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WIKI ANALYSIS
Intel, Inc. (NYSE:INTC) is the world's leading semiconductor producer and has been the industry leader since the inception of the personal computer. Intel produces products for many facets of advanced technology including flash memory products, motherboards, wired and wireless connectivity products and networked storage products.
Since the 1980s Intel has seen growing competition from a number of companies but none more significant than Advanced Micro Devices (AMD). Intel has been in the industry longer than AMD and, with around 70%+ market share, maintains a significant lead over its smaller rival.[1] Intel's higher net income allows it to outspend AMD on R&D. Such high R&D funding has allowed Intel to maintain its leadership position in the semiconductor industry.[2]
Company Overview
Robert Noyce and Gordon Moore founded Intel, Inc. in Santa Clara, California in 1968. Intel began as an engineering and technology company and developed the first microprocessor chip in 1971. Upon the invention of the personal computer (PC) microprocessors became Intel's main business. Intel has always enjoyed the largest market share in the industry and only began facing competition in the 1980s. Since it was founded Intel has always been on the cutting edge of microprocessing technology.
Business Segments
Intel sells its products to a number of different types of customers:
- Original Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs) are customers who produce computers, handheld devices, and telecommunications and network communications products. The products that these manufacturers produce rely on the processors and other products that Intel makes.
- PC and network communications product users are customers (individuals, small and large businesses, etc.) that buy Intel's products through distributors, resellers and retailers across the world.
- Other manufacturers including producers of a broad spectrum of industrial and communications equipment also have significant for Intel's products.
Digital Enterprise Group (DEG)
This group manufactures products that are incorporated into desktop and laptop computers, enterprise computing servers and workstations, a broad range of embedded applications, and other products. DEG’s products include microprocessors and related chipsets and motherboards designed for the various computers mentioned. The growth in the mobile industry has affected this group's revenue generation, reducing the percentage contribution to the company as a whole.[3]
Mobility Group
This group manufactures and produces processors for notebook computers and all other mobile devices. Recently the mobility group has been increasing its percentage of total revenue.[4]
Others
Digital Health Group
Focused on providing technology for all aspects of the health care field. While no specific products have come out of this division to date, their goal is integrate technology into health care research, diagnostics and productivity, and personal health care.
Digital Home Group
Makes Intel products available around the world to third party distributors, dealers, system integrators and solution providers. Furthermore, this group designs products to meet local needs around the world.
NAND Solutions Group
Produces all of Intel's flash memory products for both embedded and wireless markets. This group includes the NAND flash memory products that are produced in Intel's joint venture with Micron. This joint venture has launched a high speed NAND flash memory technology that supposedly is five times faster than conventional NAND.
R&D Model
Intel's current development model, known as the "tic toc model", calls for the introduction of a new process technology every odd year, then a move towards a new architecture during each even year.
Business Growth
FY 2010 (ended December 31, 2010)[5]
- Net revenue increased 24.1% to $43.6 billion.
- Net income increased 162% to $11.5 billion.
Trends and Forces
Semiconductor Cyclicality
The semiconductor industry is deeply cyclical. Demand in up cycles is so high that chip manufacturers have trouble keeping up. Similarly, if electronic sales, particularly PC sales, are slow, demand for chips can plummet. The fact that the semiconductor industry is more subject to the whim of consumer demand more than corporate demand, also adds to the overall volatility. The backdrop of this high market volatility, however, has been continual growth. Over the last 20 years the semiconductor industry has seen about a 13% average annual growth rate.
Semiconductor sales have shown about an 80% correlation with GDP growth trends, meaning a downturn in GDP growth could very likely be accompanied by a downturn in semiconductor sales.
Innovation Focus
Intel spends significantly more on research and design than AMD in an effort to remain on the cutting edge of the technology field. Intel has introduced the world's first 45nm microprocessor which boasts smaller size and greater power than the previous 65nm microprocessors. Making the transition to 45nm has been extremely successful for Intel and they are now poised to transition to 32nm technology microprocessors.
Intel's innovative approach has also led to investments outside of the United States. For example, Intel has been making clean-tech investments in China.[6]
Trying to Enter the Mobile Phone Market
Intel has its Atom microprocessor for smart phones. There is a growing trend of mobile phones with internet access such as the iPhone and the BlackBerry. Intel plans to use its atom microprocessors as well as the 4G service WiMax, to enter into this expanding business. Intel will use the WiMax network that is being built through a seven company joint venture headed by Sprint and Clearwire. [7]
Competition
Intel is a large corporation with multiple divisions that compete with a variety of companies for customers. The table below highlights the major competitors identified for each division.
| Microprocessors[8] | |
| Desktop | AMD |
| VIA | |
| Mobile | AMD |
| VIA | |
| Enterprise | AMD |
| IBM | |
| Sun Microsystems (Now Oracle) | |
| Embedded | AMD |
| VIA | |
| Freescale Semiconductor,Inc. | |
| Chipsets[9] | |
| AMD | |
| NVIDIA | |
| VIA | |
| Flash Memory[9] | |
| Hynix Semiconductor Inc. | |
| Micron | |
| Samsung Electronics Co. Ltd. | |
| SanDisk Corp. | |
| Spansion Inc., | |
| Toshiba | |
| Connectivity[9] | |
| Atheros Communications, Inc. | |
| Broadcom | |
| QUALCOMM | |
The microprocessor industry is essentially evolving into an unbalanced duopoly. Intel competes directly with Advanced Micro Devices (AMD). While Intel still enjoys a significant advantage in market share, AMD has been gaining ground in the industry.
References
- ↑ AMD narrows market share gap with Intel, revenue gap grows (07-02-2008). Retrieved on 2009-06-03.
- ↑ ftp://public.dhe.ibm.com/annualreport/2010/2010_ibm_annual.pdf Intel, "2010 Annual Report"]
- ↑ INTC 2008 10-K pg. 4
- ↑ INTC 2008 10-K pg. 6
- ↑ INTC 2010 10-K pg. 23
- ↑ http://www.usatoday.com/tech/science/environment/2008-10-28-intel-solar_N.htm?csp=34
- ↑ Intel to Re-enter the Mobile Phone Market.
- ↑ INTC 2008 10-K pg. 11
- ↑ 9.0 9.1 9.2 INTC 2008 10-K pg. 12
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