Intel pitches plan to beat chip glut

Intel will speed up its design cycle to avoid a price war with AMD in a crowded chip market, Intel CEO Paul Otellini said

Facing a market glut of microprocessors and weak corporate demand for PCs running Microsoft's new Windows Vista OS, Intel hopes to stay profitable by producing new chip designs faster than its competitors, Intel CEO Paul Otellini said Monday.

"There's clearly more capacity to build microprocessors than there is demand in 2007, and probably in 2008," Otellini told financial analysts at the Morgan Stanley Technology Conference in San Francisco.

To decrease the impact of a head-to-head processor pricing war with rival Advanced Micro Devices (AMD), Intel must return to the quick development habits it used when producing its Pentium family of chips, Otellini said. Intel backed off that pace after producing the Pentium 4, and soon began to lose market share when Advanced Micro Devices (AMD) launched the Opteron chip in 2003.

"We're doing product refreshes every two years, which is the model we invented, and then stopped doing after Pentium 4, shame on us," Otellini said. "We fell off it -- mea culpa, we screwed up -- and now we're back on that pace."

The company has announced a pace of upgrading its processor architecture and shrinking its transistor geometry in alternating years. That puts Intel on schedule to upgrade its 65-nanometer Core 2 Duo processor to a "Penryn" 45nm geometry chip in 2007. The following year, Intel will upgrade its Core microarchitecture to the new "Nehalem" model, and in 2009 shrink those chips to an even smaller, 32nm scale.

That strategy will allow Intel to preserve its dominant market share in the processor industry, which has swung in the past 15 years from a low of 72 percent to a high of 87 percent, Otellini said. "Staying in that range is our modus operandi, and the higher end of that range is better than the lower end," he said.

Excess production tends to force chip prices down, so Intel needs a way to convince buyers it has a unique product. Even in a market glut, customers will continue to buy the top chip in each category, Otellini said. The company plans to do that with its technology platforms, including Centrino for wireless notebooks, vPro for business desktops and Viiv for home media centre PCs.

"In terms of pricing, it remains very competitive. But we believe you can show differentiation through platforms. Platforms like Centrino can insulate us from the commoditization of the notebook, just as vPro can insulate us from the commoditization of the desktop," Otellini said.

Intel needs to push its own pace of development because the market has not produced an expected jump in demand for PCs using Microsoft's Windows Vista OS.

"Vista will play out like XP did," Otellini said in reference to Microsoft's last major OS launch. "People won't upgrade the OS on the machine, they will buy it on a new machine when they need to do that. I think people will like Vista as they play with it -- it's nicer and prettier. For those who use Macs, it's closer to the Mac than we've seen for a long time."

Despite that growing momentum for consumer Vista sales, corporate IT managers will continue to migrate more slowly, he said. "I know of no organization that is going to adopt it before Service Pack 1 is out -- that's in the second half of this year -- and that includes us. Starting in the second half of this year we'll do a modest deployment, and continue into next year. That's the large company approach for all the people I've talked to."

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Ben Ames

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Luke Hill


I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?