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.”

By Michael Copeland

On the eve of the latest and largest Internet gathering this year, O’Reilly’s Web 2.0 Conference and Expo, Forrester Research dropped a report that concludes that companies will spend $4.6 billion on Web2-related technologies by 2013. What that means for you, fellow office dweller, is that Forrester believes the world of wikis, widgets, blogs, mashups and social networks will increasingly find a way into your work life.

The emphasis won’t be entirely on internal collaboration, Forrester analyst G. Oliver Young writes, but will also offer “a fundamentally new way to connect with customers and prospects…By 2013 investment in customer-facing Web 2.0 technology will dwarf spending on internal collaboration software by nearly a billion dollars.”

In other words, you will interact with your customers and prospects the same way you do with friends on Facebook or maybe more likely with colleagues on LinkedIn, and with the same Web-based communication and tracking tools.

It makes sense that companies embrace the same easy-to use Web-based tools that we use increasingly in our social lives. Mark Benioff at Salesforce.com has been preaching that for some time now, both through AppExchange and his latest brainchild Force.com, his so-called platform-as-a-service offering. There are numerous other Web-based services including Jigsaw, BaseCamp, Yahoo’s Zimbra, Zoho, and many others that are already bring a Web2 flavor to the work world. What Forrester is arguing, however, is that for everyone who still thinks AJAX is a cleaner, and Twitter is what birds do, a lot of Web2.0 will come.

Does that mean you will be getting Twitter updates from your customers or your boss? If not actual Twitter updates, than perhaps a more corporate version that can offer the same immediacy and easy access to a list of key people. Much of the consumer Web2.0 stuff that makes it fun won’t make the leap, no doubt, but the ease of use and connectivity will.

Will it be a less exciting and dynamic Web-based world that Forrester anticipates? Clearly. What it might also be, however, is a more profitable one. And that is something that many of the Web2 startups that are piling into San Francisco at the moment will be very happy to hear.

And so the Web 2.0 Summit comes to a close. It’s late on the last afternoon, and in the overflow room bloggers plug in their laptops and lounge on the couches. Though a panel of former Google employees are sharing thoughtful insights on why they left the company, my fellow conference attendees are surfing the Web as they listen. And five of the seven screens I can see display Facebook profiles.

Sure, this year’s conference lineup featured CEOs from more large companies than in years past. Microsoft’s (MSFT) Steve Ballmer, eBay’s (EBAY) Meg Whitman, AT&T’s (T) Randall Stephenson and News Corp.’s (NWS) Rupert Murdoch all took a turn on stage. (On the first day, co-host John Battelle noted the star power, saying, “In past years, we couldn’t even get these guys to call us back.”) But conference goers mostly wanted to talk about the company with the 23 year-old founder who pioneered the concept that has become this year’s buzz word: the social graph.

Just what is the social graph? On Wednesday afternoon when Facebook’s Mark Zuckerberg joined Battelle for an onstage interview to open the conference, he defined the term: “It’s the set of connections that a person has in the world.”

Even as Zuckerberg spoke, the conference was abuzz with speculation about news of an impending partnership with one of the Internet behemoths, Google (GOOG), Microsoft or Yahoo! (YHOO). In his interview, Battelle grilled the stoic CEO about a possible sale of a small slice of his company. When asked how they were coming, Zuckerberg responded in his predictably monosyllabic and nearly monotone manner: “Great. It’s almost wrapped up.”

Meanwhile, in the conference hallways where the real action takes place, entrepreneurs, investors and journalists frantically exchanged final notes on their latest projects. What’s the hottest idea floating around this year? “Facebook, definitely,” one entrepreneur told me, flipping open his laptop to show me an application he was designing for the site. And what’s the most over-hyped idea? He didn’t skip a beat: “Facebook.” Take note.

L.A.-based MySpace has officially arrived in Silicon Valley.

But from the look of the social network’s soiree Wednesday night following the first day of the Web 2.0 Summit, the company hasn’t left Beverly Hills far behind. MySpace hosted the invite-only party at the San Francisco Museum of Modern Art to celebrate the company’s new office in the city.

Hired models swilled champagne on a white shag carpet next to the likes of News Corp. (NWS) chair Rupert Murdoch, YouTube founder Chad Hurley, media reps and the occasional tech geek. Waiters passed bite-sized sweets on silver trays, vases of glowing orbs added color to the white modernist tables and screenshots of MySpace pages flickered on the walls.

Earlier in the day, co-founder Chris DeWolfe told the crowd at the Web 2.0 Summit that MySpace’s move north will help the company “build out its tech facilities and hire more engineers.” He said that the media-focused MySpace “will have the best of both worlds” with its new outpost.

Meanwhile, party-goers speculated on what it means now that the social network has moved closer to its biggest rival, Facebook.

“I think MySpace is thinking, ‘We kicked ass on the Web but we’re still not accepted by Silicon Valley so we came to make friends’,” said Evan Williams, co-founder of micro-blogging company Twitter. “Also, they’re probably thinking it’s time to stop flirting with that Facebook floozy.”

Despite the rivalry, MySpace invited a few Facebook reps – like head of PR Brandee Barker – to the party and the two companies did their best to get along.

But most attendees could have cared less.

“Yeah, it’s a good party, but there needs to be more women,” said Phillip Gums, director of JE Model Management. “At a party like this,” he said, “I mean, you know, dim the lights a bit. Invite some women.”