Intel Corp. (INTC) Chief Executive Paul Otellini said the tech market is starting to become more predictable as computer makers adjust to new levels of consumer demand.

"The predictability is starting to come back into the system," Otellini said at the Goldman Sachs Technology and Internet Conference.

"You've seen the global shock, now people are trying to figure out how to work out of it," he added.

In what was a comprehensive discussion of the issues currently affecting the technology sector, chip companies and Intel in particular, Otellini provided a look at Intel's strategy in netbooks and the convergence of mobile tech products, the future of the Atom processor and its lead in manufacturing technology.

Otellini also highlighted the differences between the current downturn in the chip space and the drop following the burst of the tech bubble.

Specifically, the previous downturn surprised many people in the industry, resulting in massive inventory oversupplies that took time to work through the system. In addition, he said the PC has become indispensable, limiting the extent to which demand will likely fall as people replace old computers that have gone kaput.

Intel shares were recently flat at $13.03 in late trading. Over the past 12 months, the stock is down around 33% as demand for semiconductors sank throughout the industry. Intel's drop is smaller, though, than that of many other chipmakers. The Philadelphia Semiconductor Index, or SOX, has fallen more than 42% over the same period.

One bright spot for the chip giant has been the netbook market. Intel introduced its low-power Atom processor last year and has virtually taken over the market for these cheap notebooks, designed primarily for on-the-go Internet and some simple applications.

But with the netbook's success, many other chip companies, including rival Advanced Micro Devices Inc. (AMD), graphics chip maker Nvidia Corp. (NVDA) and even such mobile chipmakers as Qualcomm Inc. (QCOM) have shown an interest in competing for the growing segment.

"Displacing us there is going to be hard," said Otellini in response to audience questions at the event. "We've got a product that was designed for this segment, no one else does."

Otellini isn't surprised by the growing competition in netbooks. He also expects that the market for mobile products - from netbooks to Internet-enabled smartphones - that has traditionally been fragmented between many chip companies will continue to coalesce.

"Moore's Law puts us all on a natural collision course," Otellini said, referring to the still functioning theory from Intel co-founder Gordon Moore that the number of transistors on a chip will double roughly every two years, increasing performance and lowering cost.

"In many ways, the battle for the smartphone will be fought in the netbook," he said. "If we do our job right, we should do very well at the smartphone business as it comes down in price points."

At the Mobile World Congress last week in Barcelona, Intel said a version of its Atom chip will be in a new mobile Internet device from phone maker LG Electronics Inc. (066570.SE).

"You'll see some announcements in the next month or so from other major handset manufacturers," said Otellini.

Meanwhile, Otellini expects netbooks to be sold in a similar way to cellphones, where phone service providers offer discounted devices when customers sign long-term contracts.

Verizon Communications Inc. (VZ) has already said it plans to begin offering netbooks with service contracts.

Otellini expects more such offers ahead, and estimated that roughly one-third of netbooks will be sold this way in 2009.

One reason Intel has been able to push costs down has been a lead in upgrading its chip-manufacturing technology. Currently, Otellini said, he estimates the company is lapping the competition.

-By Jerry A. DiColo; Dow Jones Newswires; 201-938-5670; jerry.dicolo@dowjones.com