The US silicon chip maker has positioned itself to enter the post-technology recession era in good shape, writes Conor O'Clery, in New York
Getting away from what it does best - making computer chips - has led to many false starts for the world's biggest silicon chip maker.
Intel is trying to put behind it a three-year period of product delays and shortages in its core computer-chip business, combined with technical troubles, management mistakes and ill-advised ventures like the manufacture of network servers and routers, which was abandoned last year.
The worst slowdown in the short history of the semi-conductor industry hit revenue and profits hard in 2001. That year the Santa Clara-based company shed 5,000 jobs through attrition, reducing the number of employees to 80,000, a startling reversal after a 33 per cent increase in the workforce in the previous two years.
The renewed $2 billion (€2.2 billion) investment in the Republic announced yesterday follows a retreat by Intel chief executive Mr Craig Barrett from involvement in a wide range of Intel-brand name products to its core business of making micro chips.
The firm has invested $11.5 billion in research and manufacturing - it is spending $4.1 billion more in 2002 in research and development and $5.5 billion in capital expenditure - and has positioned itself to enter the post-technology recession era in good shape. It countered the fierce competition from rival Advanced Micro Devices - which in 1999 introduced a faster chip than Intel's Pentium 111 - by slashing prices on its Pentium 4 chip by 84 per cent.
By the end of last year Mr Barrett could claim that Intel Pentium processors and chipsets were coming out ahead of schedule and "our whole road map is accelerating". However as BusinessWeek pointed out in a recent critical analysis of the firm, the speed of internet connections is impressing customers more than the speed of its PCs. Intel has operated since 1965 in accordance with Moore's law, named after the firm's co-founder Gordon Moore, which predicts that the number of digital transistors on microchips will double every 18 months, getting cheaper all the time. The law has proved accurate but the process is getting more expensive. The next breakthrough chip could be the cellular nonlinear network or CNN, an analog processor.
The challenge for Intel is to get the right balance in the manufacture of different chip lines. Intel apparently hopes to combine high-performance analog and digital chips with flash memory to advance its wireless internet on a chip up to five times more powerful than its rivals'.
"Intel's aggressive R&D and manufacturing investments paid off in the first quarter, helping our product mix and profitability in a generally soft environment," said Mr Barrett, when announcing 2002 first-quarter results, which showed Intel recovering from its major slump.
"We picked up the pace of new product introductions, launching the world's most powerful desktop microprocessors - the Pentium 4 processor at 2.2 and 2.4 GHz - along with the first mobile Pentium 4 processors and the first Xeon processors based on our NetBurst microarchitecture," he said.
Against this background and Intel's decision to resume construction of the $2 billion Leixlip chip manufacturing plant. Mr Barrett's vision involves moving Intel beyond PCs and into communications, information devices and internet services. Wireless-friendly devices will help persuade consumers to adopt new laptop and notebook computing devices. This week in New York's Grand Central Station commuters were treated to digital music, wireless gaming and films to promote Intel's new Pentium 4 Processor M. This is a mobile version of the company's Pentium 4 chip, which is available in three speeds, and passers-by were able to watch a student using a laptop to download music and a family getting travel directions, checking e-mail and watching DVD movies in their car. Intel is now working on chips designed for mobile performance and for quicker time in making a desktop chipset "mobile-friendly". With more lightness and power, the laptop has become a consumer product, after a decade as a tool of business travellers, and sales could reach 30 million units this year. Mobile communication and entertainment systems are reshaping the way people live, according to Ms Ann Lewnes, Intel vice-president and director of consumer marketing. "It's not just a laptop, it's a lifestyle," she said.
