On January 26th, Intel will do their 4th quarter conference call. On the conference call, Intel will discuss their performance in the 4th quarter and for the full year of 2022. To prepare us for this meeting, I will review some of the things we need to know.
Disclaimer: The videos below do not belong to us. The creators are mentioned in each video.
COMPANY HISTORY
Intel is the largest manufacturer of semiconductor chips in America.
Intel chips are in 70% of personal computers and 73% of datacenters.
According to Morningstar, Intel's revenue over the last twelve months was $69.5B, more than double the combined sales of their 2 largest competitors in the US.
Twelve months' sales according to Morningstar:
Intel: $69.5B
Nvidia: $28.5B
AMD: $22.5B
Below is a video about AMD.
Intel was formed in 1968 in Santa Clara, California by Gordon Moore, Andrew Grove and Robert Noyce. Gordon Moore created "Moore's Law" which states the number of transistors on a computer chip will double almost every 2 years. The more transistors on a chip, the more powerful the chip will be.
Discussions about Moore’s Law might come up on the call.
BUSINESS STRUCTURE
Intel has six business divisions. Below is a summary of the six divisions and the products they make.
INTEL FINANCIALS
STRATEGY
Intel hired a new CEO, Pat Gelsinger, in February 2021. Since starting, Pat has reorganized 70% of the company’s leadership team and created a new strategy for Intel called IDM 2.0 (Integrated Device Manufacturing 2.0).
The emphasis of Intel’s new strategy is for the company to move with urgency to regain the leadership role in making advanced chips. The strategy also calls for Intel to expand their business by collaborating with outside parties.
NEW STRATEGY - IDM 2.0
With the new strategy, Intel will:
1. Continue to use Intel factories to make most of the company's chips;
2. Build new factories in Ohio and Arizona. These new factories will make smaller, more powerful chips that can help Intel become more competitive;
3. Use outside manufacturers to produce some of the chips Intel is unable to make until they finish building their new factories;
4. Use the newly formed "Intel Foundry Services" division to manufacture chips for outside companies. Companies are willing to work with Intel because they don't want to rely solely on Taiwan Semiconductor Manufacturing Company and Samsung to make their chips; and
5. Produce 4 chip sizes in 5 years instead of the normal 8 years.
RECENT DEVELOPMENTS
Below are the recent events that may be discussed on the call.
January 10 2023: Sapphire Rapids Release
Intel released the long awaited Sapphire Rapids chip for datacenters. The chip had been delayed for 2 years.
December 1 2022: Barbara Novick was elected to Intel's Board of Directors.
Barbara co-founded the powerful $110B asset management firm, Blackrock. Her presence might help Intel develop strategies that can improve the stock price. Since Pat became CEO in 2021, Intel's stock price has dropped ~53%. Barbara Novick elected to Intel's Board
October 26 2022: Mobileye's Initial Public Offering (IPO).
Intel sold 6% of their ownership stake in MobileEye to investors for $21 per share. Intel raised $1B from the sale.
August 23 2022: Intel’s Partnership with Brookfield Infrastructure Partners
Intel entered into a partnership agreement with Brookfield Infrastructure Partners to fund the construction of their manufacturing plants in Arizona. Intel has a 51% stake in the partnership and Brookfield 49%. The cost of the factory will be around $30B. This partnership will reduce the amount of money Intel needs to build their factories.
August 9 2022: CHIPS and Science Act Passed
The US government will invest $52.7B in the semiconductor industry. This bill is supposed to make the US more competitive in the global chip industry. Intel will receive a portion of this money along with tax benefits.
February 15 2022: Intel agreed to buy Tower Semiconductor for $5.4B
Tower Semiconductor is an Israeli company that produces chips that are less advanced than Intel's. This acquisition will allow Intel's newly formed Intel Foundry Services division to make chips for customers in the car, consumer electronics, medical devices, and industrial equipment industries. The deal is expected to close in the 1st quarter of 2023.
Jan 21 2022: Intel announced plans to build a $20B factory in Ohio.
Construction began in September 2022 and is expected to be complete in 2025.
May 2021: Pat Gelsinger paused Intel’s stock buyback program.
Pat is using the money to build Intel’s new factories. Some people believe Intel should also stop paying the dividend and reinvest the money into their business. Pat is against cutting the dividend because it is important to shareholders, and since the company's new strategy will take time, the dividend will keep investors somewhat happy while the strategy is being implemented.
CONCLUSION
Studying Intel is going to make us some tech geniuses!
Remember to register for the call. Link below:
See you after the call.
“Now may the Lord of peace himself give you his peace at all times and in every situation. The Lord be with you all.”
2 Thessalonians 3:16 NLT
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