Catch them if you can
(August 2003)
Amid the most stubbornly sluggish tech economy that the world has seen in years, Intel CEO Craig Barrett explains how his company is moving forward at full speed—not only to stay ahead of the competition, but also to deliver a shot in the arm to a listless tech industry
Intel® CEO Craig Barrett is a man with a plan.
It's a remarkably simple strategy that you can boil down to a few words.
Capacity. Investment. Innovation.
Notice the word that is conspicuously absent?
"You can't save your way out of a recession in our industry," Barrett says. "If you don't invest for the future, you don't have a future."
Barrett's perspective is based on the idea that technology development does not slow down even when the economy does. Just consider the technological advances that the world has witnessed since the NASDAQ and Dow Jones Industrials stock market indicators took mutual nose dives in April 2000:
- the worldwide demand for wireless
- the achievement of 10 Gigabit Ethernet data speeds
- the widespread global adoption of broadband
- the acceptance of the Linux® operating system into the mainstream
- the development of Web services
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...just to name a few trends that are changing the business landscape dramatically. Attendance at major tech trade shows such as CeBIT and Comdex might have shrunk slightly, but many businesses still flock to these venues each year to show off their latest and greatest to business users, consumers, and the media—evidence that they are pumping dollars into research and development (R&D) even as buyers push their wallets deeper into their pockets.
In short, economic recession does not release tech companies from the breakneck pace of technological advancement. It actually raises the stakes and requires that you innovate tirelessly—or watch your competitors innovate you right out of the market.
The roots of optimism
The tech industry's relentlessness is demonstrated in a well-known maxim called Moore's Law—which also happens to be the root of Barrett's philosophy. In 1965, when soon-to-be Intel founder Gordon Moore was director of research and development at Fairchild Semiconductor, Gordon Moore predicted that the number of transistors the industry could fit on a computer chip would double every couple of years. Although originally intended as a rule of thumb in 1965, it has become the guiding principle of the industry to deliver evermore-powerful semiconductor chips at proportionate decreases in cost.
Today, 35 years after Moore co-founded Intel, Barrett finds himself at the helm of the ship. He brandishes Moore's words as more of a commandment than a prediction, because he knows that Moore's Law does not contain an exit clause for economic uncertainty. At Intel, Moore's Law is the Law of the Land—a "no excuses" approach to the opportunity for market development.
Barrett knows something else: During an economic recession—when the typical knee-jerk reaction is to skimp and save as penance for the sins of the late '90s excess—the company that can keep up with the pace of innovation soon will find itself at the forefront of innovation. Barrett also is banking on the idea that competitors will be hard-pressed to catch up to Intel when the economy goes on the mend, because Intel will have gained an incredible competitive advantage and leadership in technology during the years that rivals were biding their time.
Setting the pace of the race
The PC industry is on the verge of a revolution that experts have envisioned for the last 30 years, as computing and communications capabilities finally converge to produce wirelessly connected notebooks, cell phones, and handhelds. Combining digital computing and communications with digital content will bring a wave of new products and capabilities to business users and consumers. And Intel is just the company to satisfy society's constant hunger for technology that is faster, smaller, and more mobile.
"We see this convergence as one of the most exciting trends happening in the industry today," Barrett says. "Intel is staying ahead of the technology evolution by integrating communications capabilities into essentially all of our computing product architectures."
Barrett says the technology can help businesses "do more with less"—the immutable mantra of nearly every company in the world.
It's the forest, not the trees
"Intel is involved in everything from life-changing technology innovation to the heart of the communications arena, where our devices are part of infrastructure gear that the average person will never see," Barrett says. "It might not have an 'Intel Inside' sticker on it, but the brains of those devices come from Intel."
In the digital communications market, Intel provides flash memory, application processors based on Intel XScaleTM technology, and cellular baseband chipsets. In the networking sphere, Intel manufactures network connectivity products based on Ethernet technology—which Intel helped to co-found along with Digital Equipment Corp. and Xerox.
Over the last 30 years, the Ethernet standard has become the network technology of choice for homes and enterprises—approximately 85 percent of the world's local area networks (LANs) are Ethernet-based. Today, Intel is helping to drive Ethernet technology and product growth into new market segments with faster standards.
It is this diversified approach to innovationalways contributing to an overall solution set—that keeps Intel fabrication facilities hopping with busy workers in bunny suits.
"Intel's compelling proposition is a platform that wins on a price/performance front and is backed by a solution set," Barrett says. "In other words, we don't just sell pieces of silicon and leave them for others to figure out. We work with the entire industry to ensure that we contribute to an overall solution for end users—including the hardware, the operating system, and the software—and that everything works together to create a truly valuable solution to end users."
The price—and payoff—of innovation
Because Intel is in the business of fortifying and powering other companies' products, fruitful partnerships are vital to its success. But the nature of Intel's business model creates an interdependent relationship in which everyone must be faring well for Intel to fare well. In other words, if the masses aren't buying the PCs and servers, then the PC and server makers aren't buying the chips from Intel.
But this idea leads us back to Barrett's dogged belief in capacity, investment, and innovation. Pair the persistent pace of technological development with the plain fact that economic trends are cyclical, and you can understand why Barrett is doing everything he can to be ready for the inevitable upswing in tech buying.
Most notably, Intel is currently in the process of building the third of four new "fabs"—fabrication facilities—that will produce some of the world's most advanced semiconductors in the most massive quantities. The newest plant, known as D1D and located in Hillsboro, Oregon, produces 300 mm silicon wafers that have a quarter of a billion transistors on a single chip.
The cost of all four plants? Ten billion dollars. That's billion—with a "b."
But by producing more chips on a single piece of silicon, Intel immediately decreases the cost of producing a single chip. So when the economy turns, not only will Intel be producing better, more technologically evolved chips, it also may be producing them at a lower cost.
The next stop along the chain reaction: By producing more chips at a lower cost, Intel can provide increased functionality and new capabilities to its customers—the companies that sell hardware directly to end users. The hardware then becomes more valuable and, at the same time, more affordable to enterprises and consumers. The buying begins and—voilà!—the tech recovery is well on its way. Enterprises can stop doing more with less, and start doing more with enough—and even set their sights on profits for a change.
True, that might be an oversimplified outcome of the "capacity" strategy. But Moore's Law has always been a somewhat simple, optimistic view of the tech world. For Barrett and Intel, the law has never failed. And if it works for Intel, then it works for everyone else.
"Intel's strategy is not merely a self-serving objective. Our investment in capacity and focus on innovation are as much a responsibility as they are an opportunity," Barrett says. "When the economy turns around, our customers will have new challenges that we will need to help them solve. And innovation today is the only way that we can fulfill our commitment to our customers tomorrow."
It's a dirty job...
The role of an IT decision maker is an unenviable position these days. We asked Intel CEO Craig Barrett for some words of wisdom for the people in the hot seat.
"IT decision makers are not only responsible for the infrastructure, but they're also responsible for the productivity of employees and the competitiveness of the entire company. You have to make sure that you equip your work force with the appropriate technology that enables them to be competitive. It's a tough job. My advice: Don't invest in a bunch of piecemeal solutions to solve piecemeal problems. Always look at challenges from a 'total solution' perspective. When it comes to IT solutions, the whole is definitely bigger than the sum of its parts."
