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Intel Marks 1 Billionth Computer Chip - 2003-06-21

Twenty-five years ago this June, the Intel Corporation of Santa Clara, California produced its first microprocessor chip for computers, called the "8086." It now seems a relatively simple chip, containing 29,000 transistors. Today, as the world's leading manufacturer of chips, Intel just produced its one billionth computer chip, its Pentium 4 processor with 55 million transistors, 600 times faster than the old "8086" chip. Intel chips are in 80 percent of America's computers and the company is seen as a "bell-weather" of the high tech industry. As Intel goes, so too go the fortunes of computer makers and the like. Intel's President and Chief Operating Officer, Paul Otellini, was just in Washington, D.C. to receive an award.

In presenting the Leadership Award for Global Commerce at this year's Computer World ceremony in Washington, Morgan Stanley managing director Guy Chiarello described Paul Otellini's role in leading Intel's sales growth in non-American markets. "During his tenure leading Intel's sales and marketing group, he focussed on extending Intel's global presence into emerging markets and making Intel a leader in deploying 'e-business.' Today, Intel derives 70 percent of its revenues from overseas operations. The Asia Pacific region is the single greatest producing [area] in the world for Intel. In 2002 alone, China accounted for $3 billion in revenue for Intel. In addition to China, India and Russia are among the fastest growing regions in terms of sales for the company," he says.

In an interview following the awards ceremony, Paul Otellini described the importance of information technology in today's global marketplace. "Information technology is the heart of the entire modern world. Everything runs on information technology. Increasingly, silicon-based computing is becoming more pervasive. We are going from having 'people-per-computer' to 'computers-per-person' in the not-too-distant future," he said. "That's the most exciting thing to drive our industry forward: Driving the pervasiveness of computing making it easier and more invisible- and therefore, more useful to people."

In recent years, Intel, and other high tech companies have been a major part of America's economic slowdown. Some of it has been attributed to a decreasing need for consumers and businesses to "upgrade" through purchasing new computers and other equipment. But Intel's Otellini said his company and others are no longer depending on these "upgrade" purchases to increase company profits. "No one buys a new computer every year. Even though we bring out new computers all the time or new chips for computers, we're really aiming at bringing new capabilities. [When] the combinations of new software and hardware give new capabilities, people then decide it's worth upgrading. That threshold has been three to four years for a long, long time. On the other hand, two-thirds of the world has never seen or touched a computer. So the potential has really just been [scratched]," he said.

The "brains" of most computers are chips made by Intel under the brand name "Pentium." With each advance in speed or other capability, the chips are named by increasing numerical designations. The latest Intel chip is called the "Pentium 4." And Mr. Otellini said it's the heart of the future direction in chip use. "I think there's a tremendous opportunity for us in the notion of convergence. This is the physical integration of computing and communication in single chips and more and more intelligent devices," he said. "From a simplistic fashion, think about making every computer communicate more seamlessly and wirelessly. Think about every communication device like a cell phone or handset -things you hold in your hand or in your pocket- getting increasingly 'intelligent' by putting the power of Pentium 4 [chips] into these devices over the next ten years. That notion of convergence really is where the potential for true growth lies."

Paul Otellini joined Intel right out of college, when the now huge company was just another fledgling high tech firm. He says he was impressed with the company's optimistic view of the industry's future growth. It was Intel's co-founder Gordon Moore who provided the guiding principle for the high tech industry -to make more powerful chips at a decreasing cost. His so-called "Moore's Law," developed in 1965, suggests that the number of transistors inserted on an integrated circuit could be doubled about every 18 months.

"The company was six years old then," said Mr. Otellini. "So it was hard to tell [about its future]. It was a big 'start-up', a $100 million-a-year company. But the potential was there from the start. The people I interviewed with, out of school [i.e. college], were spectacular. They were head and shoulders above other companies I talked to. You could see the potential. They believed in what they were doing. They believed in the power in Moore's Law and what it could do to change the world."

Mr. Otellini said Intel does not have plans to diversify into other areas of technology besides their specialty of chip making. "We're pretty much focussed on chips. This is what we do best. We're probably the best in the world at it. Of course we have the software that goes with the chips," he said. "But it's fundamentally around delivering products in silicon to very large markets."

As the American high tech sector shows signs of recovery along with the companies' stock prices on Wall Street- Intel President Paul Otellini says he shares such optimism about the expanding use of information technology. "I remain very optimistic. I think this is -in particular for the mature markets- the way to increase productivity," he said. "When you look at emerging markets, where much of the growth is coming, it's the way these economies move into the 21st century in a competitive fashion."

Paul Otellini, president and chief operating officer of Intel, a $144 billion corporation that is the world's largest manufacturer of semiconductor chips. Earlier this month, Intel announced an optimistic forecast for its second quarter, with revenues of at least $6.6 billion. As it celebrates the 25th anniversary of the making of its first computer chip, Intel is increasingly looking at international markets for its future revenue growth.