Intel Corp. will ship close to half of Pentium 4 chips through distributors in this quarter, said Paul Otellini, executive vice president and general manager of the Intel Architecture Group.
Otellini, as on previous conference calls with analysts, reiterated the strong growth of the distributor channel for PC processors, which grew 46% in the third quarter over the same period a year ago. "The distributor channels last quarter accounted for 24% of all Pentium 4 shipments and will account for 40% in Q4," he asserted to analysts.
Distributors accounted for 56% of all processor sales in emerging markets, such as China and India, and grew 60% in the third quarter over the same period a year ago. In Latin America distributor shipments grew 100% during the year.
Separately, Intel expects to cut the production cost of wafers 25% by 2003 when it has six wafer fabs running 0.13-micron processing technology, financial analysts were told during the conference call late Tuesday.
Craig Barrett, Intel CEO, said the new production technologies will allow the firm to continue on its aggressive price performance curve. In addition, he said Intel will make its first move into next generation 0.09-micron processing starting in Q3 '03.
"By the end of this year four fabs -- in Hillsboro, Ore., Santa Clara, Calif., Chandler, Ariz. and Hudson, Mass. -- will be operating completely at 0.13 micron. By mid-'02 two 300mm fabs will be on line at Hillsboro, Ore. and Albuquerque, N.M," Barrett said.
Signaling a challenge to Intel's long-time third-party server chipset supplier, ServerWorks, Inc., Santa Clara, Inc., Otelleni said Intel in the first quarter of next year will re-enter the market "shipping chipsets in volume. We expect to gain significant market share."
Otellini repeated the projection he made to EBN last August that Intel would ship the 0.13-micron Northwood Pentium 4 processors and double-data-rate 845 chipsets this quarter to OEM customers to prepare for an industry launch early next year. Some sources who discovered the Northwood and DDR chipset shipments were underway believed Intel had moved up its launch for the products.
Answering questions, Otellini conceded "there may a few pockets of tightness" in the market for the new 478-pin Pentium 4 processors, but claimed production would quickly meet all demand for the new version chip. "There are no production problems," he claimed.
Sean Maloney, executive vice president and general manager of the Communications Group, said Intel in Q2 '01 had increased its market share of Ethernet controllers to 59%, with second place 3Com dropping to 36%. He said Intel had boosted its lead from 50% share in Q4 '00, with 3Com having 31%.
Barrett said Intel had devoted 25% of its $3.9 billion R&D budget this year to its communications, network processors and optical products.
He said Intel was targeting 15%-to-20% a year growth in its combined three business units of microprocessors, wireless, and networking.