March 14, 2012 / 12:29 AM / 5 years ago

Intel's supply chain chief says ready for mobile

Intel Chief Operating Officer Brian Krzanich is seen during an interview with Reuters at Intel headquarters in Santa Clara, California March 13, 2012.Robert Galbraith

SANTA CLARA, California (Reuters) - In a technology landscape dotted by upstarts focused on the next big idea, Intel's new COO prides himself on being a master of minutiae: a supply chain and production perfectionist.

Brian Krzanich, whose January promotion marks him as a front-runner to one day become chief executive, said some of his best work at Intel Corp (INTC.O) has been shortening turnaround times in the top chipmaker's cutting-edge factories. Those improvements have become key in a fragmented and fast-growing market for chips used in tablets, smartphones and personal computers, he said.

"What have I brought to manufacturing? Speed and agility," he told Reuters. "That's exactly what the PC business and exactly what the phone business will need."

Krzanich was already in charge of Intel's manufacturing, including a $12.5 billion capital spending budget for 2012, as well as much of the company's day-to-day operations.

As COO, he is now also in charge of Intel's IT and human resources departments.

Chief Executive Otellini was COO until 2005. Vice Chairman Andy Bryant, named executive chairman last year, had been handling some of the COO duties before Krzanich was promoted.

Intel has fallen far behind in processors for smartphones and tablets like Apple's (AAPL.O) iPad, a market dominated by chips based on technology from Britain's ARM Holdings ARM.L and made by companies like Qualcomm and Texas Instruments (TXN.O).

The Santa Clara, California, chipmaker's new Medfield chip has been chosen for a few upcoming smartphones from Lenovo (0992.HK), Motorola Mobility (MMI.N) and other manufacturers.

"We will start to see more and more of our capacity and our output go to things that are mobile, like phones and tablets and other devices," Krzanich said.

Intel is betting its lead in manufacturing technology will help it win more ground from rivals, and it is speeding up the rate at which it uses its most advanced factories to make mobile chips.

As head of manufacturing, Krzanich shortened the time it takes Intel to build a cutting-edge plant and start production.

He declined to predict how much of Intel's revenue would be derived from mobile processors within a few years, as more consumers choose tablets, hurting PC sales in the United States and Europe.

While Silicon Valley is thick with young entrepreneurs rich with ideas for social media and smartphone applications but often poor on follow-through, Krzanich typifies the chip industry, where production processes and in-time delivery schedules make the difference between survival and collapse.

Smaller rival Advanced Micro Devices AMD.N has struggled for years -- partly because of execution hiccups -- to turn good chip designs into products threatening Intel.

SPEED AND AGILITY

A 30-year Intel veteran, Krzanich said that in the past five years he has halved both the time it takes to manufacture a component, and the time elapsed from receiving an order to delivering it.

That work paid off early last year, when a flawed chipset interrupted the launch of a major PC processor. Krzanich's manufacturing engineers were able to resume production with a fixed part within about two weeks, and he sped up output to make up for lost demand before the end of the quarter.

This year, Intel is increasing capital spending by about 17 percent, safeguarding its lead against rivals in manufacturing technology and helping it turn out greater numbers of its most advanced chips.

The costs of building cutting-edge factories is rising as researchers at Intel and its competitors grapple at the atomic level as they try to create ever smaller microprocessors.

Intel is now building a $5 billion plant in Chandler, Arizona, which it will use to manufacture chips with features measuring 15 nanometers, or billionths of a meter. That facility is expected to give Intel about a two-year lead in manufacturing technology over rivals like Taiwanese contract chipmaker TSMC.

"If I look at what will change over the next three to five years, it will be that we'll continue down Moore's Law, but the level of detail ... to ensure that happens will increase and create an increased burden," Krzanich said. "It would be dishonest to not say it's getting harder."

Editing by Phil Berlowitz

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