Intel’s Strategic Shift

WSJ writes about Intel’s change of strategy – from faster chips to chips that fit the new ways people actually use their computers:

That bet is beginning to pay off, helping Intel become one of the biggest winners to emerge from the long tech slump. In the new world of digital wireless gadgets, computer users care about other things besides speed — such as long battery life and small size. Intel has reorganized the company to deliver chips that offer just that.

Intel got a big boost from one of the first fruits of its new strategy: the Pentium M, a specially designed microprocessor for laptop computers. It’s no speed demon, but it gobbles a lot less power than typical chips, giving portable computers a couple extra hours of battery life, and its small size makes it inexpensive to manufacture. Aided by the new product, Intel’s gross profit on chips for notebook systems is about 75% of sales, 10 points higher than its margins on desktop PCs, estimates UBS Securities analyst Thomas Thornhill.

Intel is whipping up demand with a huge advertising blitz for a combination of chips called Centrino, which includes the Pentium M plus wireless networking and other accessory chips.

Intel’s strategies go beyond portable computers. Power-saving features such as those on the Pentium M, for example, could help reduce electrical bills for companies that buy hundreds of servers that use Intel chips. “We are as obsessed now about power consumption as we are about performance,” says Sean Maloney, an Intel executive vice president and general manager of its communications group.

Intel also is looking for other places to use Centrino-style chip combinations, says Mr. Otellini. For example, Intel may incorporate Wi-Fi and data-compression technology into chips for PCs and other home gadgets, to make it easier to beam digitized music, photos and videos to stereos and televisions.

Intel has other big weapons. The massive factories that a year ago looked like costly mistakes are close to ready, just as PC demand is rebounding. Early next year, Intel will start churning out chips with transistors that are just 90 nanometers across — about one-thousandth the width of a human hair — while most rivals are still gearing up 130-nanometer production. The new technology will turn out chips that are faster, less expensive and use less power.


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Rajesh Jain

An Entrepreneur based in Mumbai, India.