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Intel reported net sales of $77.9 billion for full-year 2020, up from $72 billion in FY2019. Operating margins remained flat at around 30.5%, despite Intel driving up its investment in R&D activities. Net income dropped from $21.05 billion to $20.9 billion over the same period, but aggressive share buybacks saw EPS rise to $4.98 from $4.77 over this period.
In 2020, Apple announced that it was gradually shifting from Intel's chips in their macbooks, to their own range of chipsets. Apple's latest macbook range confirmed this, with most of the new notebooks using Apple's new M1 chipset instead of Intel's i5 and i7 series. Further, Intel announced that its newest generation of chipsets won't come out before late-2022. This could hamper Intel's chipset sales further as its biggest competitor AMD has already launched its next generation of chipsets, driving OEMs to shift from Intel to AMD for their chipset needs.
Below are key drivers of Intel's value that present opportunities for upside or downside to the current Trefis price estimate for Intel:
For additional details, select a driver above or select a division from the interactive Trefis split for Intel at the top of the page.
Intel manufactures and markets microprocessors used in servers, desktops and notebooks. Microprocessors are a PC's central processing unit (CPU) or the brain behind the computer. A microprocessor is the single most important component that drives computer's power and performance.
Intel also manufactures chipsets used in desktops, notebooks and wireless devices. A chipset operates as the PC's nervous system, sending data between the microprocessor and input, display and storage devices such as the keyboard, mouse, monitor, hard drive and CD or DVD drive.
Microprocessors and chipsets used in servers, desktops and notebooks are the major sources of revenue for the company.
AMD's Ryzen processors are in high demand of late. Ryzen CPUs have been able to deliver competitive power at a relatively lower cost. As such, AMD has gained some market share from Intel over the past few quarters. AMD is currently working on 7nm chips, which will roll out around the same time with Intel's 10 nm chips. AMD could gain further share in the coming quarters over Intel with its new chips, which it plans to launch for all major products - Ryzen, Radeon, and EPYC processors.
Beyond Ryzen, AMD's growth in the server market is more worrying for Intel. AMD's EPYC processors have been gaining share amid strong performance at a lower price point.
Server virtualization is essentially server consolidation that enables running multiple applications on a single server instead of on multiple servers. Server virtualization is driving a mix shift to higher-end servers, which requires multi-core processor servers that tend to be more complex and more expensive than traditional single core processors.
While PC shipments have declined drastically in the last few years, mobile shipments (particularly smartphones and tablets) have grown at a robust rate. Though growth rate has slowed as developed markets near saturation, mobile shipments continue to expand at a fast pace.
Both Intel and AMD have moved away from the idea of integrated graphics. These chips pack GPU within the CPU leading to much better graphics performance than one can get from traditional integrated graphics.
New windows versions are ARM-compatible which has opened up the market to ARM-based processor manufacturers. This market was traditionally been dominated by x86 processor architecture. This will challenge the dominance of Intel which could lose some market share in the future, on account of increasing competition.
IoT includes all other computing devices apart from PCs, tablets and smartphones. IoT is still at a nascent stage, but it is expanding fast and is considered to be the next big growth driver in the semiconductor industry, after smartphones and tablets.
According to Cisco Consulting Services, IoT has the potential to unleash $19 trillion of global economic value, by 2024. McKinsey Global Institute estimates that the impact of IoT on the global economy can be as high as $6.2 trillion by 2025. The installed base for IoT devices is estimated to grow from around 10 billion connected devices today to as many as 30 billion devices (50 billion as per some estimates) by 2020.
Intel was a late entrant in the mobile computing space and for this reason does not (yet) have a very large presence in the market. However, the computing giant is keen not to miss the next big wave in computing – Internet-of-things.
In 2014, Intel completed its acquisition of Basis Science, which specializes in wearable device technologies for health and wellness applications. This gives Intel an immediate entry into the wearable devices market. The company intends to build upon this foundation to deliver new products that offer greater utility and value to its customers. Intel has been investing in a wide range of start-ups in the wearables space, and has also tied up with some fashion houses to market wearable gear as a fashion accessory rather than just a device that monitors your health (and more).
In March 2017, Intel entered into a definitive agreement to acquire Mobileye, which offers leading computer vision expertise to create automated driving solutions from the cloud through the network to the car, for nearly $15 billion. The acquisition is expected to position Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles. Automotive is one of the fastest and most promising sub-segments of IoT. Intel estimates the vehicle systems, data, and services market opportunity to be up to $70 billion by 2030. (Link)