In an interview with Reuters, Krzanich says he has fine-tuned the company’s supply chain in order to meet an anticipated demand for tablets. “We will start to see more and more of our capacity and our output go to things that are mobile, like phones and tablets and other devices,” he tells the global newswire.

Indeed, when the man responsible for Intel’s massive global chip-manufacturing operation speaks, he does so with the authority of a company that tracks the pulse of demand for chips obsessively, so he doesn’t make so public a statement lightly.

Yet the basic competitive problem remains. While Intel still dominates the roughly 300-million-unit-per-year market for PC microprocessors, it has struggled to compete against chips based on designs from the British chip designer ARM, which power most of the world’s smartphones and tablets — including, not insignificantly, the iPad. And while Intel’s lower-power Medfield-generation chip has landed in designs from Lenovo and Motorola Mobility, the wins are seen as progress in a race in which it was already well behind the leader.

Perhaps more interesting is how Reuters casually refers to Krzanich as a candidate to succeed CEO Paul Otellini. Intel shook up its management ranks in January, and promoted Krzanich to COO. Covering Intel includes paying attention to a constant drumbeat of speculation about who the next boss is going to be. Otellini is 61, and the company’s mandatory retirement age is 65, so the succession race, and the perennial handicapping chatter that goes with it, will be something of a marathon.

Krzanich would be a logical successor, mainly because most Intel CEOs become COO first, including both Otellini and his predecessor Craig Barrett. Yet there’s still one rival who bears continued attention: Sean Maloney, the English-born current head of Intel China, had been widely seen as the leading contender before suffering a stroke two years ago. However, people who know him say his recovery is remarkable.

I noted Maloney’s return to competitive rowing last year. A September profile of Maloney in Fortune had more to say on that subject. While he has largely recovered physically, the main lingering effect of the stroke has been on his speech. If he can get close to sounding as he did before the stroke, we may have a real horse race on our hands.

The first was last year in Hillsboro, Oregon, and during the visit, Intel CEO Paul Otellini announced that the new chip plant, or “fab” as they’re usually called, would be built in Arizona.

The main reason that Obama loves Intel is that it’s an example of the kind of manufacturing work that he’d like to see more of in America. As such, the sight of Intel spending $5 billion to build a new plant and adding 4,000 jobs is the sort of thing that any president would like to stand close to, especially at the onset of what looks to be a tough re-election campaign. It’s also one of those rare companies that’s riding high despite an uncertain global economy.

One thing Obama certainly didn’t mention was that Intel added plants in Israel and China in the last year as well. He’s also in no hurry to remind the audience that the chips that Intel makes will be shipped to China and inserted into computers and servers, many of which will be shipped into the United States.

We also learned this week from the New York Times, Obama seemed vaguely baffled by the notion that Apple’s iPhone is manufactured in China, and in a meeting in Silicon Valley last year asked Apple CEO Steve Jobs why they couldn’t be made in the U.S. Jobs’s answer, which is correct: Those jobs aren’t coming back. David Ricardo’s law of Comparative Advantage strikes again.

Anyway, the only video of the full speech that I’ve found came from the local TV station, ABC15, and thankfully they have made it embeddable.

In his remarks, the president is impressed both with the grand scale of things involved in building chips — he remembers seeing an electron microscope at Intel’s plant in Oregon that was powerful enough to display atoms, which is certainly impressive. In Chandler he’s impressed with what he says is the world’s largest land-based crane, which is being used in the construction effort. Enjoy the speech.

(Image is a screen grab from earlier in the video.)

The big news is that Intel has a new COO: Brian Krzanich. He’s a former senior vice president who ran Intel’s manufacturing operations. Krzanich will also be in charge of internal IT and human resources functions that previously belonged to Bryant.

Next, Dadi Perlmutter has been promoted to chief product officer. He’s a widely respected engineer who has long been head of Intel’s Architecture Group, which is basically in charge of designing Intel’s chips. Perlmutter is often mentioned as a candidate for CEO.

Diane Bryant, Intel’s CIO, will now run the increasingly important Data Center Group. Bill Holt, head of Intel’s Technology Development Group, will now report directly to CEO Paul Otellini, having previously reported to Bryant.

Kirk Skaugen, who has run that group, will now run the PC Client Group, replacing Mooly Eden, who will be taking over as General Manager of Intel Israel. Kim Stevenson, VP of global operations and services, was named CIO.

Intel’s full statement is below:

Intel Announces Management Changes

Intel Names Chief Operating Officer and Chief Product Officer

SANTA CLARA, Calif., Jan. 20, 2012 – Intel Corporation announced a number of executive promotions and rotations today that recognize outstanding performance and assign new responsibilities as part of Intel’s commitment to management development.

As previously announced by Intel’s board of directors, Andy Bryant will move from vice chairman of the board to full-time executive chairman at the company’s Annual Stockholders’ Meeting in May. In anticipation of that change, Intel is promoting two senior executives, one of whom will take on much of Bryant’s prior responsibilities.

First, the company has promoted Brian Krzanich to chief operating officer, reporting to Paul Otellini, president and CEO. Krzanich had previously been a senior vice president in charge of Intel’s worldwide manufacturing. In his new role, Krzanich will continue to oversee manufacturing and also take on responsibility for internal IT and human resources, functions that previously reported into Bryant.

Secondly, in recognition of his outstanding work in developing the Intel® Architecture product portfolio, Dadi Perlmutter is being promoted to chief product officer. Perlmutter will continue to lead the Intel Architecture Group and continue reporting to Otellini.

Stacy Smith, senior vice president and chief financial officer, will now report directly to Otellini. He had previously reported to Bryant.

Bill Holt, senior vice president and head of Technology Development, will also now report directly to Otellini. He, too, had reported to Bryant. Holt and Krzanich will continue to co-manage the Technology and Manufacturing Group, allowing Intel to maintain the critical, close collaboration between semiconductor process technology development and manufacturing.

Kirk Skaugen, Intel vice president and head of Intel’s data center business, will become the new head of the PC Client Group (PCCG), succeeding Intel Vice President Mooly Eden, and reporting to Perlmutter. After 9 years in the United States, Eden is moving back to Israel at his request and will assume the position of president and general manager, Intel Israel, reporting to Perlmutter. While in the United States, Eden led Intel’s mobile PC business before being promoted to run PCCG, Intel’s largest product group, in 2009.

Diane Bryant, Intel vice president and CIO, will lead the data center business and succeed Skaugen as general manager of that group. She will report to Perlmutter.

Kim Stevenson, vice president of IT Global Operations and Services, will succeed Diane Bryant as CIO and report to Krzanich.

The organization changes will become effective over the next 30 days, and are designed to create a series of smooth management transitions.

Intel (NASDAQ: INTC) is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the world’s computing devices. Additional information about Intel is available at newsroom.intel.com and blogs.intel.com.

In 2011, it crossed the threshold of $50 billion in annual sales for the first time, having hit the $40 billion mark only last year. This came after a tough year — 2009 — during which sales declined a bit to $35 billion, down from $37 billion in 2008. But the larger point is clear: Intel continues to be a significant growth machine in a tech ecosystem that is supposed to be on the decline.

Who says so? “The experts.” Earlier this month, Gartner and IDC both reported what they described as the second-worst year for PC sales growth in recorded history, second only to the doldrums of 2001, when the world was beset by the dotcom crash, the onset of the global war on terror and general recession, all in one. This came after the same two outfits made similarly depressing predictions for worldwide IT spending.

Intel’s results tell a different story. Consider its strengths: Sales in its data-center group — chips being sold to companies building servers that will be used to power data and applications running on the Internet — grew 17 percent year on year to north of $10 billion. And the lowly PC? The machine that is said to be on the decline by so many people who claim to know what’s going on? Sales in Intel’s PC client group grew by more than $5 billion year on year to north of $35 billion.

How can that be possible? It’s an argument that Intel has been making for some time now, and is now becoming familiar: Persistent strength in emerging markets. As Intel CEO Paul Otellini said on a conference call with analysts today, emerging markets, where household incomes are improving to the point that consumers are able to buy their first PCs, are accounting for two out of every three units of incremental microprocessor demand. Which means that for every three chips of new growth sold in a year, two are sold in an emerging market.

PC sales in China, by Intel’s reckoning, grew 15 percent, and as yet have only achieved a household penetration rate of 35 percent, which says there’s lots of room still to grow. By comparison, the U.S. market is 90 percent penetrated, meaning nearly everyone who wants a PC has one. India grew 22 percent; Indonesia, 37 percent.

Here’s another really interesting metric that should give you some food for thought: In 2012, Intel will spend $12.5 billion on capital expenditures. That’s more than twice what it spent last year. What is it spending so lavishly on? Four new chip factories — in Oregon, Arizona, China and Israel — which, when completed, will turn out chips built on the very latest, edge-of-reality technology, where chips have transistors and other elements on them that are at the 14-nanometer scale.

How small is 14 nanometers? About one-fifth the size of a typical virus cell, and only slightly bigger than the thickness of the cell wall of a typical germ. Next year, there will be four factories, employing thousands of people, turning out thousands — and later millions — of these miniscule fragments of silicon that arguably constitute some of the most complex implements mankind has ever built.

And Intel does this profitably, which is so difficult and requires such financial scale that most companies that make other kinds of chips long ago gave up running their own factories and farmed the work of actually building them to other companies. Intel is so good at it that its gross margins in 2011 were 62.5 percent. Its full profit for the year was nearly $13 billion on $54 billion in sales.

Yes, we beat on Intel for not having conquered the smartphone industry or the tablet industry as readily as it spent the 1990s bending the PC industry to its will. There is a school of thought that says Intel is less relevant today than it was, say, five years ago, and that its anemic presence in the future of personal computing — smartphones and tablets — is all the evidence one needs to render that judgement. In fairness, smartphones and tablets are still on the rise, and Intel is starting to show some promising progress, though its competition and an industry-wide preference for chips based on the ARM architecture will be difficult to dislodge.

Still, it’s a little hard to find much fault with Intel, when the numbers so clearly demonstrate that, despite the conventional wisdom, it is clearly at the height of its powers.

The company’s profit climbed by nearly 6 percent in the quarter, despite persistent worries that demand for personal computers is down generally in the face of worldwide economic uncertainty, the popularity of tablet devices like Apple’s iPad, and smartphones in which Intel’s chips are not a significant factor.

Yet, as has been the case for the last several quarters, Intel knows the demand for its global markets — specifically Brazil, Russia, India, and China — far better than any industry analyst, and its executives, especially CEO Paul Otellini, have seemed to enjoy bursting the bubbles of the IDCs and Gartners of the world, who continue to preach a catechism of PC doom.

It’s important for the wider tech industry, because if Intel is healthy, it says a lot about the health of the rest of tech. If PCs are selling well, that means consumers and companies are buying them, either to replace new machines or buying a PC for the first time. And if PCs are selling well, then servers are selling well. Behind all that talk about cloud computing and cloud services are physical servers sitting in a data center somewhere, usually containing Intel chips.

The earnings conference call is about to start, so we’ll get some better indications about how and why Intel managed to surprise the Street once again.

2:35 pm: Ah, joining the conference call in progress. CEO Paul Otellini is speaking and, naturally, he’s crowing about Intel landing a chip in a Lenovo smartphone announced at CES last week.

“In the first quarter, we completed the acquisitions of McAfee and Intel Mobile Communications, formerly of Infineon. They will allow us to extend our strategies across computing.”

He’s recounting highlights of the past fiscal year. During Q4, Intel acquired Telap, which specializes in location-based technologies.

Now he’s talking about a smartphone reference design, basically a board around which a phone maker can build and customize. In the reference design is an Intel Medfield chip. Also, a strategic relationship with Motorola Mobility. “While the Lenovo and Motorola designs are first steps, we’re not done making announcements in the space.”

Now he’s talking about more chips for 2012. For example, 70 Ultrabooks are coming to market this year.

2:39 pm: CFO Stacy Smith is speaking. Nice gross margins of 65.5 percent, which were in the high end of the range. That’s Intel’s speciality — efficiency.

Smith: We saw a reduction of orders for microprocessors as a result of the Thailand flooding. The flooding didn’t affect sales directly, he says.

Smith: Q1 revenue will be down a little more from the average seasonal decline, as the flooding will continue to affect sales.

Smith: 2012 growth of revenue in the high end of single digits. Capital spending of $12.5 billion, in order to build a fancy new fab.

Smith: We continue to see strong results in emerging markets, as increased incomes allow more people to afford PCs.

Time for Q&A with the analysts.

First question from Citi: He’s asking about gross-margin projections and revenues. What is the PC forecast assumption that underlies that?

Smith: It will play out similar to this year. There will be some unit growth, and we’ll benefit from a rich product mix. The high single-digit number in perspective. Strip out some things from 2011, we expect it to come down, in part because of lower GDP growth, but we see the same kind of trends in 2012 that we saw in 2011.

Citi analyst asks if the unit costs per chip are coming down.

Smith: That’s a normal phenomenon as we ramp factories to a new process, and then the cost comes down over the course of the year.

A question from Jefferies: As you get more success in the smartphone and tablet markets, I’m wondering if it’s your intention to get more chips up and down the stack, or is it different from PCs?

Otellini: Our intention is to participate broadly in all three of those markets. In tablets, we’ll be well-positioned for that. Who knows where the prices go over time, but we’d use the advanced silicon integration capabilities that we have to drive the costs down. We’re coming in at the top of the smartphone market; we’re aiming at best performance and very good battery life. And the Infineon acquisition has given us a very good position in basic phones. They shipped about 400 million modems.

Jefferies: Do they inherently carry more profitability than the PC processor business?

Otellini: The other guys have lower margins. But we’ll get paid twice. We’ll get paid as the foundry, but also for the architecture.

2:50 pm: Question from Bank of America: There were a lot of announcements on Ultrabooks from CES. Will they cannibalize notebook sales?

Otellini: I have not seen this level of excitement since before Centrino, which was in 2003. Initially, you will see this will be a replacement of existing notebook sales. People will trade up. As we move through 2012 and into 2013 as Windows 8 machines roll out, you have the possibility or even the probability of many of those machines incorporating touch. At that point, the machines incorporate the best of both the PC and the tablet. I don’t know how that plays out, but we’ll be well-positioned.

Question from JMP Securities: I know you don’t guide by segment, but what’s happening on the data center side of the business? And how does Romley change that? (Romley is a future server chip.)

Smith: Let me do a higher-level look. The data-center business can be pretty lumpy, but on a secular basis, we’re pretty confident in the growth trends.

Otellini: We’re seeing stronger growth for Romley than we saw for Nehalem at the same point in its lifespan, two years ago. Initially, it will not drive the same kind of replacement cycle that Nehalem did. It will drive replacement for high-capacity needs. I think this product is the most well-rounded in the genre so far.

Question from Deutsche Bank: Overall, as we look at flood impact, how should we see that snapping back, and against the backdrop of the seasonality?

Otellini: There are more moving pieces as I look out over the next 11 months. Our view is that the industry seems to be hitting the bottom of their output trough in Jan. and Feb. Everyone who seems to want to buy a PC has been able to. There are some stockouts in particular SKUs. You will see some compression of the supply chain. We think there is likely to be some refilling of the pipes in the second quarter, and into the third quarter. Or people will learn to live with leaner supply chains, which is always good for us.

3:00 pm: Question from Goldman Sachs: What’s the incremental growth in capacity? And what is the initial assumption on factory loadings?

Smith: Let’s talk about what’s driving the capital spending. $12.5 billion is a big number, but you have to take in the context of how our business has grown. Then it makes sense. I think my depreciation as a percent of revenue stays in a healthy range. In terms of the makeup of specific capital spending, it’s a two-year cycle as we’re building buildings. That part starts to come down in 2013. Buildings are depreciated over a longer period of time.

In terms of factory utilization, we’re running full-out today. We’re just in the beginning of the 22-nanometer cycle. We took advantage of the flooding by taking some older equipment offline sooner than we would have otherwise. We’re selling every 22-nanometer unit we can get out there.

3:06 pm: Totally missed the question from UBS. Sorry, UBS.

Question from Credit Suisse about Ultrabooks. Are there any sort of milestones you expect — perhaps, say, percentage of total notebooks?

Otellini: Starting with the mix. Core processors are about 70 percent of our mix, and that’s historically high for our premium brand. What we can’t yet predict is the mix between i3, i5 and i7. As we move toward the second half of the year, the mix comes down to i3. In terms of a target, our goal would be to exit the year with about 40 percent of consumer notebooks being Ultrabooks.

3:11 pm: J.P. Morgan asks if Intel is going to continue to spend like a drunken sailor on capital expenditures and R&D.

Smith says Intel is making some important investments this year, but they will come down from here.

A question from Nomura: Android tablet sales seemed like a disappointment in 2011. What was the issue, and is there a reason to be more optimistic this year?

Otellini: They were where I thought they would be, but I was below where others were. Until you get to Ice Cream Sandwich, you’re at a comparison with Apple’s iPad. The other part of that test is the Windows 8 tablets that are being queued up for production. I don’t think anything about the tablet market is settled yet. The jury is out on the long-term segmentation by form factor.

Ew. Questions from Barclays are being turned back. Smith just won’t go where he wants them to go. Too granular.

3:16 pm: Otellini: The data-center storage is not your grandmother’s data-center business of before. Back to lumpy data-center sales, when Facebook or Apple turns on a new data center. We’re seeing a change to the linearity to data-center sales. Expect more short-term lumpiness, but stick to the year-on-year growth.

One more question to go. And it’s from Caris & Co. He’s asking about capex again.

Smith: If you look at spending for capex in 2012, a historically large part of it is the four-factory model. From here, our capex will be a function of two things — the unit growth we see and the speed with which we bring our process technologies to the leading edge. We balance off those decisions as we go forward. With a big increase in units, we’ll spend the capex to support it.

Caris: You’ve taken on some debt in the quarter, as you look for flexibility to buy back more stock.

Smith: Our balance sheet supports taking on more debt, and we certainly have the capability of doing so. We’ve said in the past, our first priority is investing in the business. We bought McAfee and Infineon. We had a significant increase in dividends in 2011, and as a percent of free cash flow. We did take advantage of low interest rates and high-dividend yield to buy back a lot more stock.

And that is the end of the call. Good night!

The company has come up with an iPhone-esque prototype of an Android device running its chip. More than just a concept device, though, the phone (pictured here) is a fully baked design that Intel is making freely available for phone makers to use in whole or in part.

“You’ll see a number of Intel customers using the guts of this phone to go into the market in the first half of next year,” CEO Paul Otellini said at a Credit Suisse investor conference last month. “And we’ll have more announcements of that at CES.”

Otellini is slated to give a keynote speech at the Las Vegas event on Jan. 10, so that would be a logical place for any news, though the company has also scheduled a notebook-related press conference for the prior day.

Technology Review posted a story on Tuesday, talking about Intel’s efforts and quoting Intel as saying the phones should hit the market in the first half of 2012. However, Otellini suggested in his Credit Suisse speech that Intel is aiming to have products out there sooner rather than later.

“We’ll be shipping in the first quarter of next year,” Otellini said.

Intel has previously talked about its plans for phones, and Android in particular, including at its September developer conference, when Otellini invited Android chief Andy Rubin on stage to talk about Google’s work to make Intel chips a first-class citizen for future Android releases.

The chip giant faces a host of competitors as it enters the space, including the current Android leaders — Qualcomm, Texas Instruments and Nvidia. Broadcom has also said it has designs on the market, particularly the low end, an area dominated by MediaTek.

Though cognizant of the competition, Intel has said its tests show its reference design as a solid competitor not just on performance, but also in the all-important area of battery life, where many have felt that Intel could not compete with ARM-based processors.

The move is about more than phones, though. Intel already faces steep competition from ARM and Apple in the tablet arena, and with Windows 8 it will also see challenges on the PC side of things.

Leading Intel’s effort are former Infineon executive Hermann Eul, and former Apple and Palm executive Mike Bell. The chipmaker recently reorganized its mobile efforts, putting the two executives in charge of all aspects of the project.

After years of talking about being in the smartphone processor game, it will be interesting to see if Intel can actually make some headway.

MORE CES NEWS:

• Complete coverage
• HP’s Former CTO: Ultrabooks Are Nothing New, webOS Still Has Life Yet
• Walt Shows Off CES Gadgets for Fox Business News (Video)
• What Kind of Web Video Plans Does Sony Have? (Video)
• Fujitsu Seeking Way Into Crowded U.S. Smartphone Market
• Why Rhapsody Is (Probably) Bigger Than Spotify — In the U.S.
• Microsoft Beefing Up CeBit Presence Even as It Pulls Back on CES
• Inside the CES Lost & Found
• FCC Chairman Has New Tablet, but Same Script: More Spectrum!
• Verizon Wireless: We Want to Connect Five Devices for Every Subscriber
• Ultrabooks From HP and Lenovo That Are (Kinda, Sorta) Different
• Walt and Katie Take a Tour of CES (Video)
• Schmidt-Storm Alert: The Google Chairman Didn’t Like Your Question
• T-Mobile Expands Bobsled Messaging Service
• Intel Shows Just How It Plans to Get Into Phones (Video)
• Motorola CEO: We’re Going to Release Fewer Phones This Year
• Kinect Helps Keep Aging Xbox at the Top of Its Game
• More From T-Mobile CEO: On Pricing, LTE and That Ever-Elusive iPhone
• Exclusive: New Boss Acknowledges Windows Phone Still Has “Awareness Problem”
• And You Thought Jawbone UP Was Going to Miss the CES Party!
• Interview: T-Mobile CEO Says No Second AT&T Deal Out There
• Grover Is at CES and I Am Missing It
• BlueStacks Bringing Android Apps to Windows 8
• Why the Future of TV Won’t Be Here Soon
• Nvidia’s Tegra 3 Tries to Save Battery in All Sorts of Different Ways
• Dynamic Dual Coverage: Ballmer’s Last Act in Vegas and the BCS Championship in 3-D
• Microsoft Phoning In Its Last CES Keynote
• Myspace — Yes, Myspace — Says It’s Going to Sell You Web TV
• Samsung Unveils “Super” 55-Inch OLED TV
• Nokia Unveils That LTE Windows Phone It’s Been Dying to Share
• Steve Ballmer Gives Ralph De La Vega a Very … Vigorous Greeting (Video)
• Interview: AT&T’s De La Vega on LTE, Tablets and Life After T-Mobile
• AT&T’s De La Vega: Shared Data Plans Still in the Works
• LG: 55-Inch Glasses-Free 3-D Screen Is on the Way
• LG Pushes 4G Smartphone Through Verizon: The LG Spectrum
• Live: AT&T’s Vegas Act Stars LTE and, Making Her Return to the Stage, Nokia
• CES Notebook: The Constant Search for Power and Vegas’ Worst-kept Secret
• Belkin Bringing Mobile TV to Lots of Cellphones, Will Anyone Tune In?
• Acer Introduces “World’s Thinnest” Ultrabook and a “Me-Too” Cloud Service
• There Better Be Some Cool Stuff at CES, Because CE Holiday Sales Data Bytes!
• CES 2012: Snooki and Bieber Are In, Gaga Is Out!
• Coming to a Smartphone Near You: Gorilla Glass 2
• RIM Hopes Next PlayBook OS Will Impress at CES
• Ultrabooks, the Ultra-Fancy New Name for Laptops
• At CES, Expect More Gadgets Telling You to Get Off the Couch
• Intel to Detail Its Phone Plans at CES Next Month
• Microsoft Pulling Out of CES After Upcoming Show
• Intel to Detail Its Phone Plans at CES Next Month
• Dell Will Drop the Flashy Vegas Act for CES This Year
• Ultrabook Conga Line Preps for CES 2012

That, said Intel CEO Paul Otellini, is one of three myths he aimed to bust today in a speech at a Credit Suisse technology conference in Phoenix.

First off, he pointed to the emerging markets. Intel is seeing significant growth in countries like Argentina, where the market for PCs grew 38 percent in 2011; Venezuela, where it grew 34 percent; and Russia, which grew 26 percent. “This emerging market trend is real,” Otellini said. And it’s not likely to end anytime soon: In 2010, the top five PC markets by country were the U.S., China, Germany, Japan and Brazil. In 2015, Intel forecasts suggest, the top five will be China, the U.S., Brazil, Russia and Germany.

With all the attention on phones and tablets, especially Apple’s iPad and various Android devices, the PC has gotten a little stale, Otellini conceded, so it’s time to make it exciting again. Intel’s answer is the Ultrabook. Thinner, sleeker notebooks that boot up fast and have touch-enabled screens and long battery lives will get consumers excited again, he said.

And don’t forget the part that Intel plays in the cloud: Most of the servers running cloud services have Intel chips inside them. And Intel’s data center business has doubled over five years and will double again in the next five. “This is where we see more and more of our customers buying from us direct. They’re building custom boards to run the data centers at Facebook, at Amazon, at Google, at Baidu and Alibaba,” he said.

Myth No. 2: Intel chips are too power-hungry for mobile devices.

Moore’s Law is still alive and well, Otellini said. In 1997, Intel built a supercomputer called ASCI Red that could compute one teraflop. It required 2,500 square feet of space and 9,298 chips to get the number crunching done. Earlier this month, Intel announced a chip codenamed Knight’s Corner that can do a teraflop by itself. In the mainstream marketplace, today’s notebooks are 300 times more powerful than notebooks built in 1995.

Intel, Otellini says, has built its own demonstration Android smartphone to show off the upcoming Medfield generation of its Atom processor, due in 2012. When its power consumption during basic phone functions like things like standby, audio and HD video playback is measured, Intel isn’t the best, but it’s not the worst, either. It usually comes in second or third place when compared against smartphones already in the market, but ahead of others, though Otellini didn’t say which phones it beat and which ones it didn’t.

And on three computing performance benchmarks it beats the others hands down: When using a browser on a phone, the Intel chip smokes the others. It also wins on GLBench, a graphics metric, and SunSpider, a Java test.

Myth No. 3: Intel can’t compete with ARM.

Yes, it’s true that ARM-based chips are everywhere that Intel would like its Atom chips to be and are showing no signs of giving ground.

But, noted Otellini, despite the growth of newer platforms, Intel and its x86 instruction set still command the largest army of software developers — north of 14 million — and the largest body of software created so far — more than 6 million applications. “As we come into these markets we’re bringing an incredible legacy of people that know Intel and know the Intel architecture.”

Then there’s Windows 8. Otellini called it “one of the best things that has ever happened to our company.” It will allow tablets to gain mainstream acceptance, especially in the enterprise that they don’t have today. “A lot of IT managers are worried about security and about porting their legacy applications to an Android tablet or an iPad. What Microsoft is doing is making that seamless for them.”

Finally, he said, Intel has a history of entering markets dominated by someone else and dominating them over time. In the early 1980s as the first Intel chips went into PCs, the dominant machines on the market were the VIC-20 and the Apple II. In the early 1990s, when Intel first went after servers, the dominant chips came from Sun Microsystems and IBM. Now Intel rules both markets. And the same thing has happened in supercomputing. (See the slide from Otellini’s presentation below, though someone needs to check the first field at left because the VIC-20 appears twice.)

Did his mythbusting work? Intel shares rose a bit today, closing up 12 cents to $23.58, and the shares are up 12 percent so far this year. We’ll see how right he was in 2012.

Update: Intel has corrected Otellini’s slide. No longer does it show the VIC-20 occupying two market segments. Well, it was kinda popular.

What gives? The research firms don’t have access to the same kinds of sales-channel data that Intel does, especially when it comes to emerging markets. Namely Brazil, Turkey, Russia and other rapidly developing revenue streams.

Intel CEO Paul Otellini called this “channel revenue” during the conference call with analysts. Channel is industry lingo for the business Intel does that’s not with major PC manufacturers like Apple or Hewlett-Packard or Dell, but instead goes through indirect sales channels to smaller companies that make PCs with lesser-known brands geared toward specific markets.

This channel revenue grew 17 percent during the quarter, Otellini said, because demand for PCs remains healthy in these countries. Turkey and Indonesia were both up 70 percent over last year. India was up 17 percent. Russia, 15 percent. China, 14 percent. Latin America as a whole was up 12 percent.

But then there’s Brazil. Otellini said it’s growing like crazy and is on track to become the world’s third-largest PC market next year, after the U.S. and China.

This channel business in emerging markets helps explain at least part of the dichotomy between the results that Gartner and IDC report in their quarterly market surveys — both of which show a market that grew by less than three percent — and Intel, which saw sales in its PC division grow 11 percent.

Later, Otellini and Chief Financial Officer Stacy Smith addressed this issue in response to a question from Evercore analyst Patrick Wang. You can hear their exchange, which runs less than three minutes, below.

Intel-q2-2011-call by ahess247

Though “roaring” isn’t always the word for it. Analysts, expecting a slowdown, trimmed estimates only to be shown once again that analysts don’t know everything.

Revenue set a record at $13.1 billion, marking the fifth consecutive quarter of record-setting sales at Intel. Per-share earnings were 59 cents a share, up 16 percent year over year. Gross margins were 62 percent, down 5.5 percent from the year-ago quarter. Expect some explanations about that. Most importantly, sales in its PC client group were up 11 percent year over year, defying the perceived PC-industry slowdown. Also, sales of chips used in servers, which Intel calls its data center group, were up 15 percent.

Intel’s conference call with analysts is expected to start at 2:30 pm Pacific time, or 5:30 pm Eastern time. I’ll be dialing into the call and liveblogging what I hear.

2:31 pm: And so we’re waiting for the call to begin. Hold music is still going. It’s classical. I think it’s Vivaldi.

And here’s the intro.

Kevin Sellers, VP of investor relations, reads the boilerplate.

A change to guidance and quiet period. A shorter quiet period that’s two weeks shorter can only be a good thing.

And a plug for the Intel Developer Forum in December September.

Otellini: Another record quarter. The trends that we described at our last investor meeting remain strong. Enterprise PC refresh continues, and data center business is strong.

Strong double-digit revenue growth across every single business segment. If we look at the channel, which is a good proxy for emerging markets, business is strong. (Missed the number.)

Data center group CPU revenues topped $2 billion for third consecutive quarter.

Also, networking revenue grew 40 percent from a year ago.

As for servers, the story is much the same. Cloud customers are fueling strong demand. Demand up 50 percent versus a year ago. We believe we are very early in the cloud build-out, and Intel remains well-positioned to profit from it.

We shipped one million Atom processors into embedded applications, up 76 from a year ago. (Then why are revenues on Atom sales 15 percent lower year over year? — Ed.)

2:37 pm: McAfee turned in a strong quarter. It was a second-quarter revenue by revenue (no number). McAfee is executing very well and the importance of security is never more evident. A new jointly developed product is coming later this year. More details at IDF in September.

2:38 pm: PC business strong. Demand for Sandy Bridge processors is good. Overall trends in PCs are much the same as last few quarters. Corporate market is consistent and healthy, while consumer market is soft.

At this point in the year, we believe PC unit growth will be eight to 10 percent, but above that in revenue, as corporate PCs will be better.

Ah, here’s the channel number again: Up 17 percent. Now he’s talking about strong sales in markets like Turkey and Russia. Brazil is poised to become the third-largest market for computers in 2012. These are all markets where PC penetration remains low.

Going over process technology announcements like 3-D transistors. We expect the lead that we have in process technology will expand going forward.

Second was the Ultrabook announcement at Computex. They combine the best of the consumer PC with the best of tablet functionality. We are pleased at the industry response. More details at IDF in September.

2:42 pm: CFO Stacy Smith is now speaking.

Strength in corporate markets was offset by soft consumer markets.

Smith is going over the numbers again.

As expected, our 22 nanometer start-up costs peaked in the second quarter.

The goal is to keep spending as a percentage of revenue below 30 percent.

There’s that phrase “Internet of things” again. Have they been looking over Cisco’s paper?

2:46 pm: Time for Q&A.

And the first question comes from Deutsche Bank, on total PC unit forecast. How do you reconcile a weaker addressable market to Intel’s view that the guidance hasn’t changed?

Otellini: Our PC client business is running double digits.

Smith: We’re expecting pricing to be relatively flat.

Next question from Evercore: Give us some milestones over the next quarter on emerging markets.

Otellini: The next milestone is three months from today.

Q: Help us get a better sense to track the growth in those areas.

Otellini: There’s no better way than putting feet on the street. I was just in Brazil. The fact that it’s going to be the number-three market is pretty astounding. It’s the dynamic of increase in disposable income and decrease in cost of computing. Some of this stuff is below the radar screen of some of the third-party trackers. (Another dig at IDC and Gartner there.)

2:50 pm: Evercore again. In your emerging markets, what kind of a product mix are you seeing there?

Otellini: The mix in emerging markets is not much different from the overall mix. Each market is different. China has a slightly richer mix than other markets. Just like you’d expect when it’s your first time to buy a TV or a computer — you want value, you tend to buy up a bit.

Question from Citadel: First on geographic trends. Americas seemed stronger than Europe. Any thoughts on dichotomy?

Smith: You have to be a little careful of that data, and that’s billings data. The world builds more of the notebooks in APAC (China and Taiwan).

Next question, Citi: If we look at 3Q guidance, what parts of the business will be above the longer-term average?

Smith: Across the major businesses, what we’re expecting is seasonal. Relative strength in enterprise and emerging markets. Consumer weaker. We usually see a seasonal uptick in consumer in the second half of the year.

Q: When you look into emerging markets client (PC) business, is there a difference in the way that inventories are managed? Is it harder to track or easier?

Otellini: It’s actually better. We have the same visibility in China that we do in Cleveland. We’re seeing a conservatism there to customers moving to air lanes from shipping lanes. In emerging markets in general, a lot of sales come from the channel, in the white box and the build-to-order business. We get a much more real-time feed there. Its more real-time than mature markets or enterprise markets.

2:57 pm: Credit Suisse question: Where are we now with Sandy Bridge as a percentage of the core-branded chips?

Otellini: We’re taking Sandy Bridge below the core brand and taking it into Pentium and Celeron. (They still sell Pentiums?)

A question about the Romley code-named server architecture.

Otellini says Romley is a Sandy Bridge version of the server products. We’ll be in product this year and nothing is changed. No public launch date, because server manufacturers are conservative. I would add that as we’ve seen the product, the performance is quite good.

2:59 pm: A question from MKM Partners about average selling prices. They’re up. How much of that increase is driven by product mix, or marketing, or sales of enterprise clients?

Smith: We’ve spent a lot of energy to articulate differentiated features at different price points, and that has led to a richer mix. Plus the enterprise market being stronger has been a secondary benefit.

Q: How much of emerging markets is enterprise? What’s the split, corporate versus consumer?

Smith: We expect a lot of the growth to come from the consumer part of those markets.

Here’s a question from Doug Freedman of Gleacher. He’s asking about capital expenditures. Is the number a pull in from next year?

Smith: Some of it is. Some of it is construction-related spending, some of it is from 14-nanometer manufacturing. Some of it is the scope of the factories. We’re doing some things to make it easier to allow factories to support new geometries (like seven nanometers!) after 14. It’s easier to spend that now versus later.

3:04 pm: Question from FBR. Can you help us understand how much of the Capex is four-year equipment, and how much is halls and walls, and how to think about depreciation?

Smith: It’s almost all construction. You can have varying depreciation schedules, but they take a long time. Equipment depreciates faster.

3:11 pm: Question from UBS, asking about Ultrabooks. Sean Maloney said they were expected to be 40 percent of consumer mix within a few years. What’s your level of confidence?

Otellini: He’s comparing Ultrabook to a prior Intel project, Centrino, which was a highly successful chip that combined Wi-Fi with the processor. As we talk to our customers, we see a great deal of engineering. The features we want to see in these machines are expensive.

UBS is asking about Intel’s ability to capture more of the space inside a PC.

Otellini: End customers are demanding a higher mix of products. In terms of bill of materiels, we had a strong presence with graphics before Sandy Bridge, and it only got stronger.

3:15 pm: Next up, J.P. Morgan: Paul, take a step back and update us on tablets. What are your share goals on tablets?

Otellini: After I saw the numbers from Apple, I believe this category is additive to computing. It’s not going to replace computing. I think it’s going to replace some discretionary spending. It’s a device that some people will use as a computing device, but some use it as a companion device.

3:19 pm: Question from Bank of America. How will Intel be impacted by the launch of Windows 8. Is that a net positive?

Otellini: In general, I think it’s good. When Microsoft has a new OS, it’s good for us. We have worked with them for some time. The jury is out on how well that will be received by the public on tablets. We intend to be hyper-competitive for the tablets. We plan to out-battery and outcompete the ARM guys on tablets.

3:24 pm: Question from Wells Fargo. Can you go through the gross margin puts and takes from September to December quarter?

Smith: When I think about fourth quarter, we benefit from start-up costs going down. And the big variable for us is that we have a lot products teed up, and where those product qualifications fall says a lot about gross margin.

And that appears to be a wrap. See back here on October 18 for the next Intel earnings call.

Paul Otellini, Intel’s chief executive, told analysts at a meeting in Santa Clara, Calif., on Tuesday that the “centerpoint”–or the average power used by Intel’s chips–in the past was around 35 to 40 watts. Intel is now shifting that down to about 15 watts, with the change being implemented over the next several years.

Meanwhile, Mr. Otellini reiterated Intel’s bullish guidance for the second quarter, saying the view is “still right on” and PC growth should be “pretty good” this year despite what other companies–like PC maker Hewlett-Packard Co.–have said.

Read the rest of this post on the original site »

This appears to be the announcement that CEO Paul Otellini alluded to during Intel’s quarterly earnings conference call last month. Intel has kept a pretty tight lid on the details, but I’ve talked to enough people who say this is one of those times when Intel will “open the kimono” on what will be going on inside its chip factories–or fabs–later this year. The big news will revolve around Intel’s disclosure of its 22-nanometer manufacturing process. It’s the sort of thing that gets people who know chips kind of excited and leaves others kind of cold. But in fact, everyone should be kind of excited about this.

Perhaps you’ve heard of Moore’s Law. This was the observation in 1965 by the Intel co-founder Gordon Moore (pictured at the Intel Museum in 2005) that the number of transistors that could be crammed onto a chip doubles–and the size of those chips tended to shrink–as manufacturing technology improved on a fairly regular basis: About every 18 to 24 months. That shrinking meant two things. Chipmakers could make a chip with the same computing power as the previous generation more cheaply, or they could make a more powerful one with more transistors for about the same cost.

It all comes down to how many transistors you can cram onto a chip, and how many useful chips you can get from a single silicon wafer. In both cases, more is better. Moore’s observation–which was first published 46 years ago this month–has held up remarkably well and has proven one of the most important engines of growth in the technology industry. All the computing oomph you take for granted in your notebook, your smart phone, in the cloud, and all around you happens in part because the chips inside the hardware have gotten smaller and yet ever more powerful every two years or so.

So back to today’s announcement. As I mentioned, it’s going to revolve around its 22-nanometer manufacturing process. A nanometer is a billionth of a meter, and its current factory processors turn out chips with transistors that are somewhat bigger–32 nanometers. Intel executives often refer to a process they call “tick-tock.” Today constitutes a tick, when in odd-numbered years, a new manufacturing process comes online and the previous generation chips are shifted to being built with the smaller transistors. A “tock” occurs in even-numbered years when Intel engineers come up with new chip designs that really show what the new factory processes are capable of. The implication is that it’s so regular you can almost set your watch by it. Intel’s long-term strategy can be summed up like so: Tick, tock, repeat.

On top of that there are likely to be disclosures about some of the advances in physics that Intel has had to make in order to get chips with transistors so small to work properly. When you’re dealing with things that small, the individual electrons flowing on the chip sometimes don’t behave as they should. For example, in 2007 Intel had to add the element Hafnium to its chip-making process in order to stop individual transistors from wasting electricity. (It was more complicated than that, but that in a nutshell was the problem.) Billions upon billions of transistors in billions of computers around the world wasting electricity is a bad thing, both financially–power is expensive–and environmentally.

What’s funny is that for years people have been saying that Intel–and indeed the entire chip industry–can’t continue on the Moore’s Law trajectory. At some point things get so small that you’re dealing with individual atoms and you can’t get any smaller than that. However, every time people have predicted its end, something happens to keep it going. A lot of companies have come up with some important advances that have kept it going. In the 1990s and early 2000s, IBM came up with some important advances that kept Moore’s Law on track. But more often that not it has been Intel that has kicked down the door when the experts said it was locked. Today it will probably kick down another.

This older video was created around the time that Intel unveiled its 45-nanometer process with Hafnium–kicking down one of those earlier doors. Perhaps there will be another today. Check in later as I cover the announcement.

The company reported sales of $12.9 billion, up 25 percent from the same period a year ago, and per share earnings of 59 cents, up 37 percent from last year, pummeling the consensus Wall Street view that called for sales of $11.6 billion and earnings of 46 cents per share. Gross margin–a closely-watched indicator of profitability–was down slightly versus the year-ago period at 62 percent. The company generated $213 million in cash from equity investments in other companies.

The results were led by sales in the Data Center group, which specializes in selling chips for use in servers used in data centers operated by large corporations and cloud computing service providers, which grew 32 percent over the year-ago quarter. Sales in the PC group grew 17 percent, despite reports from market research firms Gartner and IDC last week suggesting that sales of personal computers are slowing in the face of stiff competition from tablets like Apple’s iPad.

Equally strong was Intel’s guidance for the second quarter. The company said in a statement it expects revenue of $12.8 billion plus or minus $500 million, and for gross margins of 61 percent plus or minus two points. That exceeded the current analysts’ consensus by nearly $1 billion.

Intel shares surged in after-hours trading by as much as 7 percent at one point and were $20.68, up more than 4 percent by 1:17 PM Pacific Time.

“Intel’s work on Intel Itanium processors and platforms continues unabated with multiple generations of chips currently in development and on schedule,” Intel CEO Paul Otellini said in a brief statement issued just a few minutes ago. “We remain firmly committed to delivering a competitive, multi-generational roadmap for HP-UX and other operating system customers that run the Itanium architecture.”

As I mentioned earlier, Intel has two new generations of the Itanium chip in the pipeline. The current generation was known by the codename Tukwila. The next, which is generally expected next year, is codenamed Poulson. It’s an eight-core Itanium that will be built on Intel’s 32-nanometer manufacturing process, and Intel says it will double the performance of the current Tukwila generation. Beyond Poulson lies Kittson, about which few details are known. Otellini said it’s an “officially committed roadmap product” that is in active development. He also plans to say a lot more about it in his keynote at the Intel Developer’s Forum in Beijing next month. So, take that Oracle.

Update: And now finally Hewlett-Packard, which is for the most part the only company making servers using Itanium chips, has responded to all this.

In a statement issued just moments ago, David Donatelli, HP’s Executive Vice President and General Manager of its HP Enterprise Servers, Storage, and Networking group said the following”

“We are shocked that Oracle would put enterprises and governments at risk while costing them hundreds of millions of dollars in lost productivity.”

His name is Michael Wolfe. He’s 52 and has worked for HP for five years, most recently as VP for Information Technology. This will be his second go as a CIO. Before his stint at HP, he spent 24 years at Motorola’s Semiconductor Unit and was CIO during the period it was spun out to become Freescale Semiconductor.

His new boss, AMD’s interim CEO Thomas Seifert, had high praise. “Mike has effectively led IT transformations constantly focusing on reducing operating costs and significantly improving business innovation,” he said in a statement. “His considerable talent and experience will help AMD to continue strengthening our IT infrastructure and streamline our business based on our own products and platforms.”

This hiring is taking place against the backdrop of the complicated, difficult search for a new CEO at AMD following the surprise resignation of Dirk Meyer in January. COO Robert Rivet soon followed.

AMD shares haven’t moved much since then, and it has been the subject of recurring problematic buyout rumors. Today the shares closed at $8.55, unchanged from the prior session, and that’s up only a nickel from where it was at the start of the year. Shares fell five cents in after-hours trading. Investors seem to consider AMD a company in a holding pattern until there’s some resolution in the corner office.

The executive–Todd Bradley, who heads HP’s personal-computer business–decided earlier this month to remain with the company, the people said.

But the negotiations underscore Intel’s willingness to consider unusual measures to strengthen its management ranks as the company faces the difficult task of identifying an eventual successor to Chief Executive Paul Otellini. An executive vice president regarded as the most likely candidate among Intel’s top managers, Sean Maloney, is recovering from a stroke he suffered a year ago. Another potential candidate, Patrick Gelsinger, left Intel in 2009 to join EMC Corp.

Read the rest of this post on the original site »

Earlier in the day Intel CEO Paul Otellini agreed to join the President’s Council on Jobs and Competitiveness, which is chaired by General Electric CEO Jeffrey Immelt. Otellini announced some more good news: Plans to build a new $5 billion-plus chip factory in Arizona and hire 4,000 workers there. (Yay, America…meanwhile Oregon still gets D1X) The text of Otellini’s prepared remarks is below the video.

What a difference a year makes. At this time last year, Intel was preparing to defend itself against an antitrust lawsuit brought by Obama’s Federal Trade Commission. A settlement last August brought an end to that. Now Obama and Intel totally heart each other, as you can see in the video below, shot by The Oregonian.

The visit followed last night’s dinner at the home of venture capitalist John Doerr with numerous Silicon Valley execs, where POTUS sat between Apple CEO Steve Jobs and Facebook CEO Mark Zuckerberg.

Video streaming by Ustream

Remarks (as prepared) by Paul Otellini, President and CEO of Intel Corporation, during President Obama’s visit to Intel’s campus in Hillsboro, Ore., on Feb. 18, 2011.

Good morning and welcome. And Governor Kitzhaber, thank you for being here. I’m excited to be here today to celebrate American innovation and American manufacturing.

Our country and this company have been built on innovation – and manufacturing has been at the heart of America’s economy for over a century. Technology and the semiconductor industry have been driving economic growth for the last 50 years. In fact, when averaged over the last 5 years, the semiconductor industry is the nation’s #1 exporter.
Today we celebrate the construction of Intel’s new semiconductor manufacturing plant called D1X.

For the past 2 years I have been discussing the need to re-ignite innovation in the U.S as a means of creating jobs and wealth in our society.

I believe the world of technology and a vibrant manufacturing base lies at the heart of creating this future. This is one of the reasons for our continued investment in Oregon, and our commitment to build Fab D1X.

This new factory will play a central role extending Intel’s unquestioned leadership in semiconductor manufacturing. The transistors and chips it will produce will be the most dynamic platform for innovation that our company has ever created.

Together they will enable more capable computers, the most advanced consumer electronics and mobile devices, the brains inside the next generation of robotics, and thousands of other applications that have yet to be invented.
I’d like to pause for a moment to give you a glimpse of what will be involved in creating such a technologically advanced operation.

D1X will be a vital addition to what is already one of the largest and most advanced semiconductor research and manufacturing sites in the world. Building it we will create approximately 3,000 construction jobs over 2 years. The structure will require 19 tons of steel, 40 miles of pipe, and 13,000 truckloads of cement. When finished, D1X will have a cleanroom as big as 4 football fields. It is scheduled for start-up in 2013; and it will be the first 14-nanometer microprocessor factory in the world.

Intel is a global company today, and proudly so. Yet, we think of ourselves as an American enterprise. Intel generates three-fourths of its revenues overseas, yet maintains three-fourths of its manufacturing here in the United States. The company sets the bar for world-class manufacturing around the world.

We believe in this country’s power to create a future where America maintains its unparalleled global leadership and where jobs in 21st century industries are created and flourish. I am pleased that the President and his Administration have taken a number of steps to invest in innovation and education so that we are building the skills needed to achieve success in the 21st century and grow the economy. At Intel, we believe that we will help create this future.

Building such a future requires more than just investments in technology and manufacturing. We need to also invest in educating and training the workers that will invent and manage the industries of the future. At Intel, for example, over half of our 82,000-person workforce has technical degrees and nearly 8,000 hold a Master’s degree or Ph.D. Looking forward, we are concerned that there may be a shortfall of qualified experts in science and math in this country to meet the needs of our industry.

There are two fundamental solutions to this problem. First, revitalizing math and science education will generate qualified, interested and motivated students, and drive increased enrollments in our great graduate schools. Then, government and businesses need to make sure all of these graduates are given an opportunity to work in this great country.

I want to commend the President for his leadership and focus on improving our science, technology, engineering and math education. He has taken actions — including key steps like making STEM a priority — in his $4 billion Race to the Top competition and his Educate to Innovate campaign.

I’m proud to tell you that over the last decade, Intel has invested nearly $1 billion in education around the world, especially math and science education. Our Intel Teach program has already trained more than 9 million teachers worldwide — with nearly half a million right here in the in the U.S. — to integrate technology into and the learning process. The result is improved critical thinking and problem solving skills. We view these efforts — and our many other education initiatives — as vital investments in the next innovators, thinkers, scientists, and entrepreneurs.

This investment comes full circle when we can then hire the people we are investing in.

I’m proud to announce that this year Intel will hire 4,000 new permanent, highly skilled employees in the U.S. above and beyond the factory jobs that I previously mentioned.

These new employees will focus on areas that span the exploration of new materials to create even smaller transistors, to products that we believe will transform the way that healthcare and education are delivered, to “future technologies” that involve augmented reality and computers that can read minds, or at least anticipate your needs!

The investments I’ve discussed today are long-term investments in the things that make innovation possible. They also send a clear message that the United States will remain the location for Intel’s most advanced technology development and manufacturing.

And, I’ve saved the best news for last.

I’m happy to announce another NEW multi-billion dollar investment in America. Intel will soon begin construction in Arizona on a greater than $5 billion manufacturing facility called Fab 42 that will focus on 14-nm silicon process technology and beyond. When completed, Fab 42 will be THE most advanced high-volume semiconductor factory in the world. This activity will create thousands of construction and permanent manufacturing jobs in this country above and beyond what I’ve described earlier.

My closing message is that the best way forward for us is to unleash the unmatched creative energies of the people of this country to transform our manufacturing base for the 21st century. Intel is proud to do its part to create this promising future.

With that, ladies and gentleman, I’m pleased to introduce the President of the United States.

The White House is announcing that Otellini will be named to the President’s Council on Jobs and Competitiveness. General Electric CEO Jeffrey Immelt chairs the group, which was created by an executive order in January. Other members are expected to be named in coming weeks.

News of Otellini’s appointment is a highlight of the president’s trip west this week, which kicked off with a meeting Thursday night with tech CEOs that include Apple’s Steve Jobs, Facebook’s Mark Zuckerberg, Oracle’s Larry Ellison, Google’s Eric Schmidt and Cisco’s John Chambers. The meeting was held at the Woodside, Calif., home of John Doerr, the prominent venture capitalist.

Read the rest of this post on the original site

Despite the headwinds, Intel delivered on its quarterly results. Profits were up 48 percent year-over-year, and Intel set all-time records in sales and profits both for the quarter and the full year.

As he pointed out in his prepared remarks in today’s quarterly earnings conference call, sales at Intel’s Data Center Group grew by 15 percent in the fourth quarter and finished 2010 up 35 percent. What’s driving such healthy growth? The Internet, of course. Its growth is causing a mushrooming demand for servers of all kinds, which means demand for Intel server chips is going up right along with it.

Traffic on the Internet was 245 exabytes in 2010, he said–greater than all previous years combined, and within five years another billion people getting online will push that to over 1,000 exabytes a year.

(What’s an exabyte? 1,024 petabytes. What’s beyond the exabyte? The zettabyte. Incidentally, Royal Pingdom released some interesting numbers about the size and scope of the Internet today, and they’re worth reading.)

Hear the snippet from Otellini’s remarks below.

Later, in response to a question from Patrick Wang of Wedbush Securities, Otellini talked about where enterprises are in their PC refresh cycle, one of the few bright spots for PC sales that Gartner and IDC mentioned in their sales estimates yesterday. Reiterating an earlier comment that he expects PC sales to grow at a rate in the “low to mid-teens” in 2011, Otellini said he thinks many corporations haven’t yet updated to using Microsoft’s Windows 7, and so the upgrade cycle hasn’t yet, in his view, reached its midpoint. Then Intel CFO Stacy Smith jumped in with some comments about where cloud computing figures into sales of server chips. Another two-minute audio highlight is below.

Also asked during the call by Shawn Webster of Macquarie Research about Microsoft’s announcement that it will create a version of Windows for ARM-based chips from Qualcomm, Texas Instruments and Nvidia, Otellini said it didn’t seem to him like “new news,” and that versions of Windows for chip architectures other than Intel’s x86 family have been around before. In this 90-second audio clip he talks about the potential pluses and minuses of Microsoft’s move for Intel.

“In 2011 alone, just the first year of shipments, Sandy Bridge will represent over one-third of Intel’s corporate revenues this year, and will generate over $125 billion of revenue for the PC industry. This is a huge, huge product.”

– Intel CEO Paul Otellini, speaking at the company’s CES press conference today, at which it formally launched its latest generation of PC microprocessors, which combine a traditional PC processor with a graphics chip.

“We believe that like netbooks, tablets will expand the term for computing overall with a new form factor and new uses that bring computing to even more aspects of our lives,” Otellini said during the call. “Will they impact PC sales? Sure. At the margin, they probably will. Consumers will have a limited amount of discretionary income and some will choose to purchase a tablet instead of upgrading an existing PC or purchasing a netbook in any given period. We saw the same thing happen when netbooks were introduced, but three years later, both the PC and the netbook market segments have grown substantially and we believe that will happen again with tablets.”

Given that, what does Intel (INTC) plan to do to gain a little more presence in the category?

“We are deeply engaged with a number of partners to bring to market innovative tablet solutions,” he explained. “Our design win momentum is very strong, and in the coming months and quarters, you will see Intel solutions that run on Windows, Android and MeeGo operating systems across a variety of form factors and price points. We fully expect to participate broadly and profitably in this category, and that in the end, the tablet category will be additive to our bottom line and not take away from it.”

“We are the only architecture that runs all of the major–all but one of the major tablet operating systems, we don’t yet run on Apple,” he added. “So I think we’re in a pretty good space.”

We don’t yet run on Apple? Is that just wishful thinking or…eh, never mind.

PREVIOUSLY:

• Intel: Tablet Market Will Grow Between 73 Percent and 88 Percent by 2014