Intel banking on smaller chips for recovery

Sinking profits will be turned around by making smarter, more efficient processors, says Intel's CEO. Ben Ames reports

The best way for Intel to battle shrinking profits is to keep shrinking its chips towards 32-nanometer geometry by 2009.

That's the view of Intel chief executive Paul Otellini, who recently disclosed that the chipmaker's profit will likely fall 23% to US$9.3 billion. At a recent analyst presentation, Otellini announced a short-term plan to cut costs by restructuring the company and possibly shedding some jobs over the next few months. However, in the long term, the road to higher profits lies with smaller chip geometries, he said.

Intel is already heading in that direction — by the third quarter of this year, it will be making more chips with 65-nm geometry than 90-nm.

That change allows Intel to upgrade its current Netburst microarchitecture family of chips, known as Presler, Yonah and Dempsey. Those processors are sold as Pentium D for desktops, Pentium M for mobile PCs and Xeon for servers.

Intel plans to launch its new, Core microarchitecture line beginning with the Woodcrest chip for servers in June. Its Conroe chip for desktops will go on sale in July and its Merom chip for mobile PCs in August.

Sometime in 2007, Intel will build a 45-nm version of the Core chip family called Penryn. By 2008, Intel will upgrade its microarchitecture in a chip called Nehalem.

The company will move to 32-nm design by 2009, shrinking that chip line into a design called Nehalem-C. By 2010, Intel will upgrade its microarchitecture again for a future line of chips called Gesher.

If current trends continue, Nehalem and Gesher will be extremely fast and efficient processors.

Intel claims that its new 65-nm, dual-core chips are three times more power efficient than their 90-nm, single core predecessors.

They are also more powerful — the new Conroe chip for desktops will be 40% faster than the Pentium D960, the new Merom chip for mobile PCs will be 20% faster than the Core Duo T2600 and the new Woodcrest chip for servers will be 80% faster than the Xeon 2.8 GHz.

There are two ways Intel can make maximum profit selling these new chips, Otellini said at the analyst meeting.

t will target ultramobile PCs in the US and emerging economies in China, India and Latin America. Each sector could generate sales of 100 million units per year, he said.

Intel also makes a lot of money on its chips by bundling them into platforms, such as Centrino for mobile wireless, Viiv for home entertainment and the new vPro for business desktops. Those three brands alone will account for more than 25% of Intel's revenue in 2006, Otellini said.

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