Intel CEO Predicts Better 2005 Performance

NEW DELHI – Intel Corp. (INTC), the world's largest maker of computer microchips, expects a much better performance in the first half of next year, Chief Executive Craig Barrett (search) said Thursday.

In October, Intel, a bellwether for the technology sector, reported a 15 percent rise in third quarter earnings to $1.91 billion, on the back of record sales in Asia and a stronger demand for notebook and server computer chips.

"I am looking at a much improved performance in the first half of 2005 than what it was in the first half of 2004," Barrett, who is on a two-day visit to India, told reporters, in response to a question about product delays and manufacturing problems at Intel this year.

"I think we are on track for improved performance. We were not meeting our own standards of performance earlier this year."

An Intel spokesman later said Barrett was referring to the company's operating performance, not its financial performance. Nonetheless, Wall Street analysts expect Intel's revenue to rise 5 percent in the first half of next year from the first half of 2004, according to Reuters Estimates.

Intel, whose microprocessors power more than 80 percent of the world's personal computers, will introduce chips based on state-of-the-art 65-nanometer technology by the second half of next year.

"I believe we will be the first major corporation to have production of that technology," Barrett added. "We already have two microprocessors designed on that technology that are running in our manufacturing plants today."

A nanometer is one-billionth of a meter and the circuitry is used to produce smaller, faster and more energy-efficient chips than those currently in the market.

Barrett said the chipmaker was also evaluating India as one of the options for setting up a chip manufacturing unit.

"India is one of the several countries that we are evaluating for setting up a manufacturing facility. India is one of the competitors."

While India has become a magnet for companies outsourcing their software requirements, the country is still not considered a world class manufacturing destination due to its creaky infrastructure and restrictive labor laws.

Santa Clara, Calif.-based Intel has a large development center in India's technology capital, Bangalore.

The unit, which houses 2,300 engineers, designs and develops software to power chips that drive computers and high- end networks for Internet-based applications.

Barrett said the company planned to raise the head count at the center. Overall, Intel has 2,400 employees in India, a 50 percent increase this year.

India's $12.5 billion software service industry has created some 550,000 software and 280,000 back-office positions and the sector is growing at more than 30 percent a year.

Intel, and global companies such as Motorola Inc. (MOT), have heavily outsourced high-end functions, such as chip design, to India to take advantage of the country's highly educated but low-cost software pool.