Group 9, Section B
OVERVIEW OF INTEL
Intel Corporation (Intel or "the company") is the world's largest semiconductor chip-making company. The company develops advanced integrated digital technology products, primarily integrated circuits, for computing and communications industries. Intel primarily operates in the US, and Taiwan, China (including Hong Kong). It is headquartered in Santa Clara, California and employs 82,500 people. The company recorded revenues of $43,623 million during the financial year ended December 2010 (FY2010), an increase of 24.2% over 2009. The operating profit of the company was $15,588 million in FY2010, compared to $5,711 million in 2009. Its net profit was $11,464 million in FY2010, compared to $4,369 million in 2009.1
A brief History1
Robert Noyce and Gordon Moore (Of Moore's law fame) established Intel in 1968. Moore and Noyce initially wanted to name the company "Moore Noyce". The name, however, was a homophone for "more noise" – an ill-suited name for an electronics company, since noise in electronics is usually very undesirable and typically associated with bad interference. Instead they used the name NM Electronics for almost a year, before deciding to call their company Integrated Electronics or "Intel" for short. 2The total initial investment in Intel was $2.5 million convertible debentures and $10,000 from Rock. Just 2 years later, Intel completed their initial public offering (IPO) raising $6.8 million ($23.50 per share). Intel's third employee was Andy Grove, a chemical engineer, who later ran the company through much of the 1980s and the high-growth 1990s. Within three years, Intel made a breakthrough with the 4004, Intel's first microprocessor. The company continued to launch improved products, including a range of 8086 to 8088 microprocessor. In 1978, the company sold these microprocessors to IBM's new personal computer division. In 1982, Intel introduced the 80286, the first Intel processor that could run all the software written for its predecessors. While Intel created the first commercially available microprocessor (Intel 4004) in 1971 and one of the first microcomputers in 1972, by the early 1980s its business was dominated by dynamic random access memory chips. However, increased competition from Japanese semiconductor manufacturers had, by 1983, dramatically reduced the profitability of this market, and the sudden success of the IBM personal computer convinced the then-CEO Andrew Grove to shift the company's focus to microprocessors, a decision that was to prove successful by the end of 1980s. Further progress led to the 386 microprocessor and then the 486-generation in 1989. In the 1990s, Intel began working on computers that allowed the incorporation of 'real world' data such as speech, sound, handwriting, and photographic images. Intel Capital, the venture capital
Source: DataMonitor, 15 July 2011 http://en.wikipedia.org/wiki/Intel
investment arm of the company, was established in 1991. Intel introduced the Pentium processor in 1993 followed by the Pentium Pro processor in 1995. The company continued with its strategy of upgrading its models. In 1999, Intel designed the Intel Celeron processor for the value PC market segment. It also launched the Pentium III Xeon processor during the same period. New releases in 2000 and 2001 included the Pentium 4, Itanium and Xeon processors. The company continued to work with and acquire a variety of specialists in different fields to come up with solutions for Electronic Product Code technology (Carrefour, Metro and TESCO), HD audio (Dolby Laboratories), video processing (Oplus Technologies), and computer security (McAfee). In 2006, Intel unveiled a new brand identity. The new brand identity involved changes to the recognized Intel Inside logo, created in 1991, and the original Intel 'dropped-e' logo, which was created by Silicon Valley pioneers Robert Noyce and Gordon. It also included a new tagline: "Intel. Leap ahead".
2007). competitors. it has to operate according to different government policies of different countries depending on the stability of the countries (Writer. Intel repurchased 70 million shares of common stock for $1. and the total dividend payout was $3. political values and beliefs shaping policies. GDP. create shortages in technical skills and result in changing values and expectations of customers and employees. currency etc
INTEL has positive trade balance with European and Asian countries in the world. customers. 2006).such as interests. distributors. In 2010. Excise. marketing practices and competitive position. and returning cash in the form of dividends. Intel continues to invest money all over the world. they are the new digital trends of this era.
. Intel cannot ignore this profitable industry.
Economic factors.5 billion.
Technological factors represent major opportunities and threats which must be taken into account while formulating strategies. Technological advancements can open up new markets. Technological changes can reduce or eliminate cost barriers between businesses. manufacturing processes. 2006). change the relative position of an industry and render existing products and services obsolete. Politics comprises government stability. Technological breakthroughs can dramatically influence the organization products. Political ideology and political stability or instability strongly influence the pace and direction of the economic growth. This is especially important for an IT company such as Intel as it can be the key for the companies to survive. So it has researched and announced the new chips for mobile devices which are believed to unleash new innovation across the microprocessor industry. It took Intel 4 years of negotiation until the Vietnamese government gave them the license (Rediff News. Ways that Intel increases stockholder value include periodically repurchasing its own stock in the open market. 75% of Intel sales come from outside the USA. create shorter production runs.5% increase in the quarterly dividend effective. suppliers. (Ho Chi Minh City.SECTOR ANALYSIS
Political factors influencing sector
Intel being a multinational company.Politics has a serious impact on the economic environment of the country.5 billion. nobody can argue that the PDA and cell phones have become so popular. There are more and more consumers in the wireless industry. Intel uses the cash that the company generates to maximize stockholder value. including a 12. customs. services markets.
it is almost impossible for new firms to get in on the huge profit margins in this semiconductors industry. A couple of years ago when a Japanese gum factory caught fire in Sumitomo . Moreover. INTEL has significantly reduced the use of lead and halogenated flame retardants in their products and manufacturing processes.
. the whole of the production line will face problems. customs. and water use. AMD which is considered to be the biggest rival of Intel still holds a small market share against Intel. In the semiconductors market. which produces processors.
Bargaining power of suppliers
Bargaining power of suppliers is very high for INTEL. In case of Intel. interstate migration. life style
Social values like demographic factors such as population. rituals influence business practices in a major ways. Suppliers with low bargaining power are good for business. making a silicon chip is a very complicated process and it depends on thousands of suppliers to make everything work properly. These targets address several parameters. energy. age. and emissions. the solid and chemical waste by-products of our manufacturing processes. climate change. Intel currently uses a variety of materials in their manufacturing process that have the potential to adversely impact the environment and are subject to a variety of EHS laws and regulations. including product design. almost all the PCs and laptops around the world use Intel’s processors like Dell.1 Company. Intel focuses on reducing natural resource use. Suppliers have power over the firm because they control inputs of the firm. 2000). India and Vietnam have a very young work-force. They may accept or refuse to provide materials.Social and Demographic: family. components or service. and the environmental impact of our products. it caused prices to rise. For example. Intel is known as the No. Over the past several years. Some of the countries that Intel has made investments like China. waste recycling. Therefore. 2006). age distribution. when one of Intel’s suppliers cannot provide enough material at a particular point of time.
Environmental: regulations and expectations
INTEL’s compliance efforts focus on monitoring regulatory and resource trends and setting company-wide performance targets for key resources and emissions. With all of its risks and high-price patents. population. The threat of new entrants is not very high (The Inquirer. principally because it was the only glue factory which made silicon chips work (Magee. Threat of new entrants is very low for INTEL. chemical. rural-urban mobility or cultural factors like social attitudes.
Threat of new entrants
Microprocessor industry is harder to enter than others. literacy levels. beliefs. Toshiba and Compaq.
Rivalry is the fierce competition among firms in an industry to gain a greater market share. but still Intel is quite reputed and considered to be the best in the market so it won’t be that easy for customers to switch. introducing a dual-core Xeon processor in 2005. Intel unleashes its inner Attila. one of its biggest rivals is AMD (All Business. there was nearly only Intel in the processor market.
. then it won’t take long for the customers to switch. Changing price. If the price of the product is too high compared to its substitute products. sometimes Intel had tried to jump into another market but only to find more strong competitors and it proved a very uncomfortable barrier for Intel to get over.2001). In the semiconductors market. Opteron ran 64-bit applications and legacy 32-bit applications without the drag on performance noted in Intel's Itanium processors (Mullins. In case of Intel. 2004). But Intel also matched AMD on the product side. Until. Moreover. The organization had to abandon plans to produce cameras because it would have meant competing with two PC partners and giants . But in other markets like communication. Therefore. Therefore the power of buyers has increased compared to the past. 2007). 2007). many potential customers have already committed to using rival Third Generation products and won’t consider INTEL’s new WiMax technology that enables highspeed Internet access over a range of around 30 miles. the quality of items is one of standards which customers notice when they choose the product. In the past. AMD Athlon made a serious challenge to Intel Pentium. all of the suppliers try to perform as well as they can to satisfy these customers demand. AMD managed to launch an attack on its rival with the introduction of its 64-bit Opteron processors. and regained the upper hand on AMD with its first quad-core Xeon in early 2007. The intensity of rivalry between these chip making giants is very high. improving product differentiation and creatively using channels of distribution are one of many ways which the suppliers use to customize their customers. AMD upped the ante further in 2005 with the introduction of its first dual-core Opteron processors that doubled the performance of single-core Opterons. Fortune. In 2003. the demands of customers are many. so the buyers simply had no choice and almost no bargaining power.Dell and Hewlett Packard (Emerald.On the developing momentum. a firm needs to satisfy the customers so that they can sell more products. In addition.Bargaining power of buyers
Bargaining power of buyers is low for INTEL. Buyers with weak bargaining power are favourable. (Brent Schlender.
PC and network communications products users (including individuals. PCs.
What drives markets?
Intel's new strategy has a strong focus on marketing . and telecommunications and networking communications equipment. for example.finding out what customers want and then providing it.
Which are important markets?
INTEL’s important markets include: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems. and Other manufacturers. These are notebooks. mobile phone companies and hospitals. including makers of a wide range of industrial and communications equipment. through distributor.Threat of substitutes
Threat of substitute products for INTEL is low because there are very few products which can replace the “quality” of microprocessors manufactured by INTEL. retail and OEM channels throughout the world. The company has been completely restructured to reflect the emphasis on communication. servers and wireless technology. and service providers) who buy PC components and board-level products. reseller. New product
. Clear communication is the key to this. as well as our networking and communications products. cellular handsets and handheld computing devices. Intel has also increased its range of end customers to include. large and small businesses. It has reorganised into four sectors to reflect the four parts of the market segment.
development focuses on specific market segments. for example in healthcare or entertainment.
. and provides specific solutions.
These innovations have been implemented in the Intel and its business ecosystem. trademarks etc. Organizational Resources: Employment Intel focuses within when it comes to the top suite. This policy is implemented to promote EGALITARIANISM or EQUALITY among employees.8 billion was allocated to the advertising with INTEL INSIDE being part of it.INTERNAL ANALYSIS
CAPABILITIES AND RESOURCES Tangible Resources Here are some of the tangible resources Intel possesses: Technological Resources: Patents. $1. there have been changes in the logo. From 1991 to 2011. In 2010. Trade Marks and Copyrights Intel has a lot of IP rights that includes Patents. microprocessor research and communications to life sciences. Many of the top management people spent their entire life working for Intel. They have given vision and direction to the company to be at top. Three strategic goals have allowed Intel to be a global leader in R & D and hence in Innovation: 1. Company has resisted from getting a CEO from outside of the company. To deliver key applications that would create demand for new Intel platforms. In 2008. Intel’s first three CEOs were all cofounders with very different strengths. advertising campaign. but INTEL INSIDE is an integral part of all the logos. To conduct research and crate thought leadership to encourage and influence customer 3. interoperability.
Intangible Resources Reputation resources: Brand name and reputation with customers: Intel Inside.
. has led Intel Brand as World’s most recognizable brand. from the visionary Robert Noyce to engineering marvel Gordon Moore and then to "Only the paranoid survive" businessman Andy Grove. Even CEO sits in cubicle. Through this it has protected its inventions. 4. The campaign started in 1991 and created a place among public and awareness of Intel processors. Create new solution that would improve Intel’s internal effectiveness and efficiency 2. Paul Otellini had been in Intel for 30 years when he became CEO. which are based on the properties of materials at the size of nano scale. a very rare occurrence in the Silicon Valley. Intel shifted its campaign from traditional media such as TV and print to online marketing. It has also IP environment to have the development of standardization and hence. It has a diverse portfolio of patents that includes silicon technology. Intel’s brand value was at number 48 in 2010 ranking of the world's 100 most powerful brands published by Millward Brown Optimor. No one in Intel has an office. Innovation resources: Intel’s in-house and contracted research capabilities have allowed it to develop products.
Core competencies of Intel are its design and manufacturing capabilities backed up by R & D. Brand name which Intel has created is Costly-to-Imitate. Strong Management team is the Intel’s Non-substitutable capability that is led by CEO of the company.
Production planning: Semiconductor device manufacturing is a very capital intensive process and therefore Intel always strived to make the most efficient use of its capital resources. Patents. Competitive Advantage of Intel One of Intel’s Competitive advantages is “Tick-Tock” chip design and manufacturing method (described in the Competitive Strategy section). Aim was to build the best manufacturing and planning schedules that considered the flexible production owing to the dynamic nature of the demand for its products. Intel estimates its R & D investments will be approximately $ 7.
Capabilities Intel’s R&D capabilities and encouragement to innovation has given the company capability to design and manufacture the world class chip for last more than two decades. It was valued in top 50 brands in 2010. microprocessors research make it a rare capability of Intel Corporation. For last 2 decades INTEL INSIDE campaign has given Intel an edge over other players in the industry. Intel adopted a host of technological changes to complement its advancement in planning processes.In 2011. and quality management systems were implemented to enable tighter integration of next-gen planning and production processes.3 to foster innovation by generating new ideas. Trademarks and IP rights of technologies. This has been part of Intel’s promise to make innovation as one of their capabilities. the concept of equality makes Intel a preferred workplace to work with. Most of the top management executive of Intel start their carrier in Intel and remain there for the life time. Also. productivity management systems. Manufacturing process overview
. New data management systems.
die and substrate releases into assembly/test factories (A/T). Third. Value chain analysis:
Inbound logistics: Intel’s main strategy is to use e-business technologies to maintain relationships with suppliers. Prior to implementation of e-business initiatives. Basic planning for these stages includes deciding the timing and quantity of wafer releases into fabrication/sort facilities (F/S). it lost of many of its business opportunities as it could not
. Planning time has decreased dramatically. It ordered raw material only in response to customer orders. Issue 3 2005)
Development of automated data systems and optimization based tools has revolutionized Intel’s supply-chain planning processes. supply costs have been reduced. A/T. pen and telephones to place and track orders. Hence. and demand satisfaction has improved. With better data.
(Source: Intel Technology Journal. hundreds of complex devices. But perhaps the most important contribution of the efforts described here is the facilitation of continuous improvement. employees and customers. Intel used the traditional paper. each containing millions of transistors. the wafers are sawn to yield individual devices (called die) that are assembled with substrates that supply physical protection and electrical connectivity. Intel planners have the time and facilities to define world-class performance. are fabricated on silicon wafers. and fast planning and analysis tools. Benefits have been realized in data and solution quality as well as planner productivity across all product divisions and all manufacturing organizations. documented business rules. and C/P facilities. after configuration and marking. and each product is produced in multiple factories. as well as assuring the availability of substrates to support the A/T plan. Each facility manufactures multiple products. the final product is packed and shipped to the customer. and semi-finished goods releases into configure/pack facilities (C/P). Second.First. Volume 9. These planning decisions are made more complex by Intel’s risk management method of having multiple F/S.
and it thus helps its customers derive best synergies possible with an integrated technology implementation. It can take orders round the clock. Intel uses a vendor driven inventory management and does not believe in keeping excess stock over and above customer demands. Outbound Logistics: Intel uses web-based delivery management system to track deliveries. payments and shipments. It was able to reduce manufacturing lead times. enabling the product and its suppliers to take full advantage of its novelty and price in the market. with its e-business strategy in 1998. Operations: Intel uses its web based e-business operations management system to aid in the quick exchange of details and queries pertaining to customer orders. building. and cycles times significantly. Online sales doubled from US$ 1 billion to US$2 billion a month. Customer orientation
. It employs a highly skilled pool of consultants who have deep experience on designing.000 system resellers worldwide has led to considerable increase in its sales volumes. It also keeps an updated database of successful applications which have been launched in Intel platform to serve an models of implementation. all this changed when Intel used the internet to maintain relationships with customers and suppliers. Service: Intel keenly focuses on areas that related to support and services of all its products. optimizing. Intel’s Mission Statement: This decade we will create and extend computing technology to connect and enrich the lives of every person on earth. Intel’s Values: 1. Its ability to establish links with over 75. it has reduced errors by 75%. returns and to track delays in deliveries and feedback. However. Marketing and sales: Intel has also improved time to market for its products to customers. By putting its customer order entry system on the Web. design specifications and proprietary information. where more than 25% of its transactions occurring after normal business hours. Intel also alliances with technology partners such as SAP. Intel’s goal is to move towards 100% e-business enabled automated system for supplies and purchases. Intel has many made-to-order deals with big volume direct customers and this almost instantaneous system can shave off a week or two in design and delivery of the final product. and implementing solutions on Intel architecture. Hundreds of Intel suppliers use the Web to check the status of inventory levels. Oracle. Design specifications and models can change every 6 months.meet emergency orders. and other software providers.
2. Extend Intel Solutions to win in adjacent market segments 3. the planet. Create a continuum of secure. Grow PC and Datacenter business with new users and uses 2. Care for our people. personal computing experiences 4. and inspire the next generation
. Quality Discipline Intel’s objectives: 1. Great place to work 4. Results orientation 3.
76B 1.com/content/www/us/en/silicon-innovations/intel-tick-tock-model-general. Chipsets are auxiliary components that are designed to work with the given processor.intel.intel.72B FY 2008 5.72B 1. This cushion provided to Intel R&D staff means that they have been able to come up with innovations in chipsets as well.
Source: http://www.40B FY 2009 5.
R&D INTEL AMD FY 2010 6.COMPETITIVE STRATEGIES
Huge R and D Budgets
The company invests heavily on its research and development activities.html
. and Sandy Bridge. and during the "tock" cycle.85B FY 2007 5. it develops an entirely new architecture to optimize the increased number of transistors.html
http://www. The following table shows that Intel's R&D spending is almost three times that of AMD's.65B 1.85B
Intel adopts a Tick-Tock model in which during the "tick" cycle. Intel comes out with new silicon process technology that doubles the density of transistors compared to the previous generation. AMD. the R&D budget of Intel nearly equals the total sales of its nearest rival.com/content/www/us/en/silicon-innovations/intel-tick-tock-model-general. To give an idea.58B 1. Westmere. Intel's published roadmap already includes three generations of microprocessor products: Nehalem.
Since most of Intel's competitors don't have a fabrication facility of their own.4 In 2008.
http://financialjoyride.blogspot. while two 45nm factories were under construction. they are in a better position to tweak parameters to reduce or mitigate standby power consumption. proprietary.html
. With the expected increase in the number of low-power applications. A lot of their process knowledge is in-house. Intel has a distinct competitive edge when the war on production size heats up. and cannot be off-shored to an Asian foundry. the power consumption on Intel's new processor cores will increasingly be the number to beat. This difference will start becoming more significant as digital chips transition to smaller geometries. as Intel has a complete control over their production facilities. at lower geometries. while looking forward to 22nm production.Fabrication Processes
Intel has strong fabrication processes and facilities that are distinctly ahead of those of its competitors. leakage power becomes a dominant component of the chip. Intel had already finalized plans to switch to 32nm process technologies. Also.com/2008/03/process-intels-competitive-advantage. By having an in house fab.
it collaborated with Yahoo! to launch Yahoo! Sports for TV. In the same year. the company acquired Sarvega. the company signed an agreement with Sprint to engage in joint efforts to advance the development of IEEE standardsbased 802. the company increased its investment in Vietnam to build the semiconductor assembly and test facility from the $300 million announced in early 2006. a provider of video processing products and technologies for digital television and digital displays. codenamed Kentsfield. Intel introduced the Intel Storage System SSR212MA. to $1 billion. multi-processor servers. a new service that brings football to TVs connected to Intel Viiv technology-based PCs.
Source: DataMonitor (Pg 7). In 2007. Intel acquired Oplus Technologies. Intel collaborated with Verizon to enable consumers to play PC games on their television sets through Intel Viiv technology-based PCs in 2006. These partnerships allow Intel to reach a wider customer base than would have been possible with a focus on just microprocessors. a provider of interactive software and services used by digital media creators in the game and movie industries. In 2004. Intel launched its first desktop quadcore processor. Intel and Micron formed a new joint venture in Singapore. In the same year. During 2004. co-marketing and Intel's sponsorship of the BMW Sauber F1 Team. the company sold its communications and application processor business to Marvell. In 2006. a provider of XML solutions. the company signed a multi-year patent cross-license agreement spanning multiple product lines and product generations with NVIDIA.CORPORATE STRATEGIES5
Intel has made a number of strategic alliances and acquisition till date. in the year. Subsequently. Also. Subsequently.16e WiMAX mobile technology. an Intel Xeon processor-based hardware and software storage platform designed to enable small and mid-size businesses to build a storage area network based on IP networking standards. the company along with Carrefour. In 2005. Also. a provider of storage. Intel signed a partnership agreement with BMW Group that included technology. Intel and Dolby Laboratories started cooperative efforts to extend the consumer electronics (CE) sound and entertainment experience to the PC. Intel launched first industry-standard quad-core products for high-end. Metro Group and Tesco formed a European working group to accelerate the adoption of Electronic Product Code (EPC) technology in an effort to further improve supply chain efficiencies and customer loyalty. the company acquired Havok. based on Intel high definition (HD) audio. 15 July 2011
. Also. in the year. communications and consumer silicon solutions. That same year. in 2005. At the end of 2005. Intel and Microsoft collaborated to deliver "pay-as-you-go" PC purchasing models for consumers in emerging markets. At the end of 2005. Towards the end of 2006.
Hence. Intel opened a software innovation and support center in Hangzhou. Intel and Comstar collaborated to develop mobile worldwide interoperability for microwave access (WiMAX) in Russia.
an additional 1 billion connected computing users by 2015 and with more types of devices there is value in providing a common experience between the devices. a $3 billion factory.the company commenced production of processors with Intel 45nm Hafnium based High-K metal gate transistors. During the same period. An interesting trend has been observed in high end computing arena. the world moved over the distributed computing in its quest for customization and networking. Smart TVs and other hand-held computing devices. though with a different flavour. Before the advent of distributed computing the world relied in powerful mainframe processing which were essentially shared resources. The computing industry is witnessing massive bi-directional growth in the form of increased adoption of cloud services and other such shared computing services along with an explosive increase in the types of smaller devices being connected to the internet. However. the capital of East China's Zhejiang Province. The small devices have not only increased in number but also in types.
Future Corporate Strategies:
As the computing spectrum continues to widen there is an increasing need for Intel to focus on creating microprocessor platforms to cater to the wide range of demands across this spectrum. However. For example. Intel must create end to end microprocessor platforms that fulfil the computing needs of this entire ecosystem. wherein history is indeed repeating itself. car manufacturers are now contemplating inclusion of intelligent microprocessors to handle more complex real time data such as data from traffic control systems. For this purpose the company opened "Fab 32". At the end of 2007. but is quite similar in the sense that it is shared in nature and organizations can adopt “pay-as-you-
. organizations soon realized the overheads associated with excessive customization in the form of increased capital expenditures and inflexibility to control these expenditures. the trends is to move backwards into the shared infrastructure model again in the form of cloud computing which is essentially different from mainframes. GPS connections with satellite systems etc. The future Intel architecture must be able to deliver the right combination of performance and power that provides the foundation across all computing devices creating a virtual continuum of computing to enable this common user experience. weather information." said Perlmutter in an international developer conference. The future of computing industry will be more of an “eco-system” of highly interconnected devices ranging from high performance massive cloud computing shared infrastructure to small embedded devices inside cars.
driven by transistor speed and energy scaling. video. Thus it is expected that there will be significant scope and demand for cloud computing power and Intel’s future corporate strategies must recognize this opportunity and make its presence felt in this end of the computing spectrum.go” policies and the curb their IT expenditure. diminishing transistor speed scaling and practical energy limits create new challenges for continued performance scaling. Microprocessor technology has delivered three-orders-of-magnitude performance improvement over the past two decades. Intel’s future strategies must lay tremendous focus on R&D on intensive floating point computations and development of more generalized processors with capabilities of intensive processing of images. Micro-processor performance has grown 1. This is an important future corporate strategy as the devices will continue to get smaller and almost all future devices are expected to get interconnected and operate together. Further. so continuing this trajectory would require at least 30x performance increase by 2020. Intel must focus on developing its Atom line of processors and must focus of high level of customization to cater to specific computing needs of smaller devices meant to solve specific and focused problems. Energy utilization will be the key limiting factor for Intel’s R&D department and Intel must therefore focus all its research horsepower to reduce the energy utilization but at the same time increase computing power. audio etc.000 x increases by 2030. The next challenge before Intel is to continue to meet the customer expectations in terms of creation of more powerful processor at the same rate. Its main areas of development and improvement must be centred on the trade-off between computing power and size coupled with energy efficiency.
. In the next two decades. and better energy efficiency. Its future strategies must continue to expand on its “Sandy Bridge” architecture and take it to the next level. Microprocessor-performance scaling faces new challenges precluding use of energy-inefficient microarchitecture innovations developed over the past two decades. as well as by microarchitecture advances that exploited the transistor density gains from Moore’s Law. In this area. This growth to a large extent has been fuelled by Intel’s innovation capabilities. new product release and product phase outs.000-fold over the past 20 years. Intel must also aggressively collaborate with consumer electronics giants to derive synergies with R&D departments of organizations. chip architects must face these challenges with an on-going industry expectation of a 30x performance increase in the next decade and 1. All these factors do not go together and energy efficiency is one of the key areas of concern amongst people who manage large data centers. Intel’s R&D for mobile computing must be in line with R&D of other consumer electronic manufactures in terms of time to market.
the future generation software must be able to exploit this parallelism the fullest extent in order to meet the computing demands of the future. Intel will come across a point where further reduction in size without significant compromise in energy efficiency is not possible.
(Source: Article by Shekhar Borkar and Andrew Chein – Association of Computing machinery)
. Even with high levels of hardware parallelism.As a guard against failures. Therefore. Intel’s strategies must be able to cope up with the below mentioned software challenges which are the primary concern for software giants in future. At some point in future. Intel must focus on hardware parallelism that is creation of an array of processors instead of trying to focus on making a single processor core more powerful. Therefore Intel must strike strategic alliances with software giants in future to make sure that the next-gen software are written with an intent to exploit high levels of hardware parallelism. Intel’s corporate strategy must also ensure that Intel somehow establishes its say in the way software programming is progressing. It is crucial that future software programs are written to leverage the parallelism made available through Intel architecture.
The only contingency that could arise is a natural/man-made calamity that strikes one of the production facilities of Intel.
This is mainly given the emerging markets in China and India. Any breakthrough which results in obviating this limitation would greatly improve the productivity of the firm. In fact. some important states in India face a huge power deficit. it will have to invest more in its research activities in the next five to ten years. which are responsible for keeping the machines at close to zero degrees Celsius. i. as outlined in the Future Corporate strategies section. the funds allocated to research and development activities are a low percentage of the total sales as compared to those of its nearest rival. AMD.e. but given the extremely competitive and fast-changing nature of the segment. Intel is focussing on high-power microprocessors with increasing numerical precision.PLAN OF ACTON & IMPLEMENTATION RECOMMENDATION
Increased Investment in R&D
As can be seen from Exhibit 3. The absolute figures may be very high. To tap this segment. a lot of cost associated with maintaining servers is that of air-conditioners. However. So they would be naturally interested in more efficient chips. there is a fast-increasing market for applicationspecific micro-processors. This way.
Broader Portfolio of micro-processors
As has been pointed out earlier.
. it will have to come up with a broader range of micro-processors. Currently. The following points are noteworthy in this regard: The emerging economies of the two Asian countries would not only mean an increase in IT infrastructure but also mobile technologies. Also. The countries don't have enough power-surplus. An increase in IT infrastructure would mean Intel will have to support high-power microprocessors capable of supporting cloud computers that would handle the data of potentially billions of customers. Intel remains poised to take advantage of the explosion in demand for electronic devices used for automation. Intel can target a 1000X improvement in efficiency in the chips over a period of 10 years. a 100X improvement each year.
20. 14. 1968 – Bob Noyce and Gordon Moore leave Fairchild semiconductor and incorporate Intelco. 1985.1986 – Company enters parallel supercomputers business. DEC and XEROX announce cooperative Ethernet project – the inception of LAN. 6.Intel strengthens its position in server computing market with improved Intel Itanium and Xeon. Intel realigns to bring all major product groups in line with company’s strategy to drive development of computing technology platform based on Intel ingredients. 18. and goes public at @25.8 million 1972 – Intel expands its product line by launching first commercial 8-bit microprocessor – 8008. Leap ahead”. 1993 – Intel’s Pentium processor arrives.Apple plans to transition all Macs to Intel microprocessors.000 and raises additional capital by selling convertible debentures and is named as chairman. 1998 – Intel launches Celeron for value PC market. Craig Barrett – Intel chairman retires after 35 years of service to Intel. 1988 – Intel enters flash memory business.
.50 per share and raises $ 6. 15. 3. 4.
10. 1980 – Intel microcontrollers where the bestselling controllers in the world. 8. Venture capitalist Arthur Rock contributes $10. 12. 1982 – Intel launches the powerful 80286 microprocessor as the PC industry grows at the highest growth rate. 5. 2. Launches its new branding strategy – Intel. 11. 2001. 7. 9. 2003. 17. 2009 – Intel launches Atom processors for netbooks and net-tops. 2005. 1983 – Intel passes USD 1 billion dollar revenues.Intel enters into mobile computing market – launches Intel PXA800F. and Intel Centrino for laptops. 2008 – Intel celebrates 40 years in innovation and unprecedented achievements. Intel brand is the third most valuable in the world. 1976 – The faster Intel 8085 microprocessor is launched and world’s first microcontrollers are launched by Intel 8748 and 8048. 2000 – Company emphasis in wireless networking grows with the launch on Intel xScale and Pro/Wireless LAN cards.EXHIBITS
Exhibit 1: Company timeline
1. 13. 1992 – Intel becomes the largest semiconductor supplier in the world according to Dataquest. 21. 1969 – Intel announces its first product – 3101 Schottky bipolar RAM 1971 – Intel launched its first microprocessor 4004. 19. 16. 1978 – Introduces 8086 16-bit processors (most modern day processors have descended from this design). Intel. 2006 – Intel launches world’s first Quad-core processor. The US-Japan semiconductor trade agreement is signed opening Japanese markets to US semiconductor manufacturers.
David (Dadi) Perlmutter is executive vice president and general manager of Intel Corporation's Intel Architecture Group (IAG). served as senior vice president from 2005 to 2007 and was promoted to executive vice president in December 2007. Otellini .Andy D. 2005.Arvind Sodhani is executive vice president of Intel Corporation and president of Intel Capital. Maloney served as co general manager of the Intel Architecture Group since September 2009. Barrett. He has been with Intel since 1982. Otellini is president and chief executive officer of Intel Corporation. handhelds. laptops.Sean Maloney is executive vice president and Chairman of Intel China. desktops. Bryant is executive vice president. He is responsible for Intel's platform solutions for all computing segments including data centers. financial operations.
. netbooks. Prior to his current role. Otellini previously had served as Intel's president and chief operating officer. Sean Maloney .Paul S. and consumer electronics. Manufacturing and Enterprise Services. Andy D. David Perlmutter . human resources.Exhibit 2: Intel Leadership
Paul S. Sodhani was elected vice president by the board of directors in May 1990. He became the company's fifth CEO on May 18. information technology and ebusiness functions and activities worldwide. Arvind Sodhani . positions he held since 2002. the same year he was elected to Intel's board of directors. Technology. and chief administrative officer of Intel Corporation. succeeding Craig R. Bryant . He is responsible for technology development and manufacturing. embedded devices.
00 55.89B 0.09B 12.32B 12.80B 11.82B 30.00M 86.65B 0.43B 0.63B 0.00 3.58B 3.00 7.16B 47.Exhibit 3: Intel and AMD Balance sheets
Dec 2010 Assets Cash and Equivalents Receivables Inventories Other Current Assets Total Current Assets Property.39B 0.14B 31.88B 172.18B 0.00M 0.00 39.99B 2.05B 555.54B 17.50B 2.00 5.82B 1.71B 3.00 10.00M 339.00M 1.77B Dec 2009 Dec 2008 Dec 2007
.00M 1.76B 0.81B 11.65B 2.43B 16.33B 2.70B 14.84B 7.57B 1.00 50.00 9.36B 142.43B 13.93B 31.00M 7.00 42.94B 5.00M 1.29B 31.00 3.10B 1.58B 17.93B 0. Net Intangibles Other Non-Current Assets Total Non-Current Assets Liabilities & Shareholder Equity Total Assets Accounts Payable Short Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Deferred Income Taxes Other Non-Current Liabilities Minority Interest Total Non-Current Liabilities Total Liabilities Preferred Stock Equity Common Stock Equity Common Par Additional Paid In Capital 63.31B 2.00M 8.27B 2.94B 0.20B 0. Gross Accumulated Depreciation & Depletion Property.90B 0.34B 19.59B 2.96B 23.05B 29.74B 4.71B 31.00 9.37B 3.08B 926.19B 2.98B 411.88B 46.92B 0.00M 1.00 41.89B 46.00M 8.00 10.00 4.59B 30. Plant & Equipment.00 4.72B 2.13B 16.87B 48.94B 3. Plant & Equipment.00 49.29B 38.35B 1.88B 0.61B 50.00 53.58B 3.54B 775.76B 6.39B 102.09B 30.22B 0.76B 11.00M 0.60B 17.48B 32.99B 0.46B 21.87B 3.
00 263.70B 0.00 4.00M -248.00 407.00 29.00M 247.56B 0.00M 0.98B -178.00 5.00M -1.29B 1.74B 42.00 5.56B 5.51B 49.00 5.00 32.00 0.66B 5.00M -569.37B 170.43B 102.00M 0.00M 16.00M 796.93B 0.00M 1.00 Dec 2009 Dec 2008 Dec 2007
.94B 86300 0
Company Cash Flow
Dec 2010 Cash Flow From Operating Activities Net Income (Loss) Operating Gains/Losses Extraordinary Gains / Losses (Increase) Decrease In Receivables (Increase) Decrease in Inventories (Increase) Decrease In Other Current Assets (Decrease) Increase In Payables (Decrease) Increase In Other Current Liabilities (Increase) Decrease In Other Working Capital Other Non-Cash Items Net Cash From Continuing Operations Net Cash From Discontinued Operations 11.00M -395.62B 10.56B 5.19B 5.00 260.00 26.17B 0.65B 5.92B 0.64B 79800 0
0.00 5.00M 919.82B 5.00M -506.72B 5.10B 5.46B -348.97B 39.52B 0.00 316.69B 0.00M 40.00 -584.00M 30.00 393.54B 0.00M 700.79B 0.00 6.76B 55.00 0.00M 0.00M 43.00M 1.00 26.32B 0.85B 0.62B 0.00M 214.00M 633.51B 0.00M 44.09B 50.00M 0.00M 834.00M 51.70B 53.00M -241.00 5.00M -806.00 0.00 0.70B 82500 0
0.25B 11.00 333.00 -535.75B 83900 0
-2.Cumulative Translation Adjustment Retained Earnings Treasury Stock Other Equity Adjustments Total Capitalization Total Equity Total Liabilities & Stock Equity Total Common Shares Outstanding Preferred Shares Treasury Shares Basic Weighted Shares Outstanding Diluted Weighted Shares Outstanding Number of Employees Number of Part-Time Employees
0.43B 63.00M 299.40B 12.00 -393.00M -830.00M 0.00M 1.75B 41.
02B 0.76B -4.21B -218.52B -853.54B 0.53B
.40B 5.58B 7.00M -9.93B 0.00 -7.20B 69.10B -40.62B 10.Cash Provided By Investing Activities Net Cash From Total Operating Activities Sale of Property.51B 400.00M -8.28B Dec 2007 38.00 -2.69B 5.00M 1.00M -87.96B 3.76B -3.00M 8.00M 7.00 -876.96B 1.20B -3.00 -9.99B Dec 2008 37. Plant & Equipment Acquisitions Purchases of Short-Term Investments Other Cash from Investing Activities Cash Provided by Financing Activities Net Cash From Investing Activities Issuance of Debt Cash Used for Financing Activities Issuance of Capital Stock Repayment of Long-Term Debt Repurchase of Capital Stock Payment of Cash Dividends Other Financing Charges.62B 0.90B 0.00 10.00M -11. Plant & Equipment Cash Used for Investing Activities Sale of Short-Term Investments Purchases of Property.74B -3.00 -3.73B 294.00M -157.98B -5.55B 24.58B 20.00M -4.00 637.46B 5.98B -5.00
Company Income Statement
Dec 2010 Sales Cost of Sales Gross Operating Profit Selling.05B 0. General.64B 0.57B 0.01B -5.33B 13.17B 0.00 12.00 21.23B Dec 2009 35.00 11.00M -1.00 709. Net Net Cash From Financing Activities Effect of Exchange Rate Changes Net Change in Cash & Cash Equivalents 587.00 -5.13B 25.00M -26.69B 0.31B 6. and Administrative Expenses Research & Development Operating Income before D & A (EBITDA) 43.51B 33.00B -44.00M -10.65B 10.00M -1.11B 9.65B 24.93B 5.79B -2.62B -498.00M 0.66B -1.00M -2.10B 212.11B 6.46B 5.59B 12.86B 0.72B 14.00M 16.13B 10.00 1.00M -1.00M -7.50B 167.99B 0.62B 364.76B 13.93B 0.
00 0.00 6.37B
4. Basic EPS from Cum Effect of Accounting Change Basic EPS from Tax Loss Carryf'd. Change Income From Tax Loss Carryforward Other Gains / Losses Total Net Income Normalized Income (Net Income From Continuing Operations.00 11.85B 0.20 1. Effect of Acct.00 4.37B 0.00M 7.06 2.79 0.70B 1.05B 168.92
6.00 0.69B 8.00B
7.00 0.17B 2.00 11.20 0.00 16.93 1.00M 0.00 0.
4.00 6.00 0. Basic EPS from Total Operations Basic EPS from Extraordinary Inc.98B 0.06 0.01
4.00 0. Basic EPS from Discontinued Ops.00M -10.93 0.00M 0.00 0.00 0.Depreciation & Amortization Interest Income Other Income .05 0.00M -1.18
.00 4.00 0.00M -4.79 0.83 0.00 0.26B
11.00M -223.37B 0.37B 0.34B 0.00 0.00 0.46B
5.00 0.00 5.00 2.00 0.98B 0.00M 0.00 0.69B 2.64B 119.Net Special Income / Charges Total Income Before Interest Expenses (EBIT) Interest Expense Pre-Tax Income Income Taxes Minority Interest Net Income From Continuing Operations Net Income From Discontinued Operations Net Income From Total Operations Extraordinary Income/Losses Income From Cum.00 1.00 0.00 6.00 9.70B 1.00 0.04B 0.06 0.18B 15.00 0.77
11.39B 0. Ex.29B 0.46B 0.00 5.00 0.62B 592.00 5.25 1.98B 1.06 2.00 4.79 0.00 0.00 7.00 1.04B 4.60B
6.00 0.00 5. Special Income / Charge) Preferred Dividends Net Income Available To Common Basic EPS from Continuing Ops.00 0.00 0.00 16.00 2.29B 0.46B
4.00 0.46B 0.46B 2.00 0.29B 0.00 0.00 0.00M 5.20 0.29B
4. Total Basic Normalized Net Income/Share EPS fr Continuing Ops.93 0.19B 0. Basic EPS from Other Gains (Losses) Basic EPS.00M 9.00 0.58B 0.80B 804.00 11.
EPS fr Extraord.00 0.00 2.18 0.00 0. Ex.00 0.00 0. EPS fr Cum Effect of Accounting Change EPS fr Tax Loss Carfd.01 0.00 0.00 0.23 0.55
1.00 0.00 0.00 1.00 1.56
1.00 0. Total Diluted Normalized Net Inc/Shr (Net Income From Continuing Operations.01 0.00 0.00 0.77
0.04 0.00 0.00 0.00 2.92
0. Inc.00 0.EPS fr Discontinued Ops EPS fr Total Ops.92 0. EPS fr Other Gains (L) EPS.45
.00 0.00 0.77 0.63
2. Special Income / Charge) Dividends Paid per Share
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