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.
"I don't think that consumers are asking for faster memory or a new bus, they're asking for a great entertainment experience," said Marty Seyer, general manager of AMD's microprocessor business unit. "We don't see any innovation that is going to be announced next week that we haven't already released."
At the same time, IBM has pushed Intel out of the video game market by sewing up microprocessor deals with both Microsoft and Sony for their next-generation systems. Because video game consoles will have many of the same audiovisual features that Intel is hoping to add to next generation PCs and will be heavily subsidized by the sale of videogame software, they may reduce the need for a high-end entertainment-oriented personal computer in many homes.
"Consumers don't buy chips, they buy systems," said Nick Donatiello, president of Odyssey, a San Francisco-based consumer electronics market research firm.
The challenge for Intel's plans to make the PC the home's entertainment media server, he said, is that wireless data standards are not yet ready to move video data seamlessly around the house.
In addition to offering consumers an entertainment media server, Intel, in demonstrations here on Thursday at a news media and analyst briefing, showed a personal computer that is designed to fit in stereo cabinets and looks like a cable or satellite set-top box.
However, Siu said the prices for such systems would start at about US$700, far above the costs of digital video recorders and video game machines that are now finding their way into the living room.
At the same time, the PC model for the home does have important backers.
"There is a strong catalytic value to Intel stepping up and saying, `We are going to create these integrated systems with stuff built in,'" said Rob Glaser, chief executive of RealNetworks, the Internet audiovisual service. "The PC as the smart hub in the home has basically happened."
Despite moving in the right direction, some analysts and industry executives also suggested that Intel might be out in front of the market, which will be cautious to adopt some of the features that are in its new chips.
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