EVERY once in a while, according to Craig Barrett, the chief executive of Intel, there comes a cataclysmic event that shakes an industry to its foundations.
Such an occasion, he says, does not have to be a leap forward in technology, although the development of the likes of the internal combustion engine and the internet did have profound worldwide effects.
The event occupying the mind of Barrett, the head of the world’s biggest maker of microchips, is the entry of hundreds of millions of people into the digital age. He says: “In the past few years we have had the entry into the global technology marketplace of India and China and the Arab world. If you take that three billion people, and think that maybe only even 10 per cent of them are educated to a high level, that’s still 300 million highly educated people. We have never before had an influx of that many educated people into the market. It’s a disruptive influence.”
Intel processors, called Pentium, Celeron and Centrino, are used in most PCs and notebooks and are now branching out into wireless devices. Its brand is almost as well known as Sony, Microsoft and Coca-Cola. That makes Barrett, 64, one of the few people with a tangible influence on the direction of today’s consumer technology. His peers in this rarified territory include Bill Gates, HP’s Carly Fiorina, Michael Dell and Steve Jobs of Apple.
Barrett sits placidly in a Chelsea hotel, sipping from a cup of camomile tea to soothe himself at the end of an exhaustive tour of Europe and the Middle East that took in seven countries in as many days, including Lebanon, Turkey, Israel and the Ukraine.
Because of the mellowing US technology market and competition from international rivals, Intel does 70 per cent of its business outside the US. A travelling preacher of technology, Barrett says he feels less like an evangelist in emerging markets because they are taking to technology, such as wireless broadband, so swiftly. He estimates that India, China and Russia alone have between 250 million and 500 million highly educated information industry workers between them — more than in the US.
He says: “We have maybe 1,500 people in Bangalore, a research centre in Beijing, a manufacturing plant in Shanghai; we’ve just announced we’re going to put a manufacturing plant in Chengdu.”
And Intel is not alone. There is a procession of large US and British corporations, including HSBC, Royal & SunAlliance and British Airways, heading to the Far East in find cheap, skilled labour. But what is a cost-saving opportunity for corporations is a bigger problem for nations like the US and the UK.
“From a threat standpoint, it’s really only dangerous to the established economies, rather than being a threat to any particular company,” Barrett says. “A company can do fine in this arena; as a chief executive I’ll move to the markets where I’ll get access to the best resources I can. We’re not shipping jobs from the US but growing outside of the US.”
The situation becomes more complicated, he says, “when you mix your chief executive responsibility with whatever allegiance or patriotism you have in your home economy”.
Intel, considered a bell-wether for the global high-tech industry, recently reported a sharp improvement in quarterly sales and profits. Barrett says the company is forecasting further increases this quarter. “We’ve seen reasonable strength in all the international economies, in Europe and Japan. The only areas where we’re not seeing strength is in corporate America. I’m cautiously optimistic. If we saw a strong US business marketplace I would say we’re out of the downturn.”
And that brings us to the issue that is vexing Barrett. He says that efforts to stimulate the US economy with tax cuts might be fuelling consumer demand but they do not look to the future. “There’s a mixed message from the policies that we’re seeing in America. The tax cuts are having the desired affect in stimulating the economy. But there’s a raging doubt as to whether there’s a job recovery associated with it. Frankly, it’s not all too evident that a lot of national leaders are looking at this bigger issue, the matter of economies that are emerging as rivals in the information market.”
He says the shift of jobs to emerging markets “is not a crisis from the standpoint that it’s going to be an instantaneous event. In this case we have some signposts. Things don’t decline catastrophically, they decline slowly. There’s still time for this Government to react, and react solidly.”
Barrett believes the US should invest in more education, encourage further research and development, ensure the US has the right infrastructure in place, with broadband and other communications networks, and avoid doing harm. “The reason we have Arnold Schwarzenegger as Governor-elect in California is that we had an administration there that did harm, that made California a more difficult place to do business.”
Barrett, who now lives in Arizona, blames political mismanagement of the California economy for encouraging Intel and other high-tech businesses to leave the state. Oregon, on the northern border of California, has supplanted California as the state boasting the largest number of Intel’s 79,000 employees.
Before the election for Governor of California, Barrett was the lead signatory on a full-page advert in newspapers in which top executives, including Fiorina, said that the state had become “one of the worst places to do business, not only in the US but also in the world”. Intel paid for the newspaper advertisement.
If there is a hint of urgency in Barrett’s words, it may be because he has less than two years before he gives up his job at Intel. Analysts believe Paul Otellini, the chief operating officer, will succeed him. Barrett, a San Franciscan, joined Intel in 1974. He became chief executive in 1998, taking over from Andy Grove, who, with Gordon Moore and Bob Noyce, founded Intel in 1968. “I want to leave Intel in a stronger position in the marketplace than when I inherited it. We’re in a pretty solid position. We’re the biggest semiconductor manufacturer in the world, continuing to grow market share. We have some very aggressive plans in the communications space to extend our reach, I think that we’re making good progress.”
CURRICULUM VITAE: CRAIG R. BARRETT
Born: 1939 in San Francisco.
1957-64: Attended Stanford University, graduated with BSc, MSc and PhD degrees in materials science.
1964-65: Nato postdoctoral Fellow at the National Physical Laboratory in UK.
1964-74: Worked at Stanford University in the department of material science and engineering, where he rose to the rank of Associate Professor.
1972: Fulbright Fellow at the Danish Technical University in Denmark.
1974: Joined Intel Corporation as a technology development manager.
1992: Elected to board of directors.
1997: Appointed as Intel’s fourth president.
1998: Appointed chief executive.
Other activities: A member of the board of Qwest Communications, the US Semiconductor Industry Association and the Silicon Valley Manufacturing Group. A member of the National Academy of Engineering and co-chairman of the Business Coalition for Excellence in Education.
Personal: Married to Barbara, a lawyer, and lives in Arizona. They own a ranch in Montana, where he goes horse-riding and hiking.
