The intelligence inside your computer could very well be Intel. The company -- which holds about 80% of the market share for microprocessors that go into desktop and notebook computers, and also into computer servers -- is still #1 in semiconductors. Archrival AMD ate into Intel's market share for a time, but the big guy fought back with faster processors and advanced manufacturing technology. Intel also makes embedded semiconductors for the industrial, medical, and in-vehicle infotainment markets. While most computer makers use Intel processors, PC giants Dell and Hewlett-Packard are the company's largest customers. The Asia/Pacific region generates two-thirds of Intel's revenues.
In recent years, the world's largest semiconductor manufacturer was humbled by a series of events, including slumping demand for PCs, lawsuits, and unsuccessful forays into niche markets. The global financial crisis didn't help. Intel refocused on what it does best -- developing and producing advanced microprocessors -- and narrowed its focus by identifying several key end market applications, in order to ensure that its chips remain the technology of choice not only for PCs, but for the cloud computing, virtualization, and data center platforms. Part of its strategy is to drive innovations around energy efficiency, connectivity, and security within its key markets. It also plans to expand into adjacent market segments that will allow it to apply its embedded platform to the smartphone, tablet PC, TV, car, and other products that create a consistent, connected experience for the individual user.
For 2011 Intel reported record sales -- the company broke the $50 billion mark for the first time in its history. Sales overall were up 24% in 2011 over 2010, due to higher unit platform sales and higher average selling prices for the year. Sales for its other architecture operating segments rose 64%; the increase was due to Intel Mobile Communications (formed from the acquisition of Infineon's wireless business early in the year) and higher embedded platform sales within its Intelligent Systems Group (ISG; formerly the embedded and communications group). Its software and services segment also contributed to record revenues, rising by more than 85% on the acquisition of McAfee. The resurgence in demand for both business and consumer PCs as the global economy improved, as well as expansion in the cloud computing and data center sectors, also contributed to improved results. The company saw record profits as well, with net income up 13% in 2011 due to improved capacity utilization, higher unit prices, and lower unit costs.
Intel's product groups focus on its core architecture and manufacturing operations within specific markets. The groups are aligned with the end uses for its products -- PC Client, Data Center, Intel Mobile Communications, Intelligent Systems, Netbook and Tablet, Ultra-Mobility, Non-Volatile Memory (including NAND products), and Software and Services (including McAfee and Wind River Software). In addition, Intel has stepped up its R&D efforts -- its "tick-tock" technology development -- with plans to release a new microarchitecture for its flagship PC processors every two years while ramping up its development of next-generation silicon manufacturing processes in intervening years. In 2011 Intel plans to spend about $9 billion investing in capital improvements to equip its next-generation 22nm manufacturing capacity.
In 2012 the company announced it had entered into several partnerships that will bolster its new Atom (previously code-named Medfield) wireless chip for the smartphone market. Visa, ZTE, Lava International, and Orange are among the companies Intel is working with; in fact, ZTE and Lava are two of the biggest players in two of the biggest markets in the world: India and China. Visa plans to collaborate with Intel to ensure consistent and secure transactions across Intel Atom-based smartphones and tablets by including the Intel Smartphone Reference Device in its payWave mobile payment system. The announcements came on the heels of previous reports that Motorola Mobility and Lenovo had entered into similar agreements. The company is challenging the dominance of ARM-based chips, which are widely used in smartphones and tablets. Intel has used acquisitions to add a competitive communications chip to its portfolio.
Intel went on a buying spree beginning in 2010 (two purchases closed in early 2011), as it tried to fill in gaps in its products. Intel bought the wireless unit of Infineon for about $1.4 billion in cash in 2011. The acquisition was part of Intel's strategy to move beyond its computer chip business by adding an established portfolio of chips for smartphones and other wireless devices. The unit's chips are used in products that include Apple's iPhone. Intel's move into chips for smart devices was bolstered by another acquisition that year, when it bought Silicon Hive (a spin-out from Philips Electronics) from venture capital firm New Venture Partners. Silicon Hive develops system-on-chip (SoC) chip technology for multimedia applications; its technology will help Intel expand its Atom processor-based chips into multimedia and imaging applications for mobile devices.
Intel also purchased security software provider McAfee for about $7.68 billion in 2011. The deal, which marked Intel's most significant foray into the world of software, was part of a push to offer clients a comprehensive package of hardware, software, and services for growing industries such as mobile computing and Web-connected devices, especially in the data center sector. McAfee operates as a wholly-owned subsidiary that reports to Intel's software and services group.
In a much smaller deal the same year, Intel acquired Fulcrum Microsystems. Fulcrum designs integrated, standards-based 10GbE (Gigabit Ethernet) and 40GbE switch silicon for data center network providers to support cloud architectures and converged networks. Also in 2011 it paid $300 million for Israeli location and navigation company Telmap to expand its mobile capabilities and offer location-focused API tools for its AppUp developer program. In 2012 it geared up its networking arsenal further when it bought QLogic's InfiniBand product line of switches and adapters and certain assets related to that business. Intel sees the purchase as essential to achieving fabric architecture development of ExaFLOP/s performance (the next order of magnitude above PetaFLOP/s) by 2018.
In late 2010 Intel acquired Texas Instruments' Puma cable modem product lines. It plans to combine the Data Over Cable Service Interface Specification (DOCSIS) standard technology and its own SoC devices to develop set-top boxes, residential gateways, and other modem products for the cable industry. The product line acquisition, which became part of Intel's Digital Home product group, is in line with the company's strategy to develop chips that provide the foundation for specific product groups with clearly identified markets, in this case consumer electronic products for the cable market.
Late in 2010 Intel acquired CognoVision, a Toronto-based digital signage company that uses camera sensors and computers in signs that can detect faces and track people moving through a store in order to make real-time changes to advertising. Intel wants its embedded Atom chips to handle the computing behind the signs. Other new applications for its embedded chips include car entertainment systems and home energy management.
Intel works to have its architecture used as the platform in embedded applications, and is bulking up its software programming offerings in order to provide a complete product. Another area of focus is developing products that allow handheld devices and consumer electronics linked through the home to deliver content and the Internet in new ways. One example of this is a collaboration between Intel, GE Healthcare, and the Mayo Clinic. Using Intel's remote patient monitoring technology, the organizations are conducting a study on the benefits of daily in-home monitoring of senior patients and those with chronic diseases, especially as it relates to reducing emergency room visits and hospitalization. While the Mayo Clinic is developing a model for remote patient care, Intel and GE Healthcare plan to invest $250 million over the next five years developing home-based health products and technologies that further the in-home health model. GE Healthcare will also sell and market the Intel Health Guide, a care management tool designed for health care professionals.
Building on this collaboration, in 2010 Intel and GE formed a joint venture that combined GE Healthcare's home health division and Intel's digital health group. The jointly owned health care company, called Intel-GE Care Innovations LLC, or Care Innovations, focuses on developing products and services that support independent living, chronic disease management, and assistive technologies.
Intel also divested operations considered nonessential in 2010. That year Numonyx was sold to Micron Technology for about $1.2 billion in stock. Intel has a separate joint venture with Micron, IM Flash Technologies, to make NAND flash memories.
In 2009 the company acquired Wind River Systems, a supplier of software for embedded electronics, for about $884 million in cash. Wind River became a wholly owned subsidiary. Intel is well-known as a chip manufacturer, but the company also has a substantial software development organization, turning out tools that help smooth the integration of its parts into system designs. Wind River's software portfolio, which includes operating systems, middleware, and software development tools, augments Intel's software efforts.
Paul Otellini is only the fifth CEO in the company's four-decade history, and the first non-engineer. His predecessor, Craig Barrett, retired as chairman in 2009.