Excerpts from a Q&A with
Forbes: When did you think Intel had to change?
Otellini: My epiphany for driving our strategy came around 2002. We were leading up to the launch of what ultimately became Centrino. I felt very strongly that wireless communications as an integral part of a notebook experience was a killer market opportunity. Six months after launch, it became very obvious that this was a home run.
Around the same time, I changed our planning processes. We had had a microprocessor group, a chip set team, a server group and so on. I said, "We're going to turn this around and identify the end markets and do our planning from the markets backwards." So we changed product planning inside of Intel to be around platforms. It played to our unique advantages--silicon technology, platform architecture knowledge and the ability to scale massively.
Intel had accumulated something like $10 billion acquisitions in communications and networking. Did you have to do that?
There was certainly some communications architecture expertise that we didn't have inside the company. Our work in wi-fi and WiMax came out of those acquisitions. Clearly, one of the larger areas of investment was in the handset division, which we exited. There were a lot of lessons learned there. We saw that there wasn't a way for us to make good money there. But I believe very much that the future of computing is in handheld devices.
But if the future is in handheld devices, why get out of handsets?
It's a lot easier to add voice to a computer than to add computing to a phone. We're not just shrinking the notebook. We're asking, How do we provide a full Internet experience that also includes voice, in a handheld form-factor? I think the Internet is the killer app of mobile computing. Of all computing. The Internet runs on Intel architecture today.
So our view is, if you could deliver the full computer experience, in a handheld form factor, with the right kind of power and performance characteristics, then you have a very interesting product. And in that business, we compete based on our strengths, not our weaknesses.
Is the business model for the ultra-mobile industry going to look like the PC world?
I don't think so. We're not taking the PC business model into this area. We're taking the Intel architecture, which runs most of the Internet, into new devices. These are not going to be $200 chips, inside of a $200 phone. You have to deliver the right kind of performance to run the applications, have the right power envelope to give you the all-day battery power, and the right price to hit the sweet spot for the consumer. That means high integration of technology and moving to very small chips and system-on-chip architectures.
Saying, "I'm going to take a pre-existing architecture on which a billion Internet devices run today and move that into handhelds" is wholly different than saying, "I'm going to take the PC business model and move that into handhelds." It's a whole different model. There's different software to some extent. Windows is a player there but not the only player. And you can see that with Apple emerging.
More and more chip manufacturers have stepped back from manufacturing chips and instead are relying on foundries. What about Intel?
Chip manufacturing gets harder and more expensive all the time. It's basically the laws of physics and the laws of economics at play. To build a modern semiconductor plant which uses 300-millimeter wafers, and state-of-the-art lithography with designs measuring 45 nanometers, costs close to $4 billion. Then there are the tools inside it, which amount to close to a billion dollars, per generation of technology. That means you need to generate $4 billion to $5 billion a year in revenue out of it. There are not many semiconductor companies that are $5 billion or more in revenue. So economics leads many companies to collaborate.
No. 2: The laws of physics mean chip making gets harder and harder. We think we have some breakthrough technology at 45 nanometer. We think it will be harder for people to do that than it was in the past at, say, 65 nanometer or 90 nanometer. Our lead over the competition may extend with this generation and probably extend a lot after that. This is not a macho thing. It's all based on sheer economics.
As the Internet and hopefully our architecture come into the world of consumer electronics and handhelds, the price points are not going to be $1,000 but a few hundred dollars. So we have to be able to get this to low-cost, high performance single chips. And make reasonable profits.
Will Intel work differently with these device makers than it has with PC companies?
Over time, the answer is yes. And what we do in the PC space will change too. As you move towards system on a chip, particularly in ultra-small devices, different customers will have different requirements for what's on the chip. We may have to do derivative versions or semi-custom versions--and create ways customers can exploit their own intellectual property. We do some of this today in packaging. And in some areas of consumer electronics we're building system on chips for certain classes of devices such as set-top box makers.
What about Itanium?
It's used for really big machines: the Tokyo stock exchange, mainframe replacements. There are two models for high-performance computing: scale up and scale out. Itanium is a mainframe scale-up kind of machine. Google, with its zillions of racks of servers, is a scale out. At some point in time, the scale-out model may prevail. But for right now, for some classes of applications, particularly ones for organizations where systems have to be ultra-reliable and high performance, scale up still matters. And Itanium is our best architecture for that today.
What's been your hardest decision?
The one that led to us having to downsize. It was pretty obvious at the analyst meeting last year that we said some of our basic economic models, which had existed for many years, were changing. We had to get leaner, get more focused.
What have you learned by being on the Google board?
Much of the success of Google, apart from obviously their technology, is their aggressive willingness to partner and to make their partners successful. Google says, "You, Mister Partner, and I can create a huge opportunity to monetize assets that you may have. You can do it on your own, or you can do it with me and my scale, and I'll cut you in on it." And that "cutting you in on it" has been the heart of much of Google's growth.
That business model of setting up opportunities where you share mutual success financially has not been a model that has been inside this company or even in the classic PC space. I think this is a very interesting model for us.
http://www.forbes.com/2007/05/17/intel-otellini-chips-tech-cz_bc_0517otellini.html?boxes=custom Sphere: Related Content
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