How will Intel keep the demand for its processor chips strong as the Internet, rather than the PC, becomes the center of business? By building fast chips for Web servers, and funding companies that will use its products, says chairman Andy Grove.
"Our industry has moved from solving the problems associated with personal productivity to solving the problems associated with company productivity, using the medium of connected computing," said Grove.
Grove and other top Intel executives repeatedly hammered home the company's new Net focus during a presentation Thursday for investors and analysts.
"Our goal is to make sure Internet access is synonymous with Intel architecture processors," said Grove.
To further emphasize its participation in the Net economy, Intel has reworked its mission statement, changing a keystone principle from "... serving the computing industry worldwide" to "... servicing the worldwide Internet economy."
Grove said 1999 was a turning point for the company, because it was the first time Intel spent more money on acquisitions and investments than capital costs. The company made 300 investments costing US$4.8 billion during the year.
"These investments don't just benefit us financially, but they benefit us strategically as well," said Grove.
He said the company has earmarked $250 million for the Intel 64 fund, which supports companies developing products for its forthcoming Itanium chip. Intel has similarly designated $200 million for a communications fund to feed third-party development.
Intel is putting all of its own commerce online and currently services 550 of its customers electronically, Grove said. The company does $1 billion in electronic commerce each month, and also provides technical information to its customers online.
But Intel is not forgetting its core business and will unleash a bevy of new processors in 2000, according to Paul Otellini, executive vice president of the Intel Architecture Group.
Next year, the company will introduce Pentium III and Xeon processors for servers that run at 800 MHz. The new Xeons will come with internal memory caches of up to 2 MB in size.
Notebook computers will also get a boost with 700 MHz chips and the SpeedStep technology, which makes better use of power when plugged into a wall or on the road.
Otellini said the company will be even busier during the second half of 2000.
Intel will introduce three chips. One, codenamed "Willamette," which will run above 1 GHz. Then there's the long-overdue 64-bit Itanium chip and a new product, called "Timna," which Otellini called the first single chip PC.
Timna incorporates the microprocessor, AGP graphics controller, and memory controller on a single chip, for smaller form factor at a reduced cost. It will be available for back-to-school computers by next fall, he said.
Meanwhile, 1999 has been a year of transitions for Intel, as the Pentium III went from 10 percent of the company's performance-processor business at the beginning of the year to 90 percent now, Otellini said. He pronounced Intel's efforts to corral the sub-$1,000 computer market a success, saying that the company has upped its low-end market share from 30 percent to nearly 70 percent.
Intel said the recent earthquakes in Taiwan have not affected its business and that the company would likewise be impervious to Y2K problems, despite analyst predictions that the millennium bug could slow PC sales.
Intel is moving from using 0.25 micron chips to 0.18 micron technology, and gets 30 percent better yields from each large silicon wafer, said Otellini.
Between that and the new Celeron design, unit costs for the chip will be down 20 percent, and Pentium production costs will be down another 50 percent by the fourth quarter of 2000, Otellini said. He said the 0.18 micron die will be used in 90 percent of Intel's chips by the third quarter of 2000.
