A new generation of computing microprocessors, connected wirelessly to the Internet, soon will revolutionize everyday life, creating smarter, more-efficient products.
Homeowners will be able to cut their energy bills because an electronic device on their kitchen countertop will suggest the cheapest times to do the laundry.
Doctors may be able to carry ultrasound machines in their lab coats.
Department-store shoppers will discover the most popular shirts to go with those pants thanks to an image on a screen attached to the checkout register.
Workers will find the office vending machine now makes suggestions. It processes that you're a woman, 6 feet tall, about 32 years old. It suggests the diet Sprite.
This wave of new devices, which promise to reach into nearly every corner of people's lives, could have Intel inside.
With most personal-computer users now owning their own machines, leaving Intel with less growth potential for its signature chips, the company is aggressively seeking a greater share of the market for microprocessors used in increasingly sophisticated everyday products.
The Atom microprocessor at the heart of Intel's effort is designed, sold and manufactured at a division based in Chandler. Doug Davis, the executive leading the charge, is based in Chandler as well.
Santa Clara, Calif.-based Intel, with 9,700 workers in Chandler, is a bedrock employer in the Valley's technology industry. If Atom flourishes, so, too, might Intel's presence in the Valley.
The chip, which incorporates graphics, sound, and memory all on one circuit, costs less than its Core and Xeon big brothers, so it's appealing to makers of video-game consoles, medical equipment, cars and factory-automation equipment.
For years, Intel's business tied to such products with "embedded" microchips stayed in the background as the company focused on faster, more powerful and pricier microprocessors for personal computers. Now, it could be one of Intel's strongest engines for growth.
Getting the connection
Intel estimates prepared in 2008 indicate that 15 billion devices will connect to the Internet by 2015, including cars, vending machines and parking meters.
The explosive growth of Facebook and Twitter, the launch of tablet computers and the growth of laptops, which overtook desktop PC sales more than a year ago, signal overwhelmingly that consumers want to be online and socially connected.
Beyond that, Intel projects that everyday devices will evolve from static, single functions to being able to talk to one another and the Internet. The advance will offer millions of opportunities to tailor experiences for users and new ways to perform jobs.
Take the lowly vending machine, for example. Instead of a person getting into a truck and driving to a site to see if the machine needs more products, Internet connectivity will make it possible to know exactly when it, and millions more like it, need to be refilled. The technology will make the job easier, more cost-effective and environmentally friendly, Intel executives said.
Intel saw billions of dollars of future business in its Atom microprocessors, the relatively low-cost, low-power chips launched in April 2008 that can drive these everyday devices.
Before the launch, Davis said Intel conducted extensive market-segment research to determine where it wanted to focus its efforts with Atom. Some ideas were offbeat but were identified as opportunities, so Intel is in talks with companies about them.
One idea includes a shopping cart with a screen that could offer customers coupons or specials for products in the departments they're wheeling through. Customers could use the screen to place orders for the deli while shopping in the produce aisle. If it were connected to the Internet, the screen also could allow comparison shopping between stores.
Ultimately, Intel identified 20 to 30 different markets for Atom.
For example, one is in-vehicle infotainment. The system will provide 3-D navigation, track where the vehicle is going and find points of interest along the way. The driver and passengers also can get real-time traffic updates and access to the Internet and television.
Other major markets for Atom include smart TV, which combines big-screen televisions in many living rooms with broadband Internet access so users can watch YouTube videos, download Internet applications and surf between channels and websites.
Manufacturers of exercise machines see the potential of Atom. People want to listen to music and watch TV shows via websites while they work out. Gym owners, in turn, can program the machines with advertisements.
Intel has received 4,000 inquiries from product designers and manufacturers about using the Atom chip in their products. To date, about 1,200 customers plan to use the chip in their devices.
The push to make chips for the multitude of devices is creating intense competition in the semiconductor industry.
Intel's biggest competitor for years has been Advanced Micro Devices, but other companies see potential in the embedded market. Among them are Cavium Networks; Nvidia, a leader in computer graphics; and Freescale Semiconductor, which has a large presence in Phoenix. Intel and Freescale are dueling to create navigation systems for cars.
A move into new products
It is ironic that a small, long-overlooked division of the massive computer chipmaker now carries a big share of the company's future hopes.
Intel has about 81,000 employees worldwide, about 9,700 of them in Chandler. Its embedded division has about 1,500 employees worldwide, not counting sales and engineering teams or local manufacturing technicians that work on behalf of the entire company. About half of the 1,500 are in Chandler. About half of those are tied to Atom.
Atom has ramped up faster than any product in Intel embedded history, with more than 2 million shipments since it was launched in April 2008.
"What Atom does is it opens up all kinds of new applications that we really didn't have the right product for in the past," said Davis, vice president and general manager of the company's embedded and communications group.
Employees have embraced the efforts behind Atom, Davis said.
"It was always kind of this obscure kind of business even though it was growing fast and doing really well," he said.
The myriad applications outside the PC arena is causing Intel to retool its thinking, said Tom Franz a former Intel vice president who ran the embedded business group for several years until he retired more than two years ago. While the company experimented in new markets before, it's now a focus, he said.
"Some experiments go phenomenally well," he said. "Sometimes it's the second guy to get it right. MySpace lost out to Facebook in terms of the Internet. People are going to keep experimenting with these different kinds of technologies to figure out, 'Will people buy?' "
Looking for opportunities
The potential of Atom has Intel re-thinking its classic role as a chip supplier and embarking on a buying spree for technologies that can help it expand and diversify its product offerings in the market for everyday devices.
Intel began a series of purchases last year, including buying the largest software maker for smartphone and in-vehicle entertainment.
In new devices like home energy smart meters and digital checkout kiosks, Intel now is offering mock-ups of some of its devices. This gives Intel the opportunity to offer its customers a chip and software and supply them with a vendor to help put the device together.
"We can set you up for pretty much the whole thing, and you just slap your brand on there," said Bill Kircos, an Intel spokesman.
Intel is trying to adopt a different business model, said Jim McGregor, chief technology strategist at In-Stat, a Scottsdale-based technology research firm.
"You can't just walk in there with a chip," he said. "You've got to walk in there with a complete solution, and you've got to provide engineering resources, you've got to provide support. . . . They're learning from that, and they're trying to do that."
Intel also has spent upward of $10 billion since mid-August on companies it expects will complement its new strategy.
The company plans to spend $1.4 billion in cash to acquire the wireless communications unit of Germany's Infineon Technologies AG. Infineon has chips and licenses for a host of Internet devices, and Intel will be able to take advantage of Infineon's long-range wireless networks for consumers.
The company also announced it would buy security-software maker McAfee Inc. for $7.68 billion, making it the largest acquisition in the company's 42-year history if regulators approve the deal. Intel sees McAfee as being capable of supplying more software and security to its chips for Internet-connected devices that need secure transactions.
Intel also recently signed an agreement to acquire Texas Instruments' cable-modem product line, a purchase that enhances the company's focus on the cable industry and related consumer electronics such as set-top boxes.
Challenges and potential
The company's strategy to expand from its dominance in computer microprocessors is one it tried unsuccessfully before.
During the dot.com boom, Intel bought a number of businesses while on a multibillion-dollar spending spree in an unsuccessful effort to enter the cellphone market.
The company's most recent purchases haven't impressed some analysts, who argue Intel doesn't have a great track record outside its core business.
"We feel like we have seen this movie before," analyst Craig Berger of FBR Capital Markets wrote in a research note to investors.
But moving into products outside its normal expertise gives the company potential for new business if the PC business slows. It also could mean a boost for the Chandler operation.
"It's safe to say Arizona in a lot of ways is at the center of what's going to be an explosive growth in these Internet-connected devices," Intel spokesman Kircos said. "And as that business grows, you'll see more capacity for factories, maybe even more future investment in Arizona-based factories and more employees.
"There's no doubt that any success of Intel beyond or outside the PC . . . benefits Arizona as much as any other U.S. or worldwide site that we have."
In-Stat's McGregor said Intel is not going to win every market.
"But they're at least doing it right, spreading it out. They've got potential in certain segments, especially like the digital home applications and embedded applications. They've got definitely a much tougher row to hoe trying to get into handsets (smartphones). Will they finally get there? Time will tell, but it's definitely a challenge."
Get info on some of Intel's new gadgetsby John Yantis The Arizona Republic Sept. 12, 2010 12:00 AM
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