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It's not just computers that have 'Intel Inside'. Since 2006 the US chipmaker has attempted to widen its market to handsets and other high-end devices, albeit so far with less success than with which it dominates the PC sector. It is pushing hard into the "internet of things" market, as demonstrated by, among others partnerships, one with Tag Heuer in 2015 to develop a luxury smart watch. The world would be a very different place had it not been for the American company that invented the microprocessor, a tiny silicon chip that allows electrical products to "think" for themselves. Almost all electrical appliances now contain microprocessors, from toys to washing machines, from cars to traffic lights, from telephones to thermostats. And computers of course. Around 80% of PCs worldwide operate on Intel microprocessors, and the company has powerful alliances with most of the world's biggest manufacturers. Intel also makes a variety of other memory chips and computing components. After a slowdown in the market in 2008 and 2009, the group was back in growth mode by 2010. However the shift towards smartphones and tablets - not an area of strength for Intel - began to create problems in 2012, prompting the company to launch a bigger push for its own line of Ultrabook laptops, as well as a series of acquisitions of chip manufacturers specialising in other sectors, not least cloud computing. It is increasingly trying to position itself as a "data-centric" not "PC-centric" company.
Click here for all agency account assignments for Intel. The company declared advertising expenses of $1.2bn in 2018, a large part of it on cooperative advertising with major manufacturers.
Interbrand's Best Global Brands survey ranked Intel as the world's #15 brand in 2017, with an estimated brand value of $39.5bn. Millward Brown's Brandz survey ranked Intel much lower with an estimated value of $21.9bn. Both surveys use different measurement criteria.
There is no doubting Intel's complete dominance of the computer processor market, but the company is under considerable pressure to continue delivering dramatic sales growth, and that feat becomes ever more difficult to pull off. One key to Intel's continued growth will be a successful move into mobile devices, an area where it is still weak, though performance is improving. However, here it faces a new set of challengers. Instead of traditional PC competitor AMD, Intel's main rivals are Samsung and Qualcomm. Another area for growth is the rapidly evolving cloud computing sector, and the server farms that underpin it. These arguably offer even more potential for growth.
Researcher IHS estimated Intel's share by value of the global semiconductor market at 15.6% for 2016, with Samsung at 11.4% and Qualcomm at 4.4%. However a surge in growth by competitors had lifted Samsung into 1st place by 3Q 2017, with 14.5%, while Intel slipped to 13.9%. SK Hynix and Micron Technology both overtook Qualcomm to occupy the #3 and #4 positions.
Intel is without question the leading supplier of processor chips for computers. The group's dominance in this sector has been underpinned by its long-established partnership with Microsoft to extend the boundaries of computing technology. This so-called Wintel alliance led to similar pacts with leading manufacturers including Dell, HP and Compaq. In 2006, even Apple, long considered the traditional enemy of the Wintel pact, joined the group, switching suppliers from IBM to Intel.
As a result of these close links, Intel has long maintained a stranglehold on the global PC chips market. In fact, since 2009, this steadily increased at the expense of main rival Advanced Micro Systems (AMD). The latter had gained considerable momentum at the end of the 1990s with the launch of its Athlon chip, cutting Intel's share from around 84% in 1999 to 79% by 2001. However loss-making AMD was unable to maintain that pressure, and Intel's share had climbed back up to 82% by late 2002, and crept towards 83% during 2003.
Increasingly aware that Intel's lead was maintained through more surreptitious means, AMD launched an antitrust lawsuit in 2005 which accused the larger company of maintaining a virtual monopoly through the use of generous purchasing rebates to clients and other illegal inducements. Intel was fined for these actions in several markets, but the most significant reprimand came in 2009 from European regulators who slapped the company with an unprecedented fine of almost €1.1bn. Towards the end of that year, AMD and Intel finally settled their various lawsuits after Intel agreed to pay AMD $1.25bn in damages. In 2011, the group settled a similar suit from graphics chip rival Nvidia with a payout of $1.5bn over six years. Soon afterwards, though, the US Federal Trade Commission issued its own lawsuit against Intel for abusing its position.
Meanwhile the surge in popularity of notebook computers allowed Intel to quickly rebuild its market share. By 3Q 2011, according to researcher IHS, Intel's share of global PC microprocessor revenues had reached 83.7%, its highest level since the late 1990s, and up almost three full percentage points from the year-ago period. AMD's share, on the other hand, had slipped from almost 11.5% to 10.2%. The relative position of the two companies has continued to widen ever since. By the beginning of 2017, Intel's share of the PC market had risen to as high as 93%, and it had near complete dominance of the server market. Yet AMD has regained ground since then with the introduction of new highly efficient Ryzen processors. This proved especially popular with manufacturers, cutting Intel's share to a near-ten-year low of 69% by mid-year, while AMD's share soared to over 30%.
Intel has kept to a strategy of maintaining market dominance by regularly reinventing its chip technology and system architecture. In particular it has focused on incorporating computer functions ordinarily handled by other devices into its chips as standard, thereby increasing its domination of the guts of the average machine. A new generation of PC chipsets launched in 2004, for example, provided inbuilt high-definition audio and graphics functions, bypassing the need for separate add-on cards from other manufacturers, and its current generation of laptop chips come with built-in wireless connectivity. This move into software and services was underpinned by two acquisitions. In 2009, the group paid $884m for software company Wind River Systems, which specialised in programming systems for embedded devices such as mobile phones and in-car entertainment systems.
In 2010, Intel announced a deal to acquire McAfee, the maker of antivirus and security software, for $7.7bn. Both retained separate branding within the group, developing software that can be embedded in chips and other hardware. The McAfee brand was phased out in 2014 in favour of new name Intel Security. However, attempts to integrate McAfee's security technology directly into Intel chips were largely unsuccessful, and in 2016, Intel effectively called it quits on the business. It agreed to sell a 51% stake in a newly reconstituted McAfee Security unit to private equity firm TPG for an enterprise value of $4.2bn, considerably less than it paid for the business.
The rapid changes within the technology sector, driven mainly by Apple and Google's Android operating software, led to a loosening of Intel's long partnership with Microsoft. Recent developments in 2011 were the introduction of technology to support a new generation of ultra-thin "Ultrabook" notebook computers designed to rival Apple's MacBook Air, as well as Intel's first Android-based chips and other components. The first Ultrabook computers were launched worldwide for Intel by manufacturing partners Asus, Acer, Lenovo and Toshiba. However, sales were weak, overshadowed by the explosion of consumer interest in tablets. This segment has long been considered Intel's Achilles heel. BlackBerry began using Intel chips in some devices in 2009, and in 2010 Intel unveiled a new smartphone device built by LG which used a new generation of ultra-thin low power chips. However the rapid spread of iPhone and then Android devices paid almost no dividends for Intel. Instead these devices tend to use architecture designed by competitor ARM Holdings and manufactured under license by several other companies including Samsung and Qualcomm. Accepting a competitive defeat for its own mobile chips, Intel paid $1.4bn at the beginning of 2011 to acquire the wireless chip division of German group Infineon, which supplies components for iPhone, and in 2013 it even said it would consider making other companies' chip designs under license to counter slowing production at its own factories caused by the steep decline in the global PC market.
Intel's principal business remains the development and manufacture of microprocessors, chipsets, motherboards and related computer components, effectively the "brains" and "guts" of any computer. Until recently these were based around two main products, the long-established Pentium and lesser-known Celeron family. However these products have been superseded by newer technology, and those two brand names were effectively dropped in 2006. Intel Core is now the name for general desktop processors. Several generations of this unit have been launched since then, each with more sophisticated functionality. The 8th generation was introduced in 2017, using the group's newest energy-efficient micro-architecture platform.
The Centrino name, originally used for laptop chips, has been phased out and replaced by Atom, a set of lower-priced internet-oriented chips that are smaller and require less power than mainstream processors, making them particularly suitable for value-priced mini-netbook computers and even mobile phones. Quark is an even more compact unit designed specifically for wearables and Internet of Things devices. It got its first big public outing in 2015 as the platform behind Tag Heuer's admired smart watch, a three-way collaboration between the watchmaker, Intel and Google's Android operating system. In the enterprise sector, the group markets Itanium and Xeon processors for high-end servers and workstations.
The group has also introduced new multiple core Duo technology which allows processors to have in effect two or more separate "brains", operating independently of one another. At the same time they use less power and therefore allow for quieter devices. Quad-core technology was unveiled at the 2006, allowing for four separate brains on each chip, followed by eight-core technology in 2010. The capacity of processors continues to grow, and the first step on that path was the launch in 2011 of "3D" or Tri-Gate technology, that allows electrons to move up and down as well as from side to side, allowing even more processing power to be crammed into ever smaller spaces.
Historically Intel's operations were dominated until 2004 by a single Architecture Business Group, which contributed 85% of group revenues. Reflecting its segmentation of different chip technologies, Intel broke up the main Architecture group that year into separate units, each tackling a different market platform. However these different groups were further shuffled in 2009. From 2010, the group was structured as the PC Client Group (PCCG), serving the core desktop and notebook computer business, alongside the Data Center Group (DCG), which targets server, storage and workstation platforms, including cloud computing services. From 2015, most other client-device divisions were absorbed into PCCG under the new heading of Client Computing Group (CCG), covering mobile, tablets and smartphones as well as PCs. DCG remains separate.
In 2017, the PC-centric Client Computing Group still generated the largest proportion of group revenues - 54% - but growth is limited. The contribution for 2017 was $34.0bn, up 3% year-on-year. However the contribution from DCG rose 11% to $19.1bn.
Other divisions remain, but are significantly smaller, though also even faster-growing. One unit specialises in components for so-called "Internet of Things" domestic appliances such as heating thermostats, lighting systems and so on. Sales jumped 20% in 2017 to $3.2bn. The Non-Volatile Memory Solutions Group (NSG) develops flash memory devices, mostly manufactured by third-party suppliers. In 2015 the unit launched a new form of platform, trademarked as 3D Xpoint, which operates without the use of transistors. Developed in a partnership with rival Micron, it promises "1,000 times" the performance of other forms of flash memory drives. Unit revenues soared 37% in 2017 to $3.5bn.
In 2015, Intel inked the acquisition for $16.7bn of Altera, the world's second largest developer of programmable chips, already used in large data centers by important clients such as Facebook and Amazon, but also a key area for the growth of internet of things products. It was the largest deal in Intel's history, and the Altera brand will be retained as a separate division under the heading of Programmable Solutions Group or PSG. Sales for 2017 were $1.9bn.
In 2017, Intel launched another push into new markets with a $15.3bn deal to acquire Israeli company MobilEye. It is its second-biggest acquisition after Altera. MobilEye makes chip-based camera systems that help cars visualise the driving environment around them, allowing them to steer or break autonomously. The company supplies its technology to GM, Volkswagen and Honda among others.
Early in 2013, the group revealed plans to launch its own internet-based TV streaming service, to be delivered via a new Intel-powered set-top box. No date was set for launch, however, and the company struggled to secure content from media owners. Instead, Intel was later rumoured instead to be discussing a sale of its system to a more established operator. The business was acquired in 2014 by Verizon.
Intel Capital is the company's strategic investment arm, with a huge portfolio of investments in technology companies. It is one of the world's largest corporate venture capital funds.
The group's financial performance came under some pressure between 2006 and 2008 as a result of the changing economic picture. Intel's revenues peaked in in 2005, after a third consecutive year of double digit growth in revenue and earnings, at a record $38.8bn. However, revenues dipped the following year and bounced up and down for a few years as a result of intense competition leading to lower pricing of the group's products. In both 2008 and 2009, revenues dipped lower. However, any lasting concerns were erased by the recovering economy in 2010 and 2011. Group revenues jumped by an impressive 24% each year to reach a record level of $54.0bn in 2011. Net income more than doubled in 2010 and rose by another 13% in 2011 to reach $12.9bn.
Problems began to materialise during 2012, mainly because of Intel's reliance on the global PC market, which was badly dented by a shift among consumers towards tablets. HP and Dell together accounted for more than a third of Intel's revenues and both companies suffered a slump in PC sales. Intel's revenues and net income both fell, with topline slipping 1% to $53.3bn, and bottom line by a more alarming 15% to $11.0bn. There was another slump in 2013 to $52.7bn. There has been solid recovery since then, with revenues reaching $55.87bn for 2014, before slipping back in 2015 to $55.36bn. Net income too jumped 22% to $11.7bn for 2014, and then fell back the following year to $11.42bn.
For 2016, revenues hit a record high of $59.39bn, but net income continued to drift lower, falling to $10.32bn. The group's gross profit margin has been falling steadily in recent years as a result of competitive pressures on pricing. Dell, Lenovo and HP between them accounted for 38% of group revenues. The group's single biggest geographic market is now China, accounting for 24% of sales in 2016; the US was next (just over 22%) followed by Singapore (just under 22%).
For 2017, Intel shrugged off embarrassing chip flaws and its demotion to second place in global semiconductors behind Samsung with another set of record revenues, which hit $62.8bn, well above investors' expectations. A one-off hit from tax reform in the final quarter cut net income by 7% to $9.6bn, but the adjusted figure excluding charges jumped 27% year on year.
Revenues hit a new high of $70.8bn in 2018, and net income more than doubled to $21.1bn.
Paul Otellini retired unexpectedly as president & CEO of Intel in May 2013, and was succeeded as CEO by Brian Krzanich, previously EVP & COO. Just over five years later, the Intel board asked for Krzanich's resignation after he was revealed to have engaged in a romantic relationship with a fellow employee, in contravention of the company policies on non-fraternisation among managers. EVP & CFO Robert Swan was named as interim CEO, and then confirmed in that role in early 2019. Andy Bryant is chairman.
During the 1950s, Bob Noyce and Gordon Moore were two of the founders of US technology company Fairchild Semiconductor. In 1959, Noyce developed the first integrated circuit, which allowed miniature electronic circuits to be stamped onto a single silicon chip. By the late 1960s, Noyce and Moore were frustrated with the way Fairchild was developing and wanted to set up their own business. In particular they felt that computer memory could be stored on miniature chips rather than on magnetic media such as tape or disk drives. In 1965, Moore devised a planning model later known as Moore's Law. This predicted that the number of transistors that the industry would be able to place on a computer chip would double every year. (Incredibly, the model was to remain true for the next 30 years, until Moore revised it to doubling every two years).
Backed by venture capitalist Art Rock, they set up as Intel, short for Integrated Electronics, in 1968. Recruiting another ex-Fairchild engineer, Andy Grove, they started by making RAM memory chips for mainframe computers. But in 1970 a Japanese client, Busicom, commissioned a new order. Busicom asked for 12 custom-built logic chips to run a low-cost desktop calculator. Instead Intel decided to amalgamate the 12 separate chips as one, designed so that it could be controlled by software, instead of having its programming built-in. After nine months of development, the first microprocessor was born in 1971. Smaller than a thumbnail, it contained as much computing power as ENIAC, the first mainframe computer developed in 1946, which had filled 3,000 cubic feet and weighed 30 tons.
Unfortunately, the technology had been funded by Busicom, so they owned it. Noyce and Moore bought out Busicom for $60,000. (The Japanese company went bust a year later). The other catch was that no hardware manufacturers were making products capable of using this revolutionary new technology. Intel mounted a huge campaign designed to let the electronics community know what they'd devised. In fact the first electrical products to use microprocessors had nothing directly to do with computers - they were supermarket scales, traffic lights and telephones. In effect, microprocessors allowed traffic lights to operate independently, as opposed to being wired into a huge city-wide network. Supermarket scales could convert weights into prices and print labels. Telephones could hold numbers in memory for speed-dial or redial.
However gradually computer hobbyists also began to incorporate Intel's chips into their amateur projects. Effectively the first personal computer was the Altair, sold to hobbyists as a DIY kit. It was launched in 1974, using Intel's third-generation processor design, the 8080 chip. Shortly afterwards, two Seattle-based programmers named Bill Gates and Paul Allen set up a small software partnership called Microsoft to write a simple programming language for the Altair. Meanwhile, Intel acquired watch manufacturer Microma and began manufacturing digital timepieces powered by microchips. It was a bad call. The company was quickly overtaken by Japanese manufacturers, and Intel disposed of the business in 1978.
In 1981, computer giant IBM took the decision to sub-contract some of its technology for the first time in order to develop the first commercial personal computer. It selected Intel to provide their fourth generation 8088 microprocessors, and commissioned Microsoft to supply the operating system. A year later, the 80286 - usually called the 286 - was the first chip to be reverse-compatible with software written for its predecessors. In an attempt to make the 286 an industry standard, Intel licensed the technology to smaller company Advanced Micro Devices (AMD), but quickly found they had created a competitor not a collaborator. Meanwhile Japanese rivals forced Intel out of the less profitable memory business, as well as the wider non-computer processor market. The company reinforced its position by concentrating on PC chips, launching the Intel386 in 1985. This was capable of multi-tasking - allowing the computer to run multiple programs at the same time. The 486, launched in 1989, was even faster. However, AMD sued for being shut out of the new technology and a series of lawsuits dragged until the mid-1990s.
In 1993, Intel developed a new family to replace the 86 series, the Pentium series. Containing 3.1m microscopic transistors and circuits each 1/300th the width of a human hair, the Pentium was 1,500 times faster than Intel's first 4004 chip. The Pentium Pro launched in 1995, followed by Pentium II in 1997. The company also began to diversify its range, custom-designing specific sorts of chips for different types of applications instead of the one-size-fits-all approach of previous CPUs. The Pentium II was specifically designed to provide enhanced multimedia; however this wasn't always the most important requirement for different computers. So the Pentium II Xeon range, launched 1998, was introduced for servers and workstations, which specialise in networked business applications. The budget range of Celeron chips, also 1998, offered high multimedia performance at lower prices for home users. The Pentium III, launched in 1999, is top of the range with enhanced handling of multimedia as well as demanding business computing. It is being superseded in 2000 by the company's newest chips, the Itanium processor, and Pentium 4. Advances in technology mean that the company can now stamp more than 10m transistors on a silicon chip, using circuits 1/1000th the width of human hair.
In 1997 the company also began a program of acquisitions to reinforce its product portfolio. During the 1980s, smaller company CHIPS had proved a thorn in Intel's side as a manufacturer of clone microprocessors, undercutting Intel's prices. By the 1990s, CHIPS had become a specialist in graphics controllers for portable computers. Intel paid $420m to buy the business in 1998. It also settled a lawsuit from Digital, who claimed the Pentium chip plagiarised their rival Alpha CPUs, by paying $700 to acquire Digital's semiconductor business.
Later that year Intel moved into networking, buying Level One Communications for $2.2bn. It paid a further $780bn for computer telephony business Dialogic in 1999, followed by $1.6bn to purchase cellular communications software maker DSPC. Intel also invested $100m for a strategic alliance with Korea's leading semiconductor manufacturer Samsung. There were a series of stock-based acquisitions during 2000 in a variety of companies including networking processor company Basis Communications ($450m), communications software designer Trillium ($300m), Danish chipmaker GIGA ($1.25bn) and circuit board maker Ziatech ($240m). The rivalry with AMD resurfaced in 2000 when the smaller company beat Intel to the launch of a 1-gig processor by two days. But Intel's close ties to Dell, Compaq, Microsoft and several other major developers have effectively closed out AMD from the top tiers of the computer industry.
In early 2001, the company raised the stakes even further in chip development, announcing they had perfected the technology to make microprocessors containing more than 400m transistors by 2005. Intel's current top-end chip, the Pentium 4, has 42m transistors. The group also spent almost $2bn in cash and stock to acquire a number of smaller technology developers during the year, including wireless communications company Xircom, semiconductor maker VxTel, components company Cognet and fire-optics developer LightLogic. The Itanium 64-bit microprocessor for servers, developed with Hewlett-Packard, finally launched in 2001, several years later than planned. The group sealed a deal to become the exclusive supplier of server chips to Compaq; however AMD's new Athlon chip for PCs loosened a small part of Intel's hold on the desktop market. Intel won back the lost ground with substantial price cuts, and a string of even faster Pentium chips.
Although the group has consistently held onto its leadership of the market, the economic downturn in 2001 and 2002 hit hard. Sales dropped more than 20%, as both unit volumes and chip prices fell in response to slower demand. Net income plummeted from $10.5bn in 2000 to just $1.3bn in 2001. However 2003 saw a strong recovery throughout the industry, and Intel was no exception.
Yet at least some of Intel's recovery was supported by aggressive and sometimes unfair behind-the-scenes negotiations with manufacturers and retailers, in which it paid computer makers to limit the number of chips they sourced from competitors. This led to a lawsuit from main rival AMD which resulted in fines in several countries. The most significant of these was an unprecedented €1.06bn fine handed down by European regulators in Spring 2009. The EU found that Intel had given large discounts to several manufacturers on condition that they buy some or all of their components from the company, and paid electronics retailer Media Markt, a unit of Metro Group, to sell only Intel-based machines in its stores. Intel vowed to appeal against the fine.
For several years, the group was determined to cross over from computer components into traditional wireless handsets, but these operations incurred heavy losses as Intel had difficulty breaking the stranglehold of rivals such as Texas Instruments and Freescale on the mobile phone sector. The Intel Communications Group's products included wired and wireless networking and connectivity products, application processors and chipsets for cellular handsets and handheld devices. Brand names include StrataFlash memory for high-end cellular phones and XScale processors. Performance improved dramatically in this unit in 2004, with sales rising almost 30%, but the business still reported losses. Eventually Intel called it a day in 2006, selling the entire communications unit to Marvell Technology for around $600m.
A separate unit, the New Business Group, launched a range of other products in early 2000, including DSL modems, PC cameras and toys, but the project was later phased out in the light of poor returns. Its remaining activities, web hosting services for corporate customers, were phased out in 2003.
Last full revision 15th December 2017
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