FOLSOM -- In the hills above Highway 50, tucked into cubicles inside seven office buildings, thousands of workers turn their imaginations loose trying to envision the future – and how Intel can make it faster, clearer and more fun. The future of the global high-tech company depends on it.
The Folsom research campus, celebrating its 30th anniversary next Wednesday, is Intel’s IT nerve center and the place where engineers develop the company’s core intellectual property. Their job is crucial these days as the tech giant tries to reinvent itself for the mobile age.
Intel, one of Silicon Valley’s pioneers, remains a dominant player in the industry; its chips power 85 percent of the personal computers and laptops on the planet. But that sector is shrinking, and the company is racing to develop new technologies that will allow it to better penetrate the market for tablet computers and cellphones.
“We’re developing the core graphics, media and display technology that’s going into phones and tablets, and new ways of interacting with the computer and the world you’re in,” said Eric Mentzer, head geek at the Folsom campus, as he made his rounds one day in faded jeans and a short-sleeved shirt. His workday often includes visits to labs where his employees try out new games on tablet computers or manipulate virtual realities.
Mentzer’s casual style fits a corporate culture that’s both relaxed and intense. Employees can play foosball, pingpong, billiards and air hockey on site, and perks include a spa, fitness center and free fruit and drinks in the cafeteria. But Mentzer and his co-workers constantly remind themselves that they missed mobile when Apple launched the iPhone and Intel passed on the microchip contract to power it.
Their mantra today: Don’t get beat.
“You should always be trying to spot the next big thing,” Mentzer said.
Intel’s ability to adapt to the fast-changing computing market has significant implications for the regional economy. The company is Folsom’s largest employer, with 6,300 workers, and it’s one of the largest private employers in the Sacramento area.
“It plays a really important anchor role,” said Meg Arnold, CEO of the Sacramento Regional Technology Alliance.
Since Intel moved onto Cougar Ridge three decades ago, displacing a family of mountain lions, Folsom has morphed from a rural town of 11,000 people known mainly for its prison to an affluent city of about 74,000 whose ranks include many engineers. Intel employees have created spinoff companies and increased the ethnic diversity of Folsom, where more than 9,000 people identified as Asian Americans in 2012.
On some key data points, Folsom now looks more like the Bay Area than the Central Valley. The average Intel employee’s compensation package is $174,000 a year, said company spokeswoman Christina Chin. About 70 percent of Folsom households own their own home, compared with 58 percent of households in Sacramento County, and Folsom’s unemployment rate of 3.4 percent is the lowest in the region. Folsom’s average household income is $108,134.
“We’re seeing a mini version of Silicon Valley here in the Silicon Foothills, ” said Folsom City Manager Evert Palmer.
Intel’s reach also extends deep into classrooms, where its employees mentor 2,000 students in more than 70 schools, Chin said. For every hour an Intel employee spends volunteering in local schools or nonprofits, the company donates $10.
Thanks to Intel and its spinoffs, Folsom has one of the highest saturation rates of engineers in California, said Folsom Mayor Kerri Howell, herself an engineer. Intel’s international workforce, she said, “adds diversity that otherwise might not exist.”
‘A very high bar’
Intel’s employees come from over 60 nations, equipped with doctorates in engineering, physics, math and computer science. It was here, in Folsom, that the company developed the USB, which allows data to be transferred between electronic devices, and the microchip used in digital cameras.
“The melting pot of different cultures, hobbies and expertise makes it really exciting,” said Mentzer, whose official title is vice president and director of Strategy and Operations, Visual and Parallel Group. “We attract some of the best talent in the world, and it’s a very high bar.”
This U.N. of gifted geeks often show up for work in aloha shirts, faded jeans and flip-flops. Every employee gets a two-month paid sabbatical every seven years. One employee who rode a bike across Iowa came back to find his cubicle filled with corn and bicycle models; another who grew up in a farm came back to a barn in his cubicle with eggs and straw on the floor. Mentzer said he enjoys Intel’s soap box derby, Halloween contest, company Kings games, Kids To Work Day and Diversity Day.
For all the esprit de corps, not everyone fits in here, and there are websites for disgruntled former employees. “I have friends there who work very long and unusual hours,” Howell said. “I don’t think it’s an easy company to work for; they have very high expectations.”
Intel looks for people who can multitask and do multiple things well, said Grace Davis, director of California corporate affairs. “We also need people who know how to deal with failure – we’re so innovative we’re going to fail. We want somebody who’s going to hustle, move and pivot.”
Mentzer, 53, a University of Maryland graduate in electrical engineering, gave up his condo on the beach in Florida to join Intel in 1985. Intel senior vice president Ron Smith “came to me and said, ‘We’re going to change the world!’ and I believed him,” said Mentzer, who helped bring USB technology to market.
At Folsom Intel, the stars are guys like Ajay Bhatt, an Indian engineer depicted in an Intel TV ad as a gun-slinging superhero who causes women to swoon and men to marvel as he strides through the Intel campus in black shoes, forefingers blazing. Bhatt’s claim to fame: He co-invented the USB in his El Dorado Hills home.
‘Internet of things’
Mentzer makes the rounds of the labs on the Intel campus like the chief of surgery in a teaching hospital. The next frontier for Intel, he said, is “the Internet of things.”
“Computer chips will be in your clothes, your car, your house – over 50 billion devices worldwide will be connected to the Internet by 2020,” he said. “Think about a pair of glasses or a shirt button with a tiny embedded computer that can help you find where you lost your keys.”
The key to this innovation is stuffing ever-greater amounts of computing power on smaller chips. Intel created the first commercial microprocessor in 1971, but its growth exploded in the 1990s with the proliferation of personal computers. Over the years, its chips have become much smaller while handling additional tasks.
“Before, the chip was just the brain, then you had a chip that was the display, and a chip that was a storage and one integrated with USB,” Mentzer said. “Now, Intel’s developed a chip the size of your fingernail that has integrated all those functions.”
Intel’s Folsom campus specializes in developing the graphics technology that has made computer video displays ever-sharper and more elaborate. Another specialty: a new “solid state” computer drive with no moving parts.
Engineers at Intel Folsom are working with Skype to improve the resolution of the company’s video chats. They’re trying to upgrade speech recognition technology for tablets and turning them into “eyeballs” by improving the camera’s ability to recognize objects and digitize them, Mentzer said.
Another group is experimenting with video ports for pets, so owners can communicate with them remotely from work. “Pets have anxiety when their owners go away, and their anxiety goes down when they can see them on the screen,” said Nilesh Shah, director of platform architecture in the User Experience Lab. Shah predicts these pet screens will be in regular use on TVs and screens large and small in the next two years.
Engineers in the augmented reality lab recently made a digital copy of a ferocious “General Kwan of the Middle Kingdom” statue and moved it around a room. The idea is that sometime soon, consumers will be able to hold up their tablet, select a sofa from a catalog, and then move the virtual version around their house. “This is going to be available in the next year or so,” Mentzer said.
‘Late to the game’
For decades, Intel has dominated the market for the chips used to power personal computers. The company’s history includes courtroom battles with competitors and two government antitrust investigations.
“They play hardball in the PC market like nobody else, but nonetheless they deliver a product that’s the best in the industry,” said Doug Freedman, research analyst for RBC Capital Markets. The company also leads the market for the high-performance chips used in the data processing centers that power the cloud, allowing computer users to retrieve email or send a tweet.
But it has not achieved the same success in the mobile market, where it only recently began to emerge as a player. In the first quarter of 2014, the company reported revenue of $156 million from its mobile unit, compared with $7.9 billion from PCs.
Intel’s late entry into the mobile market has put it at a disadvantage, Freedman said. “The mobile market is already 2 billion units with a processor core that’s not Intel-compatible,” he said. Intel has enjoyed some success in mobile, Freedman said, “but they changed direction a few times, and that’s hurt their momentum.”
Mark Hung, Intel specialist at Gartner Research, said Intel lost more than $1 billion in its mobile group last quarter. “There’s no question they’re late to the game. ... What smartphone customers require are integrated chips – both the processor and the modem. Intel does not yet have such a product,” Hung said. “They can no longer count on PC being their bread and butter; they need to succeed in mobile.”
Mentzer said Intel has made “great strides” in mobile and now has its technology in a variety of cellphones and tablets. That includes a number of Android models. The company’s goal for 2014: sales of 40 million tablets powered with Intel technology.
The urgency of the company’s mission can be found on every employee’s ID card, emblazoned with Intel’s 31 core values. “Win and have fun,” the badges urge. “Embrace change and challenge the status quo,” “Set up challenging and competitive goals,” “Assume responsibility” and “Execute flawlessly.”
Editor’s note: This story was changed May 16 to correct Ron Smith’s title.
Call The Bee’s Stephen Magagnini, (916) 321-1072. The Bee’s Pete Basofin and Phillip Reese contributed to this report.