Intel's Battle Plan: $699 Ultrabooks This Year; Tablet And Smartphone Blitz Next Year

Here’s what makes Intel such a bugbear: when the going gets bad, the Santa Clara, Calif.-based processor giant always makes things worse. And if you’re selling anything to consumers right now, things are grim.
Intel Chief Executive Paul Otellini blamed soft demand from consumers in the United States and Western Europe Tuesday as Intel slashed its revenue outlook for the year even as it posted second-quarter earnings ahead of analyst expectations.
Now Intel says will do what it always does when demand weakens: sharpen its teeth. Intel Chief Financial Officer Stacy Smith said weak demand is allowing Intel to scale back production of less advanced chips so those lines can be switched over to build Intel’s latest stuff.
“You’ve seen us do this before  when we have demand coming in less than expected,” Smith said on a conference call with investors. “We look for opportunities to take older generation capacity offline and because we can reuse that  equipment at the leading edge we take advantage of those opportunities.”
Right now Intel’s most advanced chips use a manufacturing process none of Intel’s competitors can yet match — allowing Intel to produce processors with features as little as 22 nanometers wide. The result: Intel’s ‘Ivy Bridge’ PC and notebook processors do more work, using less power than competitors — while being cheaper for Intel to manufacture.
That will allow Intel to keep pouring its most competitive products into the market throughout the year. In the second half of the year, Otellini says thin and powerful ‘ultrabook’ computers modeled on Apple’s MacBook Air will be selling for $699. Otellini said there are now 140 designs based on its ‘Ivy Bridge,’ processors on the way. More than 40 of those will have touch screens. Another dozen will be ‘convertibles,’ which can switch back and forth between working in tablet mode or with a keyboard.
Meanwhile Intel will accelerate its years-long push into the market for smartphone and tablet processors. Otellini said Intel is tracking more than 20 tablets designed for Microsoft‘s upcoming Windows 8 software that will use Intel’s low-cost, battery sipping ‘Clover Trail,’ system-on-a chip.
At its analyst day earlier this year, Intel outlined plans to put its low-cost smartphone and tablet processors on its most advanced process technology.“We think we’re on a path to have a lot of products on the market and a lot of design wins and build momentum into 2013,” Otellini says.
To be sure, Intel faces some serious challenges in the smartphone business — despite already having its chips in a handful of phones — but the downturn only means Intel’s manufacturing edge will be sharper than ever.
Intel shares fell 28 cents to $25.10 in late trading Tuesday.