Intel chief gloomy on the economy

By Yi-Wyn Yen

SAN FRANCISCO – Intel CEO Paul Otellini, who runs the world’s largest semiconductor business, gave a sobering view of the economy to the Web 2.0 Summit crowd Thursday.

If you think the recession is bad now, says the Intel (INTC) chief, a year from now will be worse.  “This is the deepest one I’ve seen in my lifetime. All the smart people that I talk to tell us the U.S. is in for a two-to-three quarter recession,” Otellini said. “Unemployment peaks lag GDP. We’ll see much larger unemployment a year from now.”

In its weekly report, the Labor Department said new claims for unemployment dropped slightly to a seasonally adjusted 481,000 for the week ending Nov. 1. But every day more job cuts are announced. In the past week alone, big tech companies like Cisco (CSCO), Electronic Arts (ERTS), Motorola (MOT), and Xerox (XRX) have announced layoffs or hiring freezes.

Otellini said he was grateful to take a break from the doom and gloom to attend the Web 2.0 conference. The Intel exec provided a 20-minute demo of forthcoming Intel products and answered questions from Web 2.0 host John Battelle.

“I like coming here,” Otellini said. “It’s a respite from watching the stock market crash every day.

Otellini stressed that tech companies need to stay focused on a post-recession strategy. “We have to not think about today’s market turbulence but what can happen as we get through this and what kind of products we can develop around the web as we break out of this cycle,” he said.

Intel is betting on high-powered mobile chips. An Intel employee showed a person taking a picture of a Chinese restaurant with a mobile gadget and then using the web to translate the Chinese characters into English. He also demonstrated how Web 2.0 applications can be used on the go. He scanned a Lego-like toy called K’nex and on the screen, a YouTube video popped up of a person constructing a K’nex model.

Those powerful mobile chips are coming in the next couple years. Next year Otellini says Intel will introduce a new smartphone processor that has the capacity of the original Centrino laptop chip. And by 2011, Intel will offer mobile power that runs as fast as desktop PCs. Otellini acknowledged that to unlock the value of these faster mobile devices requires “a first-class broadband infrastructure around the world.”

The Intel chief says he’s encouraged by growth in China. During a recent trip, Otellini said he met with government officials who told him that China’s GDP would grow 8% to 9% in 2009. “They’re putting in programs that will shift savings and encourage domestic consumption,” he said. “They”ll start buying a lot of tech stuff and putting cash back into the system.”