TECHNOLOGY:Instrumental in bringing Intel's operations to Ireland, its chairman Craig Barrett now faces the challenges of today's unsure economic climate

FIFTEEN YEARS ago, the first microprocessor rolled off the production line at Intel's Leixlip plant in Kildare. It was a defining event both for the company and its host country. The arrival of Intel is seen now as marking Ireland's arrival as a modern economy.

While by no means the first technology company to locate European operations here, it was even then an industry leader. Europe was becoming an increasingly important market - 1993 marked the first time that Intel's chip sales in Europe outstripped those in the US - and its decision to choose Ireland over rival sites was a signal to others in the sector of the merits of investment in our economy.

Craig Barrett was the man charged with ensuring the success of the Irish operation. A chip technologist lured to the company back in 1974 from his teaching post in Silicon Valley's elite Stanford University, he was at that time Intel's chief operations officer.

In many ways, Barrett's career has walked in step with that of the company's Irish business. When he started with Intel, it was a relatively small company founded just six years earlier and starting off in the integrated circuit business. "When I joined, the company was doing $50 million a year in business which I thought was quite a lot; we've grown that to $100 million-plus a day, which I still think is quite a lot."

Just months after Intel announced in October 1989 its intention to operate in Ireland, Barrett was appointed executive vice-president with responsibility for internal operations across Intel, including the nascent Irish operation. It was a key appointment. The elevation of the then low-profile Barrett made him the most senior figure in the corporation after the company's three founders Robert Noyce, Gordon Moore and Andy Grove.

Intel's Irish operations developed ahead of the expectations of both IDA Ireland and the company. Barrett was recognised as an integral part of that success. He was elected to Intel's board in 1992 and named the company's chief operating officer in 1993. He became the group's fourth president in 1997, before succeeding Grove as chief executive officer the following year. In 2005, he stepped down and became chairman.

Speaking to The Irish Times in the company's Santa Clara headquarters recently, Barrett recalled how the company's first premises in Ireland were far from the cutting edge environment of its Leixlip campus. Intel's first motherboard plant was housed in a vacant car dealership in Palmerstown, west Dublin as it awaited completion of construction of the initial stages of the Leixlip campus.

It wasn't the most auspicious beginning but Barrett credits the fact that it happened at all to IDA Ireland. "There are really only two development agencies around the world that I hold in ultimate esteem and reference to everyone as the way to do things - IDA Ireland and their Singapore equivalent. They are world class at interfacing with the private sector, one-stop shopping, the ability to make decisions and the ability to act rapidly," says Barrett. "They have been a pleasure to work with."

But Ireland no longer offers the same factors that drew Intel here in the first place. "From 1989, when we started, to today, Ireland has gone from the bottom of the European Union in terms of GDP per capita to the top, Dublin real estate has become the most expensive in the world and salaries have gone up as the country has prospered. The Irish experience has been phenomenal.

"But I guess, in the parlance of government, no good deed goes unpunished, and the success Ireland has had in the past 15 or 18 years has kind of pushed it into the same category as the US, with a very high standard of living. It is now a relatively costly place to operate and you have to be able to contribute more and more value to whatever you do. The question is what you do for an encore."

A passionate believer in the power of education, he points to the role of Science Foundation Ireland and its founding director Bill Harris in driving the Irish workforce and its researchers up the skills chain.

This, he believes, will help Ireland compete effectively for foreign direct investment in the future. "It is still possible to attract big foreign investment but it is the nature of the foreign investment that is going to be key."

But what about the global economic slowdown and the growing consensus that the US is heading for recession? "Obviously, if the US goes into a deep recession, that is likely to impact the rest of the world and will impact business, so we're not immune from recession," he says. But he is sanguine about the prospect. "I tend to worry about things I can impact. And that's something I can't impact so I tend not to worry about it."

In any case, he argues that an economic slowdown will not necessarily mean a halt to investment. "Trying to save your way out of a recession makes no sense. You invest your way out of a recession. Because our technology tends to move so fast, what you want to make sure you do in a slowdown is continue your investment stream in R&D and new products, new process technologies and new manufacturing, so that when the business does turn around you have a strong base to build off.

"Recession is, if anything, the most important time to invest in new things."

While conceding that this is not the case universally, he believes it holds true for the sort of R&D intensive businesses that Ireland is now trying to attract.

A greater concern for the Intel chairman is the protectionist clamour both at home and abroad. The US presidential primary campaigns have seen concerted calls for more action to protect jobs and counter more favourable tax regimes abroad. Barrett says the election primaries by their nature tend to push candidates to the extremes. He is inclined to wait for the two presidential candidates to emerge before assessing their policy statements. "You have to take that with a grain of salt. It's disconcerting to hear that dialogue but I'll wait till we get into the real campaign to see where the parties line up.

"It's hard to imagine anyone in the US saying free trade is not important to the US. It's hard for anybody in the US to think we are going to compete on anything other than our education and our bright ideas. I mean we are not going to compete on the basis of labour rates any more than Ireland will.

"So people who say, 'let's bring back the auto industry, let's bring back the steel industry, and other labour intensive industries, and how dare companies like Intel which have 75-80 per cent of their business outside the US have a single employee outside the US', are frankly kidding themselves."

However, he concedes that if US politicians continue to bash free trade agreements and continue isolationist talk, there would be a problem. "If the US entered into an isolationist period, this could have a dramatic impact on world trade and the interplay of economics between different countries and I worry about that possibility; although I think it is unlikely."

He has similar concerns about protectionist trends abroad, particularly in the emerging economies like China, Russia and India.

"Sitting back at the highest level, what you hope is that, as those markets open up, they are consuming markets, and that is opportunity. On the other hand, as those markets open up, they are also producing markets and competitors. You somehow hope those two things balance and, if you are a successful company with successful products, you'll be able to take a little bit of advantage of the upside more than the downside. So we look at them as great opportunities but also as competitors.

"In Asia, you're seeing a little bit of protectionism, some barriers to market entry, but frankly they're not that much different to what we saw in Japan in the 1980s. You kind of expect some of that."

"Our industry, fortunately for us, is one that moves forward very rapidly. Unless you are continuing to bring new products out, you are not successful, so we just don't slow down.

"We will continue to invest at the speed we're going, we'll continue to follow Moore's law [named after Intel founder Gordon Moore, which states that chip computing power will double every 18 months] and we'll continue to see the opportunity to aggressively bring new products into the marketplace. That's us and that's how we compete. We're not going to play defensively, ever. We'll play aggressive."

Barrett believes the greatest challenge to business is to ensure the continuing promotion of worldwide open standards. "You don't want countries closing themselves off or creating local standards or local barriers to the furtherance of technology. For example, as China gets to be a bigger and bigger market, you do not want China to close itself off as Japan did in the 1980s. Part of China's spectacular growth is their absorption of world standards and technology.

"So you want to make sure, as far as possible, that the world doesn't drift off into warring isolationist camps."

America's standing in the world has faced new challenges under the Bush administration, but Barrett says multinationals like Intel have not found doing business across the globe any more difficult.

"I don't think there has been a particular challenge to companies like Intel in that respect. We are truly an international company from a sales perspective. I have not seen any anti-Intel or anti-American attitudes spill over towards what we do."

However, he does feel that the company has been able to leverage the experience its managers have gained in doing business across the globe. "If you are doing most of your business outside the US, you need to visit the markets and deal with the people and respond to their needs and find out what their requirements are. I've often thought the world would be a much better place if all elected officials had to
have a certain number of visas in their passport."

Barrett says Europe remains a very attractive market for the company, but the bulk of future growth is likely to be further afield. "Europe is one of the bigger markets we have but the growth markets are places like Asia, the Middle East, Africa, Eastern Europe and Latin America. Western Europe, the US and Japan are still good markets for us but they are not the big growth markets for the future. The growth markets are the undeveloped economies."

Even after 34 years with the company, Barrett sees plenty of opportunity remaining for growth at Intel. "There are about a billion internet users out there and there are over six billion people in the world so we have just started to touch the world's population. The major challenge he sees is providing 'connectivity' to places like Africa, Latin America and Asia.

"Being a microprocessor maker, sometimes, you would think microprocessors and computers are the key - but it turns out that, if broadband connectivity is much more expensive than the hardware then that is the great limiter, not the hardware. A 256KB connection in Africa, costs around $250 (€160) a month, which is the cost of a real inexpensive computer. So the monthly connectivity charge for moderate broadband is as much as the hardware and software cost - and that's a monthly charge.

"Once you've solved that connectivity issue, the question is how you get appropriate access to the hardware, the software, the internet and content. It's not just a matter of how you give people information from the Wall Street Journalor the Financial Times; if you're a farmer in China, you could not care less. You want something to solve your local problems - local exchanges to sell produce at the highest possible profit, news on weather and fertiliser and insects and local economics. You need connectivity and local solutions.

At Intel, Barrett heads a World Ahead project that sees him travelling to 25 or 30 developing countries each year. But to what extent is this simply a case of a US corporation protecting its position or is it a more altruistic exercise?

"I'm very pragmatic about this, it is a combination of both. We've reached the first billion internet users. The next billion will not be found in London or New York, they'll be in the emerging economies and you have to demonstrate to those people how technology can impact on their lives.

"Going and demonstrating that is quite different than just talking about it. It's easy to talk. As a company, we tend to get very bored talking about things so we say 'let's go show how it works'. Then you can go to the relevant parties, such as governments and the development banks and say: 'Look what can be done. Here's the demonstration. Intel cannot afford to replicate this but we can come in and show you what's possible and, once we do, maybe we can get our interests aligned.'

"Now is that a humanitarian activity? Sure. It's bringing goodness to the world. Is it good for Intel shareholders? Sure. This is always a balance between these two. Our shareholders are not paying me just to be the humanitarian to the world but we do a lot of good in the world as well.

"And by doing good, Intel can probably prosper in the future. I don't see any problem or challenge between those two."