Peter Day's Comment

Goodbye to Intel

It is of course coincidence that the final days of Craig Barrett's 35- year career at the giant American computer chip making corporation Intel were marked by the handing down to the company of the biggest fine ever yet levied on anyone by the European Commission.

Intel is going to appeal against both the judgement that it broke European Union monopoly rules and the eye-watering fine: more than one billion euros, the equivalent of almost US$1.5 billion.

Craig Barrett had held all the top jobs at Intel, and he's been chairman for the past four years, so he was understandably robust in his defence of it when we talked the other day.
Intel has about 80% of the global market for the microprocessors at the heart of most small desk top and laptop computers.

Of the charges of bullying his much smaller rival Associated Micro Devices by threatening to withhold rebates to customers if they used too many ADM chips, Craig Barrett told me, "Although the Craig Barrett era at Intel is over, this is just the latest twist in one of the most extraordinary business stories of our time.

Intel's Ted Hoff actually invented the microprocessor that made personal computing possible..he told me about it once, sitting under one of the lemon trees in his modest garden in Silicon Valley California.

To demonstrate it, Intel put the device into a personal computer, but did not pursue the idea. When IBM actually started the personal computer movement, it bought the chips from Intel but insisted that the company license out its designs to other companies, for security of supply.

AMD, started by former Fairchild salesman, Jerry Sanders, was one of the licenses. Jerry Sanders was a protégée of the Intel cofounder the late Robert Noyce, and built his rival company upon this unique opportunity. But Noyce died young and Intel was famously competitive, and for more than two decades now the companies have been locked in epic but intermittent litigation over exactly what rights AMD has, one of the longest courtroom battles ever seen.

The much smaller AMD has never been a profits powerhouse, but it has been clever and nimble enough to keep up with the huge advances in technology mapped out for the semiconductor industry that other Intel cofounder Gordon Moore..computer power on a chip doubling every two years for the past what 30 years and into the future.

Computer chipmaking is a high stakes business. Chips are made in fabrication plants which cost upwards of US$2billion to build and equip and are out of date four or five years later. As Intel's chief operating officer, Craig Barrett is said to have "saved the company" by instituting a pursuit of engineering excellence that outdid the even the Japanese.

Profits in chip making are not just about innovation. Really superior manufacturing means a company can increase the yield of working chips it manages to make off each wafer of silicon.
This is a ruthless business, and Intel's former chairman Andy Grove is famous for saying that in business: "Only the paranoid survive".

When you think of the Intel story, you can see what he means.