume] to make more inroads into the data center." While Web and application servers are predominantly Intel based today, "were increasingly moving into big database servers—a Unix stronghold," he said.

In its 64-bit architecture bid, Intel has obtained commitments from "every major computer manufacturer." Still, Intel doesnt expect Itanium to be a large contributor to its bottom line until 2003 or 2004. Whether Itanium is ready for prime time production is up to the end user. "The end user has to make sure the promises are there—the systems, the software. Its an entirely new architecture," he said. As such, it has to be evaluated before volumes ramp up.

In transitioning from a 32-bit to a 64-bit architecture, Intel "always looked at a 5- to 10-year crossover period in desktops and servers. Servers today run a lot of 32-bit applications. Migration to 64-bit will take some time. By 2010 everyone under the age of 21 will want one," he quipped.

While the bulk of Intels business is Windows/NT centric, that will not likely be the case for servers. "I dont think competition will go away at the high end. There is probably a need for more than one version of an OS. Microsoft has made great strides, but other OSs wont disappear," he said.

Barrett predicted that Linux in the long term will be "one of the players," especially with the interest that the telecommunications industry has shown in a hardened version of Linux.

In describing the failure to converge PCs and phones, Barrett described two issues the industries are still grappling with. "The while telecommunications infrastructure is undergoing massive change. There are no standard building blocks, interfaces," he said. "That will change so the industry as a whole can innovate faster."

Barrett went on to describe a "false competition" between the telephone and PC industry. "The cell phone wont replace my PC—it has to interface to it." He went on to predict greater compatibility between the two devices, and described Intels vision of a PC extended by connecting a variety of different specialized devices to it.

"Mother Nature says horizontal works better than vertical," he said. "The telecommunications industry will have to go that route with standard building blocks." As more analog [devices] go digital, he said, "the PC can be the center of your digital universe."