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'Intel's India arm is at par with the world'

July 07, 2006 14:16 IST

After a seven-year stint with the world's largest chip-maker, R K Amar Babu is bidding India good-bye. The managing director (sales and marketing), South Asia, of Intel Technology India Pvt Ltd, who is moving to Intel's headquarters in the US in September, talks about issues such as his company's plans to set up a manufacturing plant in India, the possible pruning of its work force and the increasing rural penetration in the country.

Excerpts from an interview with Surajeet Das Gupta:

The government is looking at making India into a micro-chip manufacturing powerhouse. There have been discussions between Intel and the government on this for over a year, yet nothing seems to have come through. Is Intel looking at India as a key manufacturing base?

Our belief is that the design of a chip is actually as critical, if not more, than manufacturing. It is the highest end of silicon design and research and we are proud that it happens in Intel's development centre in India.

The centre has been designing products such as multi-core silicon chips and CPUs and a couple of products are now available worldwide. The Intel design centre is at par with anywhere else in the world. This aspect gets missed out when we look at manufacturing. After all, we spend $4-5 billion on R&D - about the same amount spent on creating manufacturing capacity.

But what about manufacturing?

We make a demand estimation on the capacity we will need on an annual or semi-annual basis, as manufacturing capacity takes two years to start off. We keep evaluating sites on parameters such as ease of doing business, infrastructure, benefits, the people and their skill sets and logistics. We look at potential sites, discuss with the governments and decide on which place makes the best business sense.

Today, India is one of the potential sites and we are going through that evaluation process. We are talking to the government. But we are not ready to announce anything yet.

What kind of policy or incentives are you looking for from the government to set up a manufacturing plant?

We have shared our inputs with the government based on our knowledge of other sites that we evaluated. Against each of those parameters, we have told the government about the competitive offering from other countries. The list of things we require is basically about infrastructure, logistics, cost of electricity, cost of resources, the quality of power and water available, tax and investment incentives and so on. But that doesn't mean that the government needs to get competitive and match them and it is not as if I have a wishlist.

As a part of its global plan, Intel is looking at pruning its workforce. Reports clearly say that this would have an impact on your workforce in India. How serious is the issue?

Whatever numbers (on layoffs) that have been put out are purely speculative - even I don't know about it. The CEO of Intel announced a project 60 days ago that we should make a complete analysis of the company and evaluate all aspects of our business with a view to make it more agile and efficient. The study would be for 90 days and it has completed only 60 days. We can see some concrete action only in July.

Considering most IT companies in India are recruiting, does this decision put Intel in a poor light in the country?

The project is not only for India but is applicable for all countries across the globe. I don't know what impact it would have in India. One example is that we have sold off our cellular and communication application business with 1,400 employees. That is the first action we have taken.

Intel dominated the Indian chip market, but in the last few years AMD has come from behind and grabbed marketshare. How will you combat this challenge?

Sometimes you lose, sometimes you win. The micro-architecture on which Pentium 4 is based on is already six years old, it is a little older than it should be and we are in the fag end of the micro-architecture cycle.

We are replacing it with a new architecture that has been launched on the servers and will be in desktops in a couple of weeks. At the end of each architectural cycle, there is a tendency of competition becoming stronger.

The new micro-chip architecture will give us a significant advantage - it is 40 per cent faster and consumes 40 per cent lesser power. At this stage, there's no competitive product in the market.

The challenge in India has been to drive down PC prices and increase its penetration. How is Intel responding to this challenge?

Emerging markets is a key part of our growth strategy and we believe that the next billion users of PC will come from these markets - and India is one of them.

Again, in India, a lot of these users will come from rural India, non-metros and for education purpose. We have a rural PC programme that is geared to increasing PC penetration.

We have realised that affordability is an issue but it's not the only one. The PC has to be accessible and you need to educate people so that they know what to use it for. Our PC platform works in an environment of shared computing and has low power, which means it works effectively on battery power.

We are also working at an affordable PC without reducing the features. We have created a reference design and our aim is to price it 20 per cent cheaper than an equally configured Intel-based PC based on the Celeron chip.

We are also working on an educational platform to create a low-cost notebook with all features, which is targeted at students. Priced between $300 and $400, it should be commercially launched by next year.

Our aim is to take existing chipsets, work with current components but re-design the platform to make it more competitive. We have to work on components that have volume economics, as anything made specifically for the low-cost market PC market would require huge volumes to justify a lower price.