Intel Enters Marathon for Handset Processors

Paul Otellini: ‘We have been in this spot before’

BARCELONA — According to organizers of the Mobile World Congress, more than 62,000 delegates attended this year’s conference — a possible record.

Each attendee has at least one mobile phone, and probably more. But none of those phones is powered by a chip made by the world’s largest chip maker, Intel.

How can that be?

Paul Otellini, president and chief executive of Intel, says it won’t be the case for long. Mr. Otellini used the conference to announce an extension to two partners — Lenovo and Motorola — building on an announcement at January’s Consumer Electronics Show in Las Vegas, when they signed up to Intel’s microprocessor, the Atom Z2460, codenamed “Medfield.”

Mr. Otellini, a 38-year veteran of Intel who took over as the company’s CEO in 2005, was not phased by the fact that others, in the shape of chips built on an architecture designed by the Cambridge-based ARM, had stolen a march.

“We have been in this spot before,” he said speaking to The Wall Street Journal, Europe. “I have been at Intel long enough to remember when we were not the incumbent in PCs; we were not the incumbent in servers; we were not the incumbent in high-performance supercomputers. And now we are — in all three of them.”

He dismissed suggestions that Intel had missed the significance of the smartphone.

“We didn’t aim at it. If you have finite resources and remember, play the clock back, in 2006-2008 Intel was restructuring itself. We downsized by over 25,000 people, we refocussed our core capabilities in PCs and servers, and we had a serious competitive exposure on the server side from AMD,” he said. “We marshaled ourselves and came out of that looking pretty sweet today.”

At the press conference to announce four new partners, he was asked why there was no major handset maker on the list. (Joining Lenovo and Motorola were Chinese manufacturer ZTE,  French operator Orange, payments processor Visa and Indian operator Lava) . “Watch that space,” he shot back at the questioner. It was a point he returned to in the interview.

“I don’t know of anyone we are not talking to,” he said. “This is a gigantic market and it is not going to move one way or another over night, so our approach is just steady and sure and get more and more customers, more and more volume, more and more capability,” he said. “This is a marathon, not a sprint.”

According to Mr. Otellini, Intel is better placed than its competitors since the company designs and makes its own chips, rather than outsourcing production. “All things being equal, we either have more latitude on price, or make more money at the same price. I think that gives us a lot more flexibility.”

So far, the handsets announced by Intel’s partners are all using Google’s Android platform, yet the close working relationship between Intel and Microsoft has been one of the longest in technology history. Mr. Otellini refused to speculate on whether a Windows Phone device would be running one of his chips anytime soon. “That depends on Microsoft. We would be a great partner for them,” he said, adding that the two companies are talking about it.

Nor was he troubled by the recent unveiling of an ARM-powered device running Windows.

“Where I think we have evolved as two companies is that we have a lot of commonality, and that is probably in the 80% to 90% range. We focus on where we have commonality in our sessions together, and recognize that we have some areas where we are noncommon and nonoverlapping. That is life between two gigantic companies,” he said.

“It does not, from my perspective, sour our relationship. You focus on what is positive.”

At the conference, Mr. Otellini also announced the Atom Z2580 processor, which doubles the performance of the Atom processor Z2460, with customer products scheduled in the first half of 2013. In addition, he disclosed plans for the Intel Atom processor Z2000, aimed at the lower-end smartphone market.