Intel: PC Demand Expected to Remain High

FRAMINGHAM (04/27/2000) - Intel Corp. executives today said they were surprised by higher-than-expected consumer demand for PCs at the end of last year and added that they expect the demand to remain high for the rest of 2000 as well.

At a meeting with financial analysts in New York, Intel CEO Craig R. Barrett said the high demand was due to a number of factors, including economic recoveries in Latin America and Japan plus sustained growth in North America and Europe.

"Basically, all the economic planets are aligned," Barrett said.

But he also acknowledged that the company was caught converting from 0.25-micron chip manufacturing technology to more advanced 0.18-micron technology. If Intel had more of the clean-room capacity needed to make semiconductors, he added, it would have continued 0.25-micron production longer and been able to better meet demand and not risk customer relationships.

"No question about it. We called it too close, demand went up, and we were caught," Barrett said. "We thought we had sufficient maneuverability."

The supply shortfall also reflected understated expectations for the fourth quarter of last year, said Paul Otellini, executive vice president and general manager of Intel's Architecture Business Group. Otellini said concern about Y2k issues caused corporate buyers of PCs to underestimate their needs for new machines.

Since then, he added, there has been "a significant increase in demand and growth" that Intel doesn't expect to go away this year.

Andy D. Bryant, Intel's chief financial and enterprise services officer, said the company has doubled its planned capital spending for 2000 to about $6 billion. But even with the increase in building and internal investments, it may take the company the rest of the year to catch up and surpass consumer demand, he said.

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