Intel’s Amazon Ambitions
Monday, January 21, 2008
By Richard Shaffer
It is, as Intel’s press release put it, “one of the most remote inhabited places on earth.” Parintins, Brazil, is on the outskirts of nowhere. The closest highway ends in ?bidos, a day or two downriver. So in 2006, when Intel wirelessly connected the Amazon city to the rest of the online world, chairman Craig Barrett promised that the venture would “bring the expertise of specialists, sophisticated medical imaging, and the world’s libraries to a community reachable only by airplane or boat.”
The city’s “digital makeover” was widely reported, publicizing Intel’s billion-dollar, five-year World Ahead Program. The message: Intel is doing good, improving the health and education of the poor around the globe. But Intel’s corporate benevolence is also a shrewd investment. Revenue from the United States and Europe has been declining, so the company is nurturing its next crop of customers in Parintins and nearly 200 other places in the developing world. The World Ahead Program is very much about building Intel’s future markets.
Parintins, it turns out, is not the heart of darkness. With some 100,000 residents–about as many as Burbank, California, or South Bend, Indiana–it is the second-most-populous municipality in Brazil’s largest state. Residents use computers and cell phones, and the city’s young people have been texting one another and posting pictures of themselves online for years. Understanding what Intel is up to there illuminates exactly what the company is getting–and seeking to get–for its $1 billion. As with so much corporate responsibility, it is a fine example of enlightened self-interest.
“We’re not a charitable organization,” says Barrett. Sitting in the lobby of the United Nations’ General Assembly building in New York, he looks like one of the numerous diplomats. The 68-year-old former Stanford University associate professor heads a UN task force that promotes digital technology for the global poor, and he had just appeared at an event promoting broadband communications in Africa.
Inside Intel, Barrett is seen as a supporter of World Ahead. He is refreshingly candid about just what the program is after. Intel is not, after all, putting its money into the globe’s least-developed nations–it’s active in Mexico but not in Malawi, in Nigeria but not in Niger. Explains Barrett: “We’re trying to foster the continued growth of our products.”
Today, more than half of Intel’s revenues come from the less-developed countries in Asia and the Americas, up from less than a fifth a decade ago. The company has moved most of its component assembly and testing to the developing world; its research is also increasingly taking place there. Half of the global middle class lives in the developing world today. Within 25 years, that figure will be 90%, according to the World Bank’s latest forecast. That will more than double, to 1 billion, the number of potential buyers for products that today are considered luxuries, including not only cars and refrigerators but also computers.
“We’re taking this tier by tier by tier,” Barrett says. In other words, Intel is pursuing not the so-called bottom of the pyramid, or BOP–the billions of people who live on a few dollars a day or less–but the next billion, consumers who rank economically just below those it serves today. The World Ahead Program, which reports to Intel’s sales and marketing team, has an average of $200 million a year in funding–equivalent to 10% of Intel’s corporate advertising budget. Barrett notes, “If we just advertised, we’d probably just reach the users who already know us and already use our products.”
Intel’s immediate goal is to win over governments whose purchasing and policy decisions could drive the company’s business forward. World Ahead operates primarily in industrializing and resource-rich economies–in Brazil, India, China, and South Africa, as well as in smaller but fast-growing markets such as Vietnam and Pakistan.
Continue reading “Intel’s Amazon Ambitions“