Asian outlook, inventory woes cloud the picture as . . . -- Intel sketches process plans
By Rick Boyd-merritt And David Lammers
April 27, 1998, TechWeb News
(my emphasis added-JS)
New York - Intel Corp. is pressing ahead with plans to bring up a next-generation 0.18-micron process technology even as it postpones its shift to 300-mm (12-inch) wafers to beyond the year 2000.
The bullet points on the technology road map for the world's largest semiconductor company emerged at an analysts meeting here last week at which Intel executives expressed cautious optimism that the PC market-sluggish in the first months of 1998-will rebound later this year.
"We are now planning for a massive ramp-up of 0.18-micron technology for mid-'99, and the bulk of this year's planned [$5 billion] in capital spending is targeted at that," said Craig Barrett, president and soon-to-be chief executive officer of Intel. "But I think our outlook on 300-mm wafers is consistent with the rest of the industry, and that means pushing the transition out to the 2001-2002 time frame.
"Our 0.18 technology will come up on 200-mm [8-inch] wafers, so the next target for a [wafer size] transition is with our 0.13 technology, which is two to 21/2 years out."
Whenever the transition comes, at least one generation of process technology, and perhaps two, will be run in parallel on 200-mm and 300-mm wafers, according to Intel chairman emeritus Gordon Moore. "It's taken a lot longer than anyone thought to get to 12-inch wafers," said Moore, who attended the analysts meeting. "At one time we thought [the shift] would come at 0.25 micron, then at 0.18 micron. Now we think it will come at 0.13 micron."
The switch to 300-mm wafers is particularly difficult. Intel today reuses as much as 64 percent of its capital equipment when it brings up a new process, but the switch to larger wafers will require new purchases of almost all the required fab equipment, Moore said.
Intel recently pared its proposed 1998 capital expenditures from about $5.3 billion to $5 billion. Barrett said he's confident the new figure will survive any further economic downturns, since it is based on planned product introductions next year.
The 0.18 process will presumably be used for future versions of the Pentium II as well as the 64-bit Merced processor, slated to be formally announced in the second half of next year.
Barrett said Intel is now qualifying its fourth fab for a 0.25-micron process, which will be used for all of its processors by the end of this year. The company is ending wafer starts for processors built in 0.35-micron technology-including its desktop Pentium with MMX multimedia extensions-as part of the transition to 0.25 micron and the Pentium II.
Sean Maloney, Intel's vice president for sales and marketing, attributed the recent financial dips at Intel, Compaq and other PC makers primarily to price wars, the Asian flu and excess inventories of older Pentium parts. "With our transition to the P6 [Pentium II], this inventory transition will continue on for a while yet, but it has everyone's attention," he said. "Unit sales growth in the second half of the year is traditionally stronger [than in the first half], and indications are that it will again be the case this year."
Maloney and other Intel executives downplayed the potential impact on Intel of a general dip in microprocessor average selling prices as the company focuses more heavily on the so-called Basic PC market with its new Celeron processors, announced earlier this month.
Barrett said he doesn't "think anyone knows whether the Basic PC will cannibalize the high-performance systems." He predicted that the streamlined systems will account for about a quarter of total unit sales this year. "It could go up higher than that, but we are not making any hard forecasts. Basically I think it will be a market expander."
PCs costing less than $1,000 now account for 20 percent of the U.S. market; the next tier, comprising machines priced at $1,000 to $1,500, accounts for another 25 percent, according to International Data Corp. (Framingham, Mass.). By the year 2000, IDC predicts, sub-$1,500 machines will claim 60 percent of the U.S. market; two years later, their share will have increased to 78 percent of the domestic market.
Intel tipped plans to serve that segment via 1999 delivery of a chip set with integrated graphics and a streamlined motherboard. The company also confirmed that it plans delivery later this year of a 300- and a 333-MHz Celeron with a 128-kbyte integrated L2 cache, as well as a low-cost 440EX chip set for a 66-MHz processor bus.
Even as it focuses on low-end PCs, the company is ramping up its server activities as part of a strategy to spread its efforts across a broader range of products. John Miner, general manager of Intel's Enterprise Server Group, said as many as 8 million Intel-based servers are expected to ship in 2001. The company expects to maintain relatively high price points for its server-oriented processors, revving speeds and features but not lowering tags on the chips over time.
The server market has been growing at a rate of greater than 30 percent over the past eight quarters, Miner said. "This is the kind of growth rate most industries would die for."
The Asian PC market, meanwhile, has been a mixed bag. In Japan, PC prices are again much higher than in the United States. That's one reason that the 2 percent drop in unit shipments in Japan last year will be followed by further declines this year and in 1999, said Miya Akatsu, senior PC analyst at IDC Japan.
Another problem, she said, is that many Japanese do not use their computers much after they buy them, and the government has done little to promote computer use.
Dennis Philbin, managing director of IDC Asia-Pacific, said South Korea's personal-computer vendors may be the hardest-hit among Asian market players. He said such companies as Samsung Electronics, TriGem and Daewoo are suffering the "triple whammy" of dependence on Asia overall, on Korea in particular, and on consumers rather than business customers.
Philbin said the high educational level of South Korea's population has contributed to a high rate of PC usage in homes. On the other hand, corruption and reckless corporate spending will make economic recovery particularly difficult in that country, he said.
U.S. suitors
Philbin expects Compaq or another U.S. computer vendor to buy TriGem, though recent talks with Compaq were unsuccessful.
Maloney of Intel said the PC markets are strong in Asia's two most populous countries-China and India-though "neither country has strong enough demand currently to overcome the overall low demand in Asia."
The low penetration of computers in Asia will make the region attractive over the long term. While the worldwide PC market is likely to see relatively slow growth this year and next, it should pick up again between 2000 and 2002.
From 1998 to 2002, the CAGR for global PC shipments is expected to be 13.4 percent.
Copyright r 1998 CMP Media Inc.
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