2004 Consumer Electronics Show (Industry Insider Series)

Paul Otellini
President and Chief Operating Officer, Intel Corporation
Las Vegas, Nev.
Jan. 8, 2004

PAUL OTELLINI: Good morning. And welcome to Intel in the House. We have exciting new products to show you today from Intel and a number of our key partners here at this presentation, but also out in the show itself.

I think the most exciting thing is what the combination of all of these new technologies will do together, the kind of changes that they're going to make inside of all of our houses.

I remember 50-plus years ago when my parents brought that first black and white television into our house. It was a revolutionary change. It brought the outside world in for the first time. Much of the technology that you're seeing here today and in the show are going to be available starting this year and will have that same kind of revolutionary effect.

So let me back that up and take you on a journey through time and go back first 20 years. Twenty years ago, this was the state-of-the-art in computing. 1983, PC AT, dual floppies, no integrated storage. It cost about an average person's two months' pay to purchase one of these.

The same year that this product was introduced, this product was introduced. It's a Sony CDP-101. It was the first CD player. It cost $900.

Both of these products were revolutionary in their day. They had some similarities. Neither one had integrated storage; neither one had a lot of software or content for it. There were six titles for the Sony at launch and probably not a lot more than six application software packages for the PC in this time frame.

Things change. If you fast-forward 10 years later, there were significant advances in both technologies. The PC advanced at a torrid rate of speed. Performance increased 30X in 10 years, and products like those you see on the screens, Intel® Pentium® technology multimedia machines were introduced into the marketplace for the first time. The first attributes of consumer electronics of entertainment capability started being brought into the personal computing environment. CD-ROMs that allowed you to play that CD media, both games and content; sound cards; speakers. Technology was moving from the right to the left.

The advances in the CD happened as well. But the CD player didn't move quite at a rate of 30X. In this time frame, the biggest change was you could now buy a carousel machine that had five rotating capabilities for CDs.

What did change in the CD side was that content shifted. In that decade, it went from six titles to essentially everything. People started thinking about digital technology moving into their home, although they didn't know it was digital technology.

If you look at today, the changes are almost revolutionary. The PC advanced again, 100X performance increase from 1993 to 2003. The PC moved from being the fast follower, the integrator of other technologies, to being the driver of technologies.

DVDs were first introduced in the PC, DVD writable formats in the PC, LCDs in the PC and notebooks for the first time, large mass storage devices, hard drives, in the PC for the first time. Most recently, Wi-Fi, wireless technologies in the PC first.

What drove that? These lines between these two industries are blurring, but they're blurring at an increasing rate. So why has the PC moved so fast? Very simply, we live, in our industry, on Moore's Law.

Moore's Law suggests that the rate of performance or capability of a given chip, doubles every 18 to 24 months. It is an exponential factor. And that exponential fact gives us in the semiconductor industry a template for creativity, for potential, for feature sets. But it does two other things. It's a template for innovation for everyone around us. It provides the software community a knowledge that performance will always be increasing so they can write better code to take advantage of these chips.

But, most important, the PC early on gravitated to some standards, open industry standards, that allowed people to have a common home base to write to, and it allowed people to take that base in terms of innovation and drive it forward.

Now, these attributes have been around in the PC for many, many years. What's driving them now to the consumer electronics industry?

It's because consumers are demanding exponential change inside their homes in terms of the kinds of requirements that they have. We all want to have multiple video streams. Not everyone in the family wants to watch the same video content at the same time. It needs to be from multiple sources. It has to be increasingly high definition in terms of its audio quality and its video quality.

We want to be able to do it not just in the home, but around the home and outside the home, we want more mobile devices.

We want access to not only the content that we own or create on our own, but also the vast libraries that may be out there at the end of the Internet.

We want to be able to do it in multiple formats when we want, time shifting things to times that are convenient for us.

This is a sea change in the requirements placed upon the consumers electronics industry. In many ways, the move towards networking, towards wireless, is another big change. It's the other law of the computer industry, Metcalfe's Law.

Metcalfe's Law talks about the usefulness or the utility of a network expanding exponentially at the number of nodes. So the more things that are connected to the network, the more useful it is. As the Internet grew and as the networks come inside the house and as devices inside the house start talking to each other, the network effect starts happening inside the house as well.

The combination of all of these, is, indeed, a new era in the digital home.

Now, at Intel, we have some experience in new eras. This is an ad that we ran in the early '70s for the world's first microprocessor, the 4004. We thought it was a pretty bold ad at the time. It said, "Announcing a new era of integrated electronics."

What we anticipated was that we could extend the architecture. We knew we could drive the feature set up, the frequency up over time. What we didn't anticipate, though, in this time frame was the impact of standards and what Moore's law would ultimately deliver and create in the PC industry.

So, if you look at what is happening today at the grass roots level in the consumer electronics industry, essentially, we are about to usher in what I'll call a new era of consumer electronics. This is something that is equally exciting as what we saw in computers. The technology, the capabilities, the convergence of all of these things that are being driven off of the computer side are moving very rapidly into consumers.

Now, if you look at what we as consumers want or demand in this era, I think there's five or six key attributes. Let me begin with Wi-Fi. That network effect can now happen for the first time inside the home, because you don't have to drill holes in walls and run cable anymore. Wi-Fi allows you to connect not just your computers, but devices that talk to your computers.

The second thing that we demand, if you forgive the alliteration, is "veri-fi." We need to have security online and on the network inside the house to protect ourselves and our assets and also, increasingly, to protect the assets of the content providers who are going to let their content come into the house.

We need to have "hi-fi," increasing quality in both video and audio streams around the house.

We need to "ampli-fi." We need to be able to reach multiple points anywhere on that network node and move any kind of data or content across it.

And most important, we need to "simpli-fi." We need to make this dirt simple. It has to be able to be able to at interface ten feet, not two feet. If you add all of these together, at Intel, we call this Uni-Fi.

We have reached a juncture in the industry where this unification process can happen. A number of key technologies have evolved in the last three or four years to make this a reality. Wi-Fi I've talked about. It's happening now. It's being deployed more and more rapidly not just in hot spots, but inside the home.

CPU performance is critical here, because the CPU performance is what you need to do the software decoding to allow all of these devices to see that content seamlessly on even reasonably high bandwidth networks.

Form factors. The advances in semiconductor technologies allow us to make things smaller, cooler, and in better ergonomic form factors over time.

Storage technology has evolved so that you can now get 20, 40-gigabyte hard drives in very, very small form factors.

The software technology and the software environment has evolved, particularly driven by our friends at Microsoft, in creating an image at the home and in the home around Media Center.

So in a very simple fashion, you can think of Intel starting to move its silicon from inside the computer to outside the computer and inside a number of other devices. This is happening not just because of our silicon, but because of Moore's Law. All of standards I've talked about really are being driven more and more into consumer electronics devices, everything from TVs to set-top boxes to smart cameras.

Over the next 40 minutes or so, we're going to take you through a trip of what it's like to be inside the digital home and around the digital home and experience some of this for yourself. But first of all, let me talk a little bit about an observation I have on the consumer electronics industry.

If you look at the attributes of designing equipment for this industry, the development time has traditionally been three to five years. Even today, many companies are designing televisions today that will not hit the market until 2008, five-year cycles.

The silicon inside many of these devices has historically been customized. It's developed one chip at a time for that device and then built in the tens of millions of units. The software that sits on top of that silicon is customized, one device at a time. Every time the device changes, the software changes. Every time the formats change, you as a consumer have to buy a new piece of equipment. And the cost has been very high as a result.

What you're seeing, though, is an evolutionary, revolutionary change inside the development cycles of the consumer electronics (CE) industry. Time is coming down, because of the adoption of standards, to nine months to two years. Silicon is now increasingly being based upon general-purpose chips. Software is moving more and more to the open standards of the PC industry. As a result, volumes go up, time to market shortens, and costs go down.

Now, we in the PC industry have seen this movie before. This is exactly what happened in the change from the old computer industry, the mainframe-based industry, to what eventually emerged around the standards of the PC. All of these attributes happened and the dynamics went forward.

We're not the only ones noticing this. Four weeks ago, Business Week magazine ran a story titled "Consumer Electronics' Tough Transition." And one of the quotes they put was, "More than ever, the spoils are going to the fleet of foot."

If that sounds familiar, that's exactly what happened in the PC industry. The first movers, the fast movers, were the ones who gained market share and ultimately won the riches of the PC industry.

This is exactly where Intel is at its best, when we can look at new markets, help new players enter new markets rapidly with new technology, bringing benefits to everyone around us. We've done this before, certainly in the PC industry. The PC industry has now shipped over one billion units worldwide over the last 20-some-odd years. But we've also done it in the enterprise.

Intel entered the server business in 1995. Since then, we've shipped tens of millions of servers, achieved 90 percent market share, and made the infrastructure that enables E-mail, that enables the Internet, enables VPN, that enables all the things we take for granted today happen as a result of cheap, ubiquitous, standard, high-volume servers.

We've also done it most recently in Wi-Fi, where we redefined what the notebook is. There's still higher and higher performance every generation. But we're increasingly equally focused on the form factor, on the battery life, extending the battery life, and on bringing that seamless connectivity through wireless to all of us who use computers.

Users get more capabilities, and they get lower costs. The industry gets lower costs, they get faster time to market. Software is upgradeable, users can benefit from the fact that these computers are reprogrammable, and the volumes have gone up and up and up.

So that's the environment. What's happening in the digital home?

The digital home has really changed its meaning I think quite a bit over the last decade. We've gone from visions of technologies like X10, or even the images of the Jetsons, to where we think the home should be today. It's a lot different vision than what it was, excuse me, 10 years ago.

It's no longer about gadgets. It's about what you do, about doing things inside the home. In the home, we now work, we play. We require style in the devices that we buy. They have to look good outside of closets. We want that freedom to be able to move around inside the home.

History is also illustrative. Ten years ago, we had the multimedia PC. It was the first mass-market computer device inside the home. Three years ago at CES, Intel CEO Craig Barrett talked about the extended PC, using the PC to connect a variety of devices to it as a hub, creating the early visions of the digital home.

Well, what happened over those last intervening three years? Part of the vision has fleshed itself out very, very nicely. Last night, Bill Gates in his keynote talked about the industry getting ahead of itself in the '90s, but as they got to this decade, we're starting to see that reality is what is driving expectations, and not vision.

In fact, I think reality has caught one the vision that many of the companies in this industry, in the PC industry, articulated over the last few years. And there were two big changes that drove that catching up. The first was Wi-Fi, which allows these devices to start being interconnected. And the second one is one that is starting to come out this year, and I'll talk more about, which is the 10-foot interface.

Moore and Metcalfe have clearly been at work here in terms of driving the progress.

The industry has made significant progress over the two-foot or left-hand side of this chart. In 2004, what you'll see is a similar kind of progress being made on the right-hand side of the chart, the 10-foot screens, which will make these devices much more accessible.

Today I'd like to talk about two new initiatives in the digital home from Intel.

The first is a concept called the entertainment PC. It's a new category of PC. It's not created for the creation of content; it's created for the consumption of content. It's designed for use with a remote and not a keyboard. It's an alternative, increasingly, to that rack of AV equipment that all of us have somewhere stacked in our house.

I'll talk more about this in a few minutes.

The second initiative, though, is new for us, and this is a new thrust of Intel, moving our silicon architectures of many kinds, inside of consumer electronics equipment.

And to do this, we have formed a new group at Intel called CEG or the Consumer Electronics Group, whose sole purpose is to take our architectures, our technologies, and optimize those for the needs of the CE devices and CE industry, much as we've taken our microprocessors over time, and optimized them for the desktop, for the notebook, for servers, and whatever. A fully functional group with design capabilities, marketing capabilities, and products.

I said I would delve down into the consumer PC, the entertainment PC. But before I do that, let me show you what consumers have today.

Most of us have, somewhere in our house, a rack that looks something like this. There's an amplifier, there's a game console, maybe a Tivo*, an old VHS player, and a CD/DVD player somewhere in that rack. It looks okay. We're all used to this look and feel by now.

The picture in the oval is what the back of this rack looks like. You've all been there and done that, right? Not a lot of fun.

All of us are mostly capable of using any one of these devices at any one time. But if you want to use all of these devices at once, it's a mess. You know, you have to deal with four or five remote controls. They don't necessarily work. The buttons certainly aren't in the same place. The world of universal remote is not here yet by any stretch.

Some of us want to have these not just in one room in the house, but in multiple rooms around the house, so you replicate these stacks all over the place.

I don't think that's what consumers really want. What consumers want is, make it simple. They want one remote. They want a device that allows you to organize all of your content, wherever it may be, on your hard drive or out on the Internet. They want the flexibility for that device to be able to hand new standards, new media standards as they evolve, without having to bring in a new device. They want the ability for that device to share with other devices on the net or on the Internet. They want to be able to upgrade it through software or through hardware features over time. And most important of all, they don't want to spend any more for it than they spent for any one of these devices over time.

The device that solves that is a new category that I call the entertainment PC.

This is an example of prototype that we've built here. This is a device that Intel will make available, under license, to any manufacturer who wants it for free. And it's representative of a new class of devices. Don't get hung up on the look and feel. Everyone will have their own. But it's what the device does that really is interesting.

It's an inevitable advance, I think.

Inside that digital home, increasingly, the sign of a sophisticated home is not going to be how many of these do you have stacked up in a rack, but how few. How simple can you make doing what you want, and how integrated you can make doing what you want. It began, as I said, as a reference design. There will be products in the market mid this year from a number of manufacturers. Maybe, to get a better feel for this, I'd like to invite Louis Burns up.

Louis is the Vice President and General Manager of our Desktop Platforms Group. His group is the one that designed this product. And he can take this baby through its paces.

(Demo begins and ends.)

PAUL OTELLINI: I wanted to give you a vision of what this product would be. But it's also not just a vision. It's growing in terms of reality.

There are a number of products that are coming out there that have actually implemented some of this technology, not quite all of it, but I would call them good prototypes. You can see a list of them up here, people like the gateway 901. I've got the IX system right here, and I have a gigabyte system here, and a system from IX here that have a number of those capabilities inside. And we know a number of companies that are building off of that reference design, as I said earlier, to deliver starting mid this year.

Now, all of these advances are only useful in that ten-foot user interface starts becoming much more pervasive. Of course, we have the user interface that comes with the Media Center edition from Microsoft. But you also need the applications, and, more importantly, over time, the services. The 10-foot services are going to be the killer app for this 10-foot environment.

A number of companies are shipping these 10-foot interfaces today. One of our key partners is MovieLink. Their interface is up here on the big screens. But also AOL, Napster, Adobe, and Rhapsody from Real. Have announced that they will ship ten-foot interfaces in 2004. So the software spiral is starting to work to create the momentum that makes these devices more and more usable.

You'll see every one of the major services start adapting to this 10-foot interface as the home entertainment PC becomes more and more pervasive.

Intel, of course, is making its software tools and libraries available for software companies to do very simple, easy porting of their existing user interfaces from the two-foot one to a ten-foot interface and give you that 10-foot couch-potato experience.

So that's the entertainment PC.

The second thing I wanted to talk about is Intel moving inside of other consumer electronics devices. Things like advanced set-top boxes and advanced set-top boxes based on Intel Architecture silicon, Intel wireless chips, Intel Ethernet chips, and also a new category of digital media recorders using much of the same technology. This is taking that whole notion of Moore's law and standards that I talked about before and bringing them to devices that have existed before, set-top boxes or PVRs, but building them with standard technology and therefore taking advantage of the performance gains that you can get as a result of buying standard products.

We're very interested in this business. There are over 350 million digital devices that will be sold into the homes around the world this year. There will be 1.5 billion devices that will be sold 2004 through 2006 according to IDC. This is a huge market. In many ways, it's a larger market than the PC itself, and it's one where we think we can bring the advantages that Intel traditionally brings to these markets -- scale, standards, performance -- to help change them as well.

There's a number of devices here which are also in production. Have three here. This is the Thompson RCA set-top box, MSI's, Samsung's and Toshiba's digital media recorders. Very, very high-end equipment at very, very affordable prices over time.

The next area you'll see Intel chips start moving into is cameras and imaging. In September, we announced a new family of programmable media processes that are focused initially at very high-end imaging machines, and ultimately moving into consumer electronics machines, for high-quality imaging starting in '05.

We also have had a number of designs putting our XScale processors into digital video cameras. Over time, we'll move that architecture, as well, to Intel microprocessor -- standard Intel microprocessor-based architectures.

The last thing I'd like to talk about is displays.

Today, we are pleased to announce our new LCOS technology. "LCOS" stands for liquid crystal on silicon. It's one of the types of technologies you can have for very large displays. The principal ones are LCD, MEMS or DLP, and now LCOS.

What LCOS does is it will have film-like HDTV experience at very, very affordable prices. And, in fact, this machine that you saw earlier, this 65-inch display earlier, is based upon an Intel LCOS engine. And for illustration think about this device having "Intel Inside" of it, as well as all of the other kinds of devices that will talk to that PC over time.

The benefits as we move our silicon inside these devices I think are very good for our customers. It allows them to consistently reuse their R & D. They can reuse their software programmability. They can take advantage of the performance that we bring into the marketplace.

Now, what does LCOS do? You saw some images before. This is an LCOS light engine, LCOS display that's connected to the light engine.

What LCOS does better, we think, than other technologies, is it takes advantage of Moore's law. It takes advantage of what we do well, which is build silicon. It takes advantage of design. It's based upon standards. And, most important, it's digital end-to-end. There's no analog technology anywhere in this.

You can see an example of the three types of resolution you can get from a comparable picture. This happens to be from Mallory Pictures, from LCD, MEMS or DLP, and LCOS displays. Very high resolution, because you have narrow interpixel distances, and you have very high resolution. The LCOS engine inside this display is based upon our 18-micron silicon technology, a two-generation-old technology. In the first half of next year, we will begin sampling those engines scaled to the next generation, 0.13-micron. As we go to the next-generation, just like it happened in microprocessor, things get better, in this case, quality goes up, pixel quality goes up; things get smaller; and they get cheaper. We're going to be able to continue to scale this and have many, many devices built around it.

It's real. We expect that our customers will have real televisions, high-definition televisions, in the market by the end of 2004.

To give you some idea of what we think the revolutionary impact of this technology is, we think that in 2005, you'll be able to buy a 50-inch HDTV based upon our LCOS technology for less than $1800.

This will change big-screen television economics.

Now, let me move out of the digital home and talk about the mobile home. This is what a mobile home may have looked like 50 years ago. Some of you may still have those around. This is what the digital home today looks like. It's changed a lot. We have different needs. The mobile home has changed a lot. We have different needs. We need to be able to do everything we did in that digital home anywhere we go.

It's the notion that we've talked about for some time at Intel called anytime, anyplace, any device. We want to have access to that content wherever you're at, whether you're at home, at work, or on the road.

Increasingly, our design paradigm is that home is where you are. You need to have that access everywhere.

What's happening is once you have that paradigm, you start seeing a blur between what you're doing at home and what you're doing at work or what you're doing on the road.

You can start thinking about accessing your own content while you're on the road from your home or a webcam of home security systems, or your kid's soccer game that someone may have recorded while you were away and you still are away, and see these things almost as good as if you were there real time, this time-shifting capability we talked about earlier.

Now, there are a number of devices that are evolving in this area as well. I wanted to start with a new category of devices called PMPs or Personal Media Players. Those of you who went to Bill Gates's keynote last night saw him show this PMP from Creative. What he didn't say and what you may not have known is this is based on Intel silicon as well.

There's another one here from iRiver that has a similar kind of capability.

There's a new one that I wanted to show you from Samsung that is cool. This has 70 hours video capability on a 20-gig hard drive inside of it. Let me turn it sideways so you can see how thin it is. It's not much bigger than the PDA.

This kind of device is as revolutionary for video as the iPods and MP3 players were for audio. And it's going to change the way we all look at video and where we look at it.

In other categories, we've had great progress working with a number of partners, Microsoft and others, and phone manufacturers, to build PDAs and handsets around the smart phone or PDA paradigm. There's a number of examples here of those.

What has been very exciting for us in the last year is what's happening in notebooks. Of course you're all familiar by now with Intel® Centrino™ mobile technology. This is our flagship product line for notebooks. And we're not stopping with the products we designed and delivered this year.

I wanted to show you a concept design that's code-named "Florence," for the city where the Renaissance began. And this is Florence. It has a 17-inch display. It has the most advanced Intel technology inside it. It has the Dathon chip, which is the next generation of the Centrino mobile technology processing family. It has our next-generation chipset called Alviso. It has the ICH6 and it has Calexico 2. Calexico 2 is our dual-band, trimode Wi-Fi solution.

It's kind of cool. It's very thin. Let me do something here, push this button, and the back folds out, so it becomes a stand. Put it like that. And, actually, the keyboard sits behind it. It pulls out. It's a wireless keyboard. And it's not just a keyboard. You can pop out this feature here, which turns out to be a fully functional Voice over IP phone.

You can take this one out, which is also the mouse. It becomes the remote mouse. But on the other side is a fully Windows Media Center Edition-compatible remote control.

So this new technology does everything for you but cook your dinner. And maybe it actually can help you do that.

So let me invite Chef Anand Chandrasekher up here to show us how he might think about cooking his dinner with Florence. Anand is vice president and general manager of Intel's Mobile Platforms Group.

(Demo begins and ends.)

PAUL OTELLINI: The next thing I'd like to talk about is infrastructure. And this is really what we're trying to do with our Intel Capital, our venture capital arm, to be able to help smaller companies make the vision of the digital home and the mobile home a reality.

It's very clear to us that while big companies have a role in making this happen, a lot of the innovation, a lot of the excitement that we're going to want to see in this revolution is going to happen from small companies as well. And to do that, to help accelerate that, we've put together and announced yesterday a $200 million fund focused on the digital home. And this is really created to invest in companies that are developing hardware and software technologies, both, around this home vision. It's worldwide, and it's multi-year.

In many ways, it's an extension of some of the individual investments we've been doing for many years, much of which you've seen in the demos today that have come out of the labs and are now in shipping products around the world.

So we have the scenario now where the hardware is getting there, the software is getting there, the services are getting there and the small-company innovation is now stimulated around this.

There's one missing piece in fulfilling this vision. And that's the availability and the distribution of premium content over the Internet. What we need and what we desire as consumers for that vision to happen is that we need that seamless availability, that robust access to those high-value content services that are in many other places around the world today, not necessarily available on the Internet.

We have worked with a number of companies in the so-called "5C" Consortium to be able to do a technology called DTCP, which is Digital Transmission Content Protection, which does encrypted and compressed video between multiple access points inside the home over multiple formats. It allows you to have a very, very easy way to be able to move this content and maintain its protection while it goes between these devices.

And a number of companies like Warner, Sony, and Revelations Entertainment have endorsed this technology.

There's also a number of other technologies being rolled out, a number of other formats being rolled out for Hollywood to be able to wrap their arms around to be more comfortable in allowing access, consumer access, to this kind of content over the Internet.

I'd like to run a video now that shows you what some of the key companies in Hollywood think about this.

(Video plays and ends.)

PAUL OTELLINI: Well, as you saw, there's a growing amount of industry support for not only bringing a premium movie and music content into the home over the Internet, but also enabling a whole variety of new customer experiences.

And to help share their vision on that, I'd like to bring up a couple of guests from the content industry. You are probably all familiar with Morgan Freeman as a distinguished actor. What you may not know is that Morgan is also one of the founders of Revolutions Entertainment, one of the key companies in the Hollywood industry, films like "Under Suspicion," one of my favorites from last year that came out, and Lori McCreary, who is the CEO of Revelations Entertainment. Please help me welcome them up here right now.

(Demo and video begins and ends.)

PAUL OTELLINI: So, we've taken you on a long journey today, from 20 years ago to what's the latest in the digital home and the mobile home.

We tried to show you that we believe in our hearts that there is a revolution coming inside that home. And it's driven off of all the things that have brought us the computer revolution in the last 20 years.

And I think that entertainment PC is going to redefine the living room as much as the original PC ended up redefining how we work.

In many ways, though, the most interesting thing about the entertainment PC is that every device inside the home that it will touch will increasingly benefit from those standards and from that performance gain and from that cost curve that Moore's law brings to it. They will all be touched in one way or another by Moore's law. And that will change this industry and make it very, very exciting for us as consumers going forward.

Increasingly, your home is going to be thought of as where you are. That is the way we are designing our products. We want you to be able to have this experience anytime, anyplace, and anywhere.

Welcome to Intel in the house. Thank you.

(Applause.)

* Other names and brands may be claimed as the property of others.