Sun, Jun 20, 2004 - Page 11 News List

Intel shifts focus of chips

NY TIMES NEWS SERVICE , SAN FRANCISCO

For decades, the Intel Corp has expanded its core business by making its computer chips faster and lowering their costs. Next week, however, the company plans to shift gears; it will mute its traditional speed message and focus instead on an array of consumer-oriented features to bolster growth.

Tomorrow, Intel is planning to announce its newest foray into the home computing market, blending performance, wireless capability and multimedia audio, video and image features into a set of chips that will be at the core of the next-generation personal computer.

The new three-chip suite, which has been codenamed "Grantsdale," is also the clearest expression of the "innovation and integration" strategy of Intel's rising star, Paul Otellini, the chief financial officer. That strategy is both a plan to lure consumers and a bet that Intel can create a new wave of growth in consumer electronics.

"Intel has changed its design paradigm to start not just adding gigahertz, but to adding features that users demand," Otellini said at an analysts' meeting last month.

That strategic shift will be much in evidence on Monday when PC makers announce the first new computers based on Intel's new chips. Intel executives said that the changes, which will make possible higher-speed computing, more reliable storage and more advanced audiovisual standards, will also be a fundamental change of the internal structure of the standard PC.

In a significant shift, the company, based in Santa Clara, Calif, will announce its fastest processor yet but will focus instead on the ability of the new chipsets -- known as the 915 G/P and 925X Express -- to view high-definition video, listen to higher-quality digital audio, serve as a Wi-Fi base station and support a storage standard that protects against disk failure.

"The last major makeover for the PC happened in the early 1990s," said William Siu, general manager of Intel's desktop platforms group. "We're trying to focus not just on technology leadership but on how people will use it."

However, how quickly the new design will be adopted by computer makers and whether it will help Intel, the world's largest chip maker, successfully push into markets now dominated by television and stereo companies is being hotly debated.

Intel dominates the home office and computing in the family room, but its future depends in no small part on its ability to cash in on a the idea of the digital living room, a market that the investment research firm Sanford Bernstein & Co predicts will generate more than US$250 billion in new revenue by 2008.

"This is very good news for the semiconductor industry," said Adam Parker, an analyst with Sanford Bernstein. "The question is how good this will be for Intel."

The challenge for Intel is that it is not alone in focusing on growth in the consumer home entertainment market.

On one side, Advanced Micro Devices (AMD), Intel's traditional rival in the microprocessor business, has quarried market share at the top end of the desktop PC business with the introduction of its 64-bit Athlon processor. Intel had been trying to lock AMD out of the 64-bit computing market by betting on its 64-bit Itanium chip for corporate computing applications.

Now that strategy seems to be falling short. Itanium is staggering, largely in competition with AMD's Opteron 64-bit chip for server computers, and it now appears that Intel has also lost some ground at the very high end of the desktop market to the Athlon.

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