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FEBRUARY 11, 2003 NEWS ANALYSIS Whoa! Intel's New -- Slower -- Chip? The giant says its latest laptop processor will slip in clock speed, yet achieve better performance. You can bet AMD and others are listening
However, by taking this new, rather un-Intel-like approach to chipmaking and -- perhaps more important -- to marketing, the world's biggest semiconductor producer is attempting to dominate what promises to be a rare, high-growth tech market. Or possibly laying itself open to a big counterattack. Intel says it achieves this performance increase without a speed increase because of the way it's bundling the new processor with other components into an integrated offering, a first for Intel. Called Centrino and set to be launched on Mar. 12, the package includes a main low-power-consuming processor specifically designed for wireless notebooks, a choice of one of two chips controlling graphics, and a wireless chip allowing the laptop to connect to wireless local-area networks. GOTTA HAVE IT. This last piece is critical, considering the explosion of interest in Wi-Fi high-speed wireless Net access. Today, most users who want to connect to, say, a Wi-Fi network at the local Starbucks have to buy special wireless cards to put into their computers. But a wireless chip like one that's part of Centrino functions as an embedded wireless card -- essentially making any notebook wireless-ready. And that's what makes these products so alluring. For 30 years, the bulk of computer processors Intel made went into desktop PCs that either sat by themselves or were connected to a network, or later to the Internet, by wires. But as corporate buyers and consumers start replacing their PCs in late 2003 or early 2004, they're expected to go ga-ga for laptops, especially those that can make batteries last longer and offer built-in wireless Web connectivity. While only 5.7% of all notebooks in existence in 2002 were wireless-ready, that percentage will rise to 35% in 2003 and 90% by 2005, according to market researcher Cahners In-Stat. In two years, 50% of corporate users will be tapping on laptops, up from 20% today, estimates Charlie Glavin, an analyst with investment bank ThinkEquity Partners. And consumers won't be far behind. FULL-COURT PRESS. So Intel, which already controls most of the market for laptop processors, "basically has to reinvent itself," says Glavin. And that's pretty much what the marketing blitz behind Centrino, Intel's first mass-market brand since the original Pentium was introduced in 1993, will set out to do. In fact, Intel says it will pour more into marketing Centrino this year than the $300 million it spent on Pentium 4 in its launch year, according to Pam Pollace, vice-president and director of corporate marketing at Intel. Centrino, whose pricing hasn't been set yet, is expected to replace Celeron, Pentium 3, and Pentium 4 Mobiles as Intel's main notebook chip by the end of 2004. As Intel, which already holds an 80% share of the PC processor market, embarks on this new marketing drive, it's adopting a strategy more like the one archrival AMD (as well as Apple) has been using for years. And therein lies the danger. AMD's top chips have often run at slower absolute speeds than Intel's fastest models, but AMD (AMD ) has always claimed superior real-world performance because of more efficient internal architecture. Ditto for Apple (APPL ) and its PowerPC chips (made by IBM). Centrino, too, will claim better overall throughput despite its slower clock speed, 1.6 gigahertz, compared to Intel's current mobile Pentium 4's 2.4 GHz. And taking a page from Transmeta's (TMTA ) Crusoe laptop chip, Intel will also emphasize Centrino's ability to extend battery life. Despite Centrino's slower speed vs. the Pentium 4 Mobile, "it will absolutely be the fastest processor on the planet for the mobile environment," claims Anand Chandrasekher, Intel's vice-president and general manager for mobile platforms group. HIGH HURDLES. In making such claims, though, Intel might itself be bolstering the arguments its rivals have long been making that chip speed is hardly everything when it comes to gauging processor performance. Tim Bajarin, president of tech marketing consultancy Creative Strategies in Campbell, Calif., believes that ultimately Intel's strategy will pay off, but not before a long hard slog. Among the hurdles Intel will face: The new benchmarks won't be as easy to explain to end users and could easily result in heightened competition from rival chipmakers eager to go up against Intel on the terms they've been stressing all along. Also, many of Intel's PC-making customers fear that packaged offerings might rob them of the ability to choose different vendors for different components. And they may not want to become even more dependent on Intel, especially since many specialty companies offer more advanced individual products compared to Intel's Centrino bundle. Although the CPU itself -- called Pentium M -- that's part of the Centrino brand will also be sold separately, most analysts believe that Intel will offer PC makers major discounts -- and advertising dollars -- to make the bundle irresistible. Intel is expected to offer generous reimbursements to PC makers that mention Centrino in their ads.
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