Intel has followed the law -- Moore’s Law, that is -- to the top spot in manufacturing and selling semiconductors. Company co-founder Gordon Moore determined in the 1960s that microprocessors would regularly get more powerful, smaller, and less expensive. Intel has followed that formula to grab about 80% of the market share for microprocessors that go into desktop and notebook computers, smartphones, tablets, and computer servers. The company also makes embedded semiconductors for the industrial, medical, and in-vehicle infotainment markets. The company’s technology roadmap calls for releasing a new Core processor and a Xeon processor every two years. Most computer makers use Intel processors.
Intel subsidiaries include Shiva Corporation, Chips and Technologies, Intel Technology India, Intel Corporation UK, Intel China, Wind River Systems, McAfee, IM Flash Technologies, and Havok.com.
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, Phone, Non-Volatile Memory (including NAND products), and Software and Services (including McAfee and Wind River Software).
Intel has more than 150 locations around the globe with assembly and test facilities in Costa Rica, China, Malaysia, and Vietnam. Singapore and China generate 21% and 19% of Intel's total sales, respectively. The US accounts for 17%.
Sales and Marketing
Intel sells its products primarily to OEMs and original design manufacturers (ODMs). ODMs provide design and manufacturing services to branded and unbranded private label resellers. In addition, Intel products are sold to makers of a wide range of industrial and communications equipment.
Its customers also include those who buy PC components and other products through distributor, reseller, retail, and OEM channels. Intel's worldwide reseller sales channel consists of thousands of indirect customers (systems builders that purchase its microprocessors and other products from their distributors).
In 2013 Hewlett-Packard accounted for 17% of the company's sales, while Dell contributed 15% and Lenovo accounted for 12%. Intel paid $1.9 billion in advertising expenses during 2012.
Intel posted lower revenue and net income in 2013 for the second straight year. Revenue dipped to $52.7 billion for the year from $53.3 billion in 2012. Unit sales decreased in the PC Client and Data Center groups, although average sales prices were up in the PC Client group. There also were lower unit sales in the netbook platform and components for feature and entry-level phones.
Net income dropped 12% to $9.6 billion in 2013 from 2012, the first time in four years it came in under $11 billion. Besides lower revenue, profit suffered as Intel spent 5% more on research and development and on corporate expenses in 2013. The company also took $240 million in restructuring charges for workforce reductions and in anticipation of closing a fab.
Operating cash flow rose to $20.7 billion in 2013 from about $18.9 in 2012. Intel had lower income taxes due in 2013, and lower inventories as it sold through older products.
While Intel has long dominated the chip market for personal computers and servers, it was late to the game for smart phones and tablets and that cost it sales and profit. The company is looking to catch up in mobile and establish leadership in other areas such as the Internet of Things and cloud computing.
To move ahead in the mobile market, Intel is investing $1.5 billion Tsinghua Unigroup of China and develop chips and a system on a chip, or SOC, for less costly but still advanced phones for emerging markets. Intel also partnered with another Chinese company, RockChip, to make an Intel-designed SOC for lower-priced tablets running the Android operating system.
In late 2014, Intel announced its Intel IoT Platform, a platform designed to unify and simplify connectivity and security for the Internet of Things (IoT). The company drew on software developed by its recent acquisitions Wind River and McAfee, for the platform. The platform is to make it easier to develop applications and to connect the “things” effectively and securely with the Internet.
In its main processor business, Intel’s fifth-generation Core processors were readied for PCs that will hit the market in 2015. The new chips, built with a smaller manufacturing process, use less power.
Mergers and Acquisitions
Intel continued to stock up on acquisitions in 2013 to bolster its offerings in several areas. It spent about $925 million on a dozen companies. With Stonesoft, Intel will expand its network security products. In 2014 Intel bought PasswordBox, an identity management service that allows users to log into websites and applications securely with less hassle. To enhance its networking chip presence, Intel agreed to buy the LSI networking business from Avago Technologies for $650 million. The deal was to close by the end of 2014.