000005086312-3110-KDecember 31, 20222022FYfalsefalse4,137149.20.0010.0015050——0.0010.00110,00010,0004,1374,1374,1374,0704,1374,1374,1374,0701.46001.39001.32 | | | | | |
| Note : | Contract Liabilities |
Contract liabilities consist of prepayments received on long-term prepaid customer supply agreements toward future product delivery and other revenue deferrals from regular ongoing business activity. Contract liabilities were $577 million$498 million as of December 31, 2022 ($498 million$1.9 billion as of December 25, 2021).
The following table shows the changes in contract liability balances relating to long-term prepaid customer supply agreements during 2022:
| | | | | | | | |
| (In Millions) | | |
| Prepaid customer supply agreements balance as of December 25, 2021 | | $ | 43 | |
| | |
| Concession payment | | (950) | |
| Prepaids utilized | | (633) | |
| Prepaid customer supply agreements balance as of December 31, 2022 | | $ | 20 | |
The following table shows the changes in contract liability balances relating to long-term prepaid customer supply agreements during 2022:
| | | | | | | | |
| (In Millions) | | |
| Prepaid customer supply agreements balance as of December 25, 2021 | | $ | 43 | |
| | |
| Concession payment | | (950) | |
| Prepaids utilized | | (633) | |
| Prepaid customer supply agreements balance as of December 31, 2022 | | $ | 20 | |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| | | | | |
| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2022. |
| or |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to . |
Commission File Number 000-06217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| Delaware | | | | 94-1672743 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
| 2200 Mission College Boulevard, | Santa Clara, | California | | 95054-1549 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (408) 765-8080
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading symbol | | Name of each exchange on which registered |
| Common stock, $0.001 par value | | INTC | | Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large Accelerated Filer | | Accelerated Filer | | Non-Accelerated Filer | | Smaller Reporting Company | Emerging Growth Company |
| ☑ | | ☐ | | ☐ | | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of July 1, 2022, based upon the closing price of the common stock as reported by the Nasdaq Global Select Market on such date, was $149.2 billion. 4,137 million shares of common stock were outstanding as of January 20, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement related to its 2023 Annual Stockholders' Meeting to be filed subsequently are incorporated by reference into Part III of this Form 10-K. Except as expressly incorporated by reference, the registrant's proxy statement shall not be deemed to be part of this report.
Table of Contents
Organization of Our Form 10-K
The order and presentation of content in our Form 10-K differs from the traditional SEC Form 10-K format. Our format is designed to improve readability and better present how we organize and manage our business. See "Form 10-K Cross-Reference Index" within the Financial Statements and Supplemental Details for a cross-reference index to the traditional SEC Form 10-K format.
We have defined certain terms and abbreviations used throughout our Form 10-K in "Key Terms" within the Financial Statements and Supplemental Details.
The preparation of our Consolidated Financial Statements is in conformity with US GAAP. Our Form 10-K includes key metrics that we use to measure our business, some of which are non-GAAP measures. See "Non-GAAP Financial Measures" within MD&A for an explanation of these measures and why management uses them and believes they provide investors with useful supplemental information.
| | | | | | | | |
| Fundamentals of Our Business | | Page |
| Availability of Company Information | | |
| Introduction to Our Business | | |
| A Year in Review | | |
| Our Strategy | | |
| Our Capital | | |
| | |
| Management's Discussion and Analysis | | |
Our Products | | |
| Segment Trends and Results | | |
| Consolidated Results of Operations | | |
| Liquidity and Capital Resources | | |
| | |
Critical Accounting Estimates | | |
| Non-GAAP Financial Measures | | |
| | |
| Other Key Information | | |
| | |
Sales and Marketing | | |
| | |
| | |
| | |
| Quantitative and Qualitative Disclosures About Market Risk | | |
Risk Factors | | |
Properties | | |
| Market for Our Common Stock | | |
| Information About Our Executive Officers | | |
| Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934 | | |
| | |
| Financial Statements and Supplemental Details | | |
| Auditor's Reports | | |
| Consolidated Financial Statements | | |
Notes to Consolidated Financial Statements | | |
| Key Terms | | |
| | |
| Controls and Procedures | | |
| Exhibits | | |
| Form 10-K Cross-Reference Index | | |
Forward-Looking Statements
This Form 10-K contains forward-looking statements that involve a number of risks and uncertainties. Words such as "accelerate," "achieve," "aim," "ambitions," "anticipate," "believe," "committed," "continue," "could," "designed," "estimated," "expect," "forecast," "future," "goals," "grow," "intend," "likely," "may," "might," "milestones," "next generation," "objective," "on track," "opportunity," "outlook," "pending," "plans," "positioned," "possible," "predict," "progress," "roadmap," "potentially," "seek," "should," "strive," "targets," "to be," "upcoming," "will," "would," and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to our strategy and its anticipated benefits, including our IDM 2.0 strategy, February 2022 Investor Meeting financial model, Smart Capital strategy, SCIP, our partnership with Brookfield Asset Management (Brookfield), the transition to an internal foundry model, and updates to our reporting structure; manufacturing expansion and financing plans; investment plans and impacts of investment plans, including in the US and abroad; future economic conditions, including regional or global downturns or recessions; business plans; internal and external manufacturing plans, including future internal manufacturing volumes and external foundry usage; future responses to and effects of COVID-19, including manufacturing, transportation, and operational restrictions or disruptions; projections of our future financial performance, including future revenue, gross margins, capital expenditures, and cash flows; future business, social, and environmental performance, goals, measures, and strategies; our anticipated growth, future market share, and trends in our businesses and operations; projected growth and trends in markets relevant to our businesses; future technology trends; plans and goals related to Intel’s foundry business, including with respect to future manufacturing capacity and foundry service offerings, including technology and IP offerings; future products, services, and technology, and the expected regulation, availability, and benefits of such products, services, and technology, including future process nodes and packaging technology, product roadmaps, schedules, future product architectures, expectations regarding process performance, per-watt parity, and leadership, and other metrics, and expectations regarding product leadership; projected cost and yield trends; product and manufacturing plans, goals, timelines, ramps, and progress; geopolitical conditions, including the impacts of Russia's war on Ukraine; expected timing and impact of acquisitions, divestitures, and other significant transactions, including statements relating to the completion of our acquisition of Tower Semiconductor Ltd. (Tower), the sale of our NAND memory business, and the wind-down of our Intel® Optane™ memory business; expected completion and impacts of restructuring activities and cost-saving or efficiency initiatives, including those related to the 2022 Restructuring Program; future cash requirements; availability, uses, sufficiency, and cost of capital resources and sources of funding, including future capital and R&D investments, credit rating expectations, and expected returns to stockholders such as stock repurchases and dividends; our valuation; supply expectations, including regarding constraints, limitations, pricing, and industry shortages; expectations regarding government incentives; future production capacity and product supply; anticipated trends and impacts related to industry component, substrate, and foundry capacity utilization, shortages and constraints; the future purchase, use, and availability of products, components, and services supplied by third parties, including third-party IP and foundry services; tax- and accounting-related expectations; LIBOR-related expectations; expectations regarding our relationships with certain sanctioned parties; uncertain events or assumptions, including statements relating to TAM, market opportunity, or projections of future demand; and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and particularly in "Risk Factors" within Other Key Information, including changes in demand for our products; changes in product mix; the complexity of our manufacturing operations; competition; investments in R&D and our business, products, and technologies; vulnerability to product and manufacturing-related risks; the effects of the COVID-19 pandemic; supply chain risks, including from disruptions, delays, trade tensions, or shortages; cybersecurity and privacy risks; investment and transition risk; evolving regulatory and legal requirements; our debt obligations; stock volatility; and the risks of our global operations; among others. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Form 10-K do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-K are made as of the date of this filing, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.
Note Regarding Third-Party Information
This Form 10-K includes market data and certain other statistical information and estimates that are based on reports and other publications from industry analysts, market research firms, and other independent sources, as well as management's own good faith estimates and analyses. Intel believes these third-party reports to be reputable, but has not independently verified the underlying data sources, methodologies, or assumptions. The reports and other publications referenced are generally available to the public and were not commissioned by Intel. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information.
Intel, Arc, Arria, Blockscale, Celeron, Cyclone, Intel Agilex, Intel Atom, Intel Core, eASIC, Intel Evo, Intel Geti, Intel Inside, the Intel logo, the Intel Inside logo, Intel Optane, Iris, Killer, MAX, Movidius, OpenVINO, OpenVINO logo, Pentium, Quark, Quartus, Stratix, Tofino, Thunderbolt and the Thunderbolt logo, Intel vPro, and Xeon are trademarks of Intel Corporation or its subsidiaries.
The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by Intel Corporation is under license.
* Other names and brands may be claimed as the property of others.
Availability of Company Information
Our Internet address is www.intel.com. We publish voluntary reports on our website that outline our performance and expectations with respect to corporate responsibility, including environmental, health, and safety compliance.
We use our Investor Relations website, www.intc.com, as well as public webcasts, analyst presentations, and investor days, as routine channels for distribution of important information about us, including our business, financial condition, and operations, among other developments. Such information may be material, and you are encouraged to follow these sources in addition to our filings with the SEC. We publish news releases, announcements, information about upcoming webcasts, analyst presentations, and investor days, archives of these events, financial information, corporate governance practices, and corporate responsibility information on www.intc.com. We post our filings at www.intc.com the same day they are electronically filed with, or furnished to, the SEC, including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K, our proxy statements, and any amendments to those reports or statements. We post our quarterly and annual earnings results at www.intc.com, and do not distribute our financial results via a news wire service. All such postings and filings are available on our Investor Relations website free of charge. In addition, our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we post financial information and issue press releases, and to receive information about upcoming events.
The content on any website referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
| | | | |
2022 revenue was $63.1 billion, down $16.0 billion, or 20%, from 2021 as CCG revenue decreased 23%, DCAI revenue decreased 15%, and NEX revenue increased 11%. 2022 results were impacted by an uncertain macroeconomic environment—with slowing consumer demand, persistent inflation, and higher interest rates—that we believe impacts our target markets and creates a high level of uncertainty with our customers. CCG revenue was down on lower notebook and desktop volume in the consumer and education market segments, while notebook and desktop ASPs were higher due to a resulting change in product mix. DCAI server volume decreased, led by enterprise customers, and due to customers tempering purchases to reduce existing inventories in a softening data center market. Server ASPs decreased due to customer and product mix. NEX revenue increased primarily due to Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. We invested $17.5 billion in R&D, made capital investments of $24.8 billion, and generated $15.4 billion in cash from operations and $(4.1) billion of adjusted free cash flow. | | |
| | | | | | | | | | | | | | | | | | | | |
| Revenue | | Gross Margin | | Diluted EPS Attributable to Intel | | Cash Flows |
■ GAAP $B ■ Non-GAAP $B | | ■ GAAP ■ Non-GAAP | | ■ GAAP ■ Non-GAAP | | ■ Operating Cash Flow $B ■ Adjusted Free Cash Flow1 $B |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| $63.1B | | | 42.6% | | 47.3% | | $1.94 | | $1.84 | | $15.4B | | $(4.1)B |
| | | |
| GAAP | | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 |
| Revenue down 16% from 2021 non-GAAP revenue | | Gross margin down 12.8 ppts from 2021 | | Gross margin down 10.8 ppts from 2021 | | Diluted EPS down $2.92 or 60% from 2021 | | Diluted EPS down $3.46 or 65% from 2021 | | Operating cash flow down $14B or 48% | | Adjusted free cash flow down $15B or 137% |
| | | | | | | | | | | | |
| Lower revenue in CCG and DCAI, higher revenue in NEX, and lack of NAND revenue compared to 2021 due to the divestiture in Q1 2022. | | Lower gross margin from lower revenue, higher unit cost, lack of NAND gross margin, higher period charges from the ramp of Intel 4, and higher inventory reserves. | | Lower EPS from lower gross margin, higher operating expenses from additional investment in R&D, partially offset by higher gains on equity investments and a tax benefit. | | Lower operating cash flow driven by lower operating income; partially offset by favorable working capital
changes. |
Managing to our long-term financial model
Our 2022 results were impacted by an uncertain macroeconomic environment arising from inflation, the war in Ukraine, and COVID-19 shutdowns in our supply chain in China, and though we expect this uncertainty and a challenging market environment to extend well into 2023, we remain committed to the strategy and long-term financial model communicated at our Investor Meeting 2022 as included in our Form 8-K dated February 17, 2022. To achieve our long-term financial model, we believe it is imperative that we drive to world-class product cost and operational efficiency. In the short term, we intend to continue to implement certain cost-cutting measures and improve our product execution. We further expect to manage to the investment phase operating expenses and net capital intensity guardrails established at our Investor Meeting 2022 and to drive back to a gross margin range of 51% to 53%, once economic conditions improve and revenue growth returns. Longer term, we plan to execute multiple initiatives designed to optimize the business, thus creating efficiencies and continued structural cost savings. This includes implementing an internal foundry model, making portfolio cuts, right sizing our support organizations, creating more stringent cost controls across our spending, and improving sales and marketing efficiency. Though we aggressively adjusted capital investments in 2022 to respond to changing business conditions, we still made significant investments in support of our IDM 2.0 strategy during the year. We expect our capital expenditures will continue to be higher than historical levels for the next several years as we execute towards our goal of delivering five technology nodes in four years. We also introduced our IDM 2.0 Acceleration Office to transition our operations to an internal foundry model that is designed to deliver consistent processes, systems, and guardrails among our business units, and design and manufacturing teams, which we expect will allow us to improve structural efficiencies by driving accountability and costs back to decision makers within the company.
1 See "Non-GAAP Financial Measures" within MD&A.
| | | | | | | | |
| Fundamentals of Our Business | 5 |
Delivering leadership products
We seek to develop and offer leading products that will help enable a future in which every human can have more computing power and quicker access to data. We remain committed to our goal of delivering five technology nodes in four years. This year, we achieved several key milestones on our product roadmap, including:
▪We launched the 12th Gen Intel® Core™ HX processors—the final products in our Alder Lake family, which utilize desktop-caliber silicon in a mobile package to deliver high levels of performance for professional workflows.
▪We introduced the Intel® Data Center GPU Flex Series for the intelligent visual cloud and revealed the 13th Gen Intel® Core™ processor family with six new unlocked desktop processors for leading gaming, streaming, and recording experiences.
▪We launched the newest Intel® Xeon® D processors and Intel® Arc™ A-series GPUs (also known as Alchemist), and began shipping Mount Evans, a 200G ASIC IPU, as well as the first Intel® Blockscale™ ASIC.
▪We began high-volume manufacturing of Sapphire Rapids, Raptor Lake, and Ponte Vecchio in 2022, with shipments beginning in Q4 2022.
Investing in at-scale manufacturing
To help accelerate our IDM 2.0 strategy, we are investing in manufacturing capacity around the world. We broke ground on two new leading-edge chip factories in Ohio, initially announcing plans to invest more than $20.0 billion to establish the first advanced semiconductor campus in the “Silicon Heartland”. We also announced our plans to invest up to €80.0 billion in the European Union over the next decade across the semiconductor value chain—from R&D to manufacturing to state-of-the-art packaging technologies. These include a plan to invest up to an initial €17.0 billion to build a leading-edge semiconductor fab mega-site in Germany; to create a new R&D and design hub in France; and to invest in R&D, manufacturing, and foundry services in Ireland, Italy, Poland, and Spain.
To create further financial flexibility while we accelerate our strategy, we announced SCIP, a program that introduces a new funding model to the capital-intensive semiconductor industry. As part of this program, we closed a definitive agreement with Brookfield Asset Management (Brookfield), creating an equity partnership whereby we and Brookfield own 51% and 49%, respectively, of the newly formed entity, Arizona Fab LLC (Arizona Fab). We expect Arizona Fab will invest up to $30.0 billion in expanded manufacturing infrastructure at our Ocotillo campus in Chandler, Arizona.
We also look to acquisitions to supplement and strengthen our capital. In Q1 2022, we entered into a definitive agreement to acquire Tower Semiconductor Ltd. (Tower) in a cash-for-stock transaction. Tower is a leading foundry for analog semiconductor solutions. The acquisition is expected to advance our IDM 2.0 strategy by accelerating our global end-to-end foundry business. While we continue to work to close within the first quarter of 2023, the transaction may close in the first half of 2023, subject to certain regulatory approvals and customary closing conditions.
Strengthening focus on the core business
We reorganized our business units in a way that is designed to accelerate the execution and innovation of our company by allowing us to capture long-term growth in both large traditional markets and high-growth emerging markets, while providing increased transparency, focus, and accountability.
We announced the implementation of cost-cutting measures, including a slower pace of hiring and restructuring actions, designed to reduce operating expenditures and manage the business toward our long-term financial strategy.
We completed the IPO of Mobileye, building on Mobileye’s revenue growth and record of innovation and unlocking value for Intel stockholders.
Committing to positive global impact
In April 2022, we announced our commitment to achieve net-zero greenhouse gas emissions across our global operations (Scope 1 and 2) by 2040 and to increase the energy efficiency and lower the carbon footprint of our products and platforms.
| | | | | | | | |
| Fundamentals of Our Business | 6 |
The entire world is becoming digital as technology is increasingly central to every aspect of human existence. As we look ahead to the next decade, we expect to see continued movement to digital for everything—the way we work, learn, connect, develop, and operate. Semiconductors are the underlying technology powering the digitization of everything, and this is being accelerated by five superpowers: ubiquitous compute, pervasive connectivity, cloud-to-edge infrastructure, AI, and sensing. Together these superpowers combine to amplify, and reinforce each other, and will exponentially increase the world’s need for computing by packing even more processing capability onto ever-smaller microchips. We intend to lead the industry by harnessing these superpowers for our customers’ growth and our own.
We are uniquely positioned with the depth and breadth of our software, silicon and platforms, and packaging and process technology with at-scale manufacturing. With these strengths and the tailwinds of the superpowers driving digital disruption, our strategy to win is focused on four key themes: product leadership, open platforms, manufacturing at scale, and our people.
Our Priorities
Lead and democratize compute with Intel x86 and xPU. Our product offerings provide end-to-end solutions, scaling from edge computing to 5G networks, the cloud, and the emerging fields of AI and autonomous driving, to serve an increasingly smart and connected world.
At our core is the x86 computing ecosystem, which supports an extensive and deep universe of software applications, with billions of lines of code written and optimized for x86 CPUs. We continue to advance this ecosystem with x86 microarchitectures focused on performance, which push the limits of low latency and single-threaded application performance, and microarchitectures focused on efficiency, which are designed for computing throughput efficiency to enable scalable multithreaded performance. Our innovative new 13th Gen client processors (Raptor Lake) combine both performance cores and efficient cores in a performance hybrid architecture that can direct workloads to the right core depending on whether they require higher performance or power efficiency. We can also combine these architectural advances with our innovations in process and packaging technology, as in our next-generation Intel Xeon data center CPU (Sapphire Rapids), which utilizes performance cores on multiple compute tiles connected through our EMIB packaging technology in a scalable design, rather than being built on a monolithic silicon die.
Beyond the CPU, we are delivering a growing family of xPU products, which encompass client and data center GPUs, IPUs, FPGAs, and other accelerators. The xPU approach recognizes that different workloads benefit from different computing architectures, and our broad portfolio helps meet our customers' increasingly diverse computing needs. As part of our strategy, we seek to develop and offer leading products across each of these architectural categories. Our vision is that our products will help enable a future in which every human can have one petaflop of computing power and one petabyte of data less than one millisecond away.
| | | | | | | | |
| Fundamentals of Our Business | 7 |
We aim to deliver open software and hardware platforms with industry-defining standards. Around the globe, companies are building their networks, systems, and solutions on open standards-based platforms. Intel has helped set the stage for this movement, with our historic contributions in developing standards such as CXL, Thunderbolt™, and PCI Express* (PCIe*). We also contributed to the design, build, and validation of open-source products in the industry such as Linux*, Android*, and others. The world's developers constantly innovate and expand the capabilities of these open platforms while increasing their stability, reliability, and security. In addition, microservices have enabled the development of flexible, loosely coupled services that are connected via application programming interfaces to create end-to-end processes. We use industry collaboration, co-engineering, and open-source contributions to accelerate software innovation. Through our oneAPI initiative, developers use a unified language across CPUs, GPUs, and FPGAs to cut down on development time and to enhance productivity. We also deliver a steady stream of open-source code and optimizations for projects across virtually every platform and usage model. We are committed to co-engineering and jointly designing, building, and validating new products with software industry leaders to accelerate mutual technology advancements and help new software and hardware work better together. Our commitment extends to developers through our developer-first approach based on openness, choice, and trust.
Ultimately, we believe our pivot to a software-defined, silicon-enhanced strategy will enable us to realize value at all layers of the stack. This should allow us to continue to monetize foundational and ecosystem enabling software through hardware sales, limited licensing, and customer-enabling service offerings. Additionally, we intend to expand our software portfolio by developing and monetizing software solutions, services, and platforms with SaaS, software subscriptions, and other business models. We expect to focus on applied AI, trust and security, and cloud performance for our SaaS and subscription-based software and we plan to launch our first security SaaS product, Project Amber (an independent attestation service), in 2023.
IDM 2.0, the next evolution and expansion of our IDM model, is a differentiated strategy that combines three capabilities:
Internal factory network. Our global, internal factory network has been foundational to our success, enabling product optimization, improved economics, and supply resilience. We intend to remain a leading developer of process technology and a major manufacturer of semiconductors and will continue to build the majority of our products in our factories.
Strategic use of foundry capacity. We expect to expand our use of third-party foundry manufacturing capacity, which will provide us with increased flexibility and scale to optimize our product roadmaps for cost, performance, schedule, and supply. Our use of foundry capacity will include manufacturing for a range of modular tiles on advanced process technologies.
System foundry. We are building a world-class foundry business to meet the growing long-term global demand for semiconductors. We plan to differentiate our foundry offerings from those of others through a combination of leading-edge packaging and process technology, committed capacity in the US and Europe available for customers globally, and a world-class IP portfolio that will include x86 cores, as well as other ecosystem IP. The current foundry model enabled explosion of ecosystem innovation at the wafer level. We believe this established model has historically served the industry well, but a new mindset is needed in our new era of chipmaking. As innovation evolves, we see the rack has collapsed into a system and the system has collapsed into an advanced package. We are building out a system foundry that has four components: wafer fabrication, packaging, chiplet standard, and software.
The system foundry involves engaging with customers at multiple levels, from basic wafer manufacturing to helping define and implement their desired system architecture. We intend to build our customers' silicon designs and deliver full end-to-end customizable products built with our advanced packaging technology.
We believe our IDM 2.0 strategy enables us to deliver leading process technology and products to meet growing long-term demand using internal and external capacity, while leveraging our core strengths to provide foundry services to others and providing superior capacity, supply resilience, and an advantageous cost structure.
Our world-class talent is at the heart of everything we do. Together we strive to have a positive effect on business, society, and the planet. Delivering on our strategy and growth ambitions requires attracting, developing, and retaining top talent from across the world. Our people build our technology, unlock new business opportunities, and work with our partners and customers to create global impact.
Fostering a culture of empowerment, inclusion, and accountability is also core to our strategy. We are committed to creating an inclusive workplace where the world’s best engineers and technologists can fulfill their dreams and create technology that improves the life of every person on the planet.
Growth Imperative
We are investing to position the company for accelerated long-term growth, focusing on both our core businesses and our growth businesses. In our client and server businesses, our strategy is to invest to strengthen the competitiveness of our product roadmap and to explore new opportunities. We believe we have significant opportunities to grow and gain share in graphics; mobility, including autonomous driving; networking and edge; and foundry services.
| | | | | | | | |
| Fundamentals of Our Business | 8 |
Focus on Innovation and Execution
We are focused on executing our product and process roadmap and accelerating our cadence of innovation. We have set a detailed process and packaging technology roadmap and announced key architectural innovations to further our goal of delivering leadership products in every area in which we compete. We are returning our culture to its roots in innovation and execution, drawing on principles established by our former CEO Andy Grove that emphasize discipline and accountability. This includes re-establishing OKRs throughout the organization to drive a common purpose.
To help us execute toward our IDM 2.0 strategy, we are leveraging our Smart Capital approach. This approach is designed to enable us to adjust quickly to opportunities in the market, while managing our margin structure and capital spending. The key elements of Smart Capital include:
▪Smart capacity investments. We are aggressively building out manufacturing shell space, which gives us flexibility in how and when we bring additional capacity online based on milestone triggers such as product readiness, market conditions, and customer commitments.
▪Government incentives. We are continuing to work with governments in the US and Europe to advance incentives for domestic manufacturing capacity for leading-edge semiconductors.
▪SCIP. We are accessing strategically aligned capital to increase our flexibility and help efficiently accelerate and scale manufacturing build-outs. This type of co-investment also demonstrates how private capital is unlocked and becomes a force multiplier for government incentives for semiconductor manufacturing expansion.
▪Customer commitments. IFS is working closely with potential customers and exploring their willingness to make advance payments to secure capacity. This provides us with the advantage of committed volume, de-risking investments while providing capacity corridors for our foundry customers.
▪External foundries. We intend to continue our use of external foundries where their unique capabilities support our leadership products.
| | | | | | | | |
| Fundamentals of Our Business | 9 |
We deploy various forms of capital to execute our strategy in a way that seeks to reflect our corporate values, help our customers succeed, and create value for our stakeholders.
| | | | | | | | | | |
| | | | |
| Capital | Strategy | Value |
| | | | |
| Financial |
| | | Leverage financial capital to invest in ourselves and drive our strategy, provide returns to stockholders and supplement and strengthen our capabilities through acquisitions. | We strategically invest financial capital to create long-term value and provide returns to our stockholders. |
| | | | |
| | | | |
| Intellectual |
| | | Invest significantly in R&D and IP to enable us to deliver
on our accelerated process technology roadmap, introduce leading x86 and xPU products, and develop new businesses and capabilities. | We develop IP to enable next-generation products, create synergies across our businesses, expand into new markets, and establish and support our brands. |
| | | | |
| | | | |
| Manufacturing |
| | | Build manufacturing capacity efficiently to
meet the growing long-term global demand for semiconductors, aligned with our IDM 2.0 strategy. | Our geographically balanced manufacturing scope and scale enable us to provide our customers with a broad range of leading-edge products. |
| | | | |
| Human |
| | | Build a diverse, inclusive, and safe work environment to attract, develop, and retain top talent needed to build transformative products. | Our talented employees enable the development of solutions and enhance the intellectual and manufacturing capital critical to helping our customers win the technology inflections of the future. |
| | | | |
| | | | |
| Social and Relationship |
| | | Build trusted relationships for both Intel and our stakeholders, including employees, suppliers, customers, local communities, and governments. | We collaborate with stakeholders on programs to empower underserved communities through education and technology, and on initiatives to advance accountability and capabilities across our global supply chain, including accountability for the respect of human rights. |
| | | | |
| | | | |
| Natural |
| | | Strive to reduce our environmental footprint through efficient and responsible use of natural resources and materials used to create our products. | With our proactive efforts, we seek to mitigate climate and water impacts, achieve efficiencies, and lower costs, and position ourselves to respond to the expectations of our stakeholders. |
Comprehensive ESG and Corporate Responsibility Strategy: RISE
Our commitment to corporate responsibility and sustainability leadership is deeply integrated throughout our business. We strive to create an inclusive and positive work environment where every employee has a voice and a sense of belonging, and we are proactive in our efforts to reduce our environmental footprint through efficient and responsible use of natural resources and materials.
We continue to raise the bar for ourselves and leverage our leadership position in the global technology ecosystem to make greater strides in corporate responsibility and apply technology to address social and environmental challenges. Through our RISE strategy, we aim to create a more responsible, inclusive, and sustainable world, enabled by our technology and the expertise and passion of our employees. In addition to our 2030 RISE goals established in 2020, in April 2022 we announced our commitment to achieve net-zero greenhouse gas emissions across our global operations (Scope 1 and 2) by 2040 and to increase the energy efficiency and lower the carbon footprint of our products and platforms. These are ambitious goals that strengthen our commitment to sustainable business practices under our RISE strategy. Our corporate responsibility strategy is designed to increase the scale of our work through collaboration with our stakeholders and other organizations; we know that we cannot achieve the broad social impact to which we aspire by acting alone. More information about our RISE goals, including progress we have made toward achieving them, is included in our Corporate Responsibility Report1.
1 The contents of our Corporate Responsibility Report are referenced for general information only and are not incorporated by reference in this Form 10-K.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 10 |
We take a disciplined approach to our financial capital allocation strategy, which continues to focus on building stockholder value and is driven by our priority to invest in the business and capacity and our capital needs. We also seek to pay competitive dividends and, from time-to-time, engage in mergers and acquisitions with a focus on adjacencies and complementary technology. As we invest in our IDM 2.0 strategy and implement our next phase of capacity expansions and the acceleration of our process technology roadmap, our allocation priorities have shifted more heavily toward investing in the business and away from stock repurchases. In the long term, we will continue to look for opportunities to further our strategy through acquisitions while remaining disciplined on capital allocation.
| | | |
| Cash from Operating Activities $B |
| | | | | | | | |
| ■ Cash from Operating Activities | ■ Adjusted Free Cash Flow1 |
Our Financial Capital Allocation Strategy
Invest in the Business
Our first allocation priority is to invest in R&D and capital spending to capitalize on the opportunity presented by the world's demand for semiconductors. We also respond to changing business and economic conditions. We adjusted and refocused our capital investment for 2022 and in the short term, while accelerating the deployment of our Smart Capital strategy.
Return Excess Cash to Stockholders
Our capital allocation strategy includes returning excess cash to stockholders. We achieve this through our dividend policy and when permissible, stock repurchases. We expect our future stock repurchases to continue to be significantly below our levels from 2021 and recent preceding years due to our current curtailment of this program.
| | | | | | | | | |
| R&D and Capital Investments $B | | Cash to Stockholders $B |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ■ R&D | ■ Logic | ■ Memory2 | | | ■ Repurchases | ■ Dividend | | |
| | |
Acquire and Integrate
Our capital allocation strategy also includes opportunistic investment in and acquisition of companies that complement our strategic objectives. We look for acquisitions that supplement and strengthen our capital and R&D investments. Our key acquisitions over the last three years include the pending acquisition of Tower and our 2020 acquisition of Moovit to accelerate Mobileye’s MaaS offering.
We take action when investments do not strategically align to our key priorities, and in 2022 we completed the first closing of the divestiture of our NAND memory business and began winding down our Intel Optane memory business. Additionally, in 2020 we completed the divestiture of the majority of our Home Gateway Platform, a division of CCG.
1 See "Non-GAAP Financial Measures" within MD&A.
2 2021 and 2022 capital investments in Memory are not presented due to the divestiture of the NAND memory business announced in October 2020. 2018-2020 capital investments presented include Memory.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 11 |
Research and Development
R&D investment is critical to enable us to deliver on our accelerated process technology roadmap, introduce leading products, and develop new businesses and capabilities in the future. We seek to protect our R&D efforts through our IP rights and may augment R&D initiatives by acquiring or investing in companies, entering into R&D agreements, and directly purchasing or licensing technology.
Areas Key to Product Leadership
We have intensified our focus on areas key to product leadership. Our objective with each new generation of products is to improve user experiences and value through advances in performance, power, cost, connectivity, security, form factor, and other features. We also focus on reducing our design complexity, re-using IP, and increasing ecosystem collaboration to improve our efficiency.
| | | | | |
| |
| |
Process and packaging. Our leading-edge process and packaging technology and world-class IP portfolio are key to the success of our strategy. This year, we have reaffirmed our commitment to achieving process technology leadership in 2025 by planning to deliver five technology nodes in four years. In addition, we have solidified our process and packaging offerings to external customers through IFS. |
▪We introduced further optimizations to our Intel 7 process node, which is now in production for our 13th Gen Intel Core processors (Raptor Lake). ▪Intel 4, taking advantage of EUV, is a node that is designed to deliver significant density scaling and approximately 20% performance-per-watt improvement over Intel 7. Meteor Lake is scheduled to be our first high-volume client product on Intel 4. ▪We expect Intel 3 to deliver further logic scaling and up to 18% performance-per-watt improvement over Intel 4. Intel 3 is our first advanced node offered to IFS customers and is optimized for the needs of Data Center products. ▪Intel 20A will follow Intel 3 and will introduce two breakthrough technologies that we expect will deliver up to 15% performance-per-watt improvement over Intel 3: RibbonFET and PowerVia. RibbonFET, our implementation of a gate-all-around transistor, is designed to deliver faster transistor switching speeds while achieving the same drive current as multiple fins, but in a smaller footprint. PowerVia is our unique industry-first implementation of backside power delivery that is designed to optimize signal transmission by eliminating the need for power routing on the front side of the wafer. ▪Intel 18A, our second IFS advanced node offering, improves on Intel 20A by delivering ribbon innovation for design optimization and line width reduction. Intel 18A is on schedule and expected to deliver an additional 10% improvement in performance per watt over Intel 20A. ▪Beyond Intel 18A, we have already initiated definition and development of our next two process nodes and continue to define, build, and develop the next-generation High Numerical Aperture EUV lithography into our process technology roadmap. ▪Our family of 3D advanced packaging technology will usher in the next generation of Foveros technology, enabling us to mix multiple top die tiles with multiple base tiles across mixed fab nodes, giving Intel and our customers greater flexibility for disaggregated chip designs. Our future Foveros Direct technology should scale interconnect pitch below 10µm, enable direct copper-to-copper bonding for low-resistance interconnects, and blur the boundary between wafer and package. |
xPU architecture. We believe the future is a diverse mix of scalar, vector, matrix, and spatial architectures deployed in CPU, GPU, accelerator, and FPGA sockets, enabled by a scalable software stack and integrated into systems by advanced packaging technology. We are building processors that span several major computing architectures, moving toward an era of heterogeneous computing: |
▪CPU. We started shipping our 4th Gen Intel Xeon Scalable processors (Sapphire Rapids) based on Intel 7 with the new Golden Cove core, built-in AI acceleration, cryptographic acceleration, and advanced security capabilities. We also launched our 13th Gen Intel Core processors (Raptor Lake), which will scale from thin and light laptops to enthusiast desktop and notebook platforms. These are based on a hybrid architecture utilizing Raptor Cove performance cores and Gracemont power-efficient cores and are socket-compatible with Alder Lake systems.
▪GPU and HPC. Following the Q1 2022 launch of the first Intel® Arc™-branded laptop GPUs (A3 series), in Q4 2022 we launched the high-performance desktop GPUs (A7 series). Intel Arc GPUs offer dedicated graphics capability to power premium laptop and desktop experiences. Intel Arc A-Series GPUs come with advanced technologies to enable immersive gaming and powerful content creation in modern, portable designs. In Q4 2022, we also introduced the Intel® Max Series product family with two leading-edge products for high-performance computing and AI: Intel® Xeon® CPU Max Series (also known as Sapphire Rapids HBM) and Intel® Data Center GPU Max Series (also known as Ponte Vecchio). These new products will power the upcoming Aurora supercomputer at Argonne National Laboratory and will help progress our vision of increasing the computing power of every human.
▪Interconnect. Mount Evans, Intel’s first ASIC IPU, is designed to address the complexity of diverse and dispersed data centers. An IPU is designed to enable cloud and communication service providers to reduce overhead and free up performance for CPUs.
▪Matrix Accelerator. In Q2 2022, we launched our second-generation deep learning processors for training and inference: Habana Gaudi2* and Habana Greco*. These new processors address an industry gap by providing customers with high-performance, high-efficiency, deep-learning compute choices for both training workloads and inference deployments in the data center, while lowering the AI barrier to entry for companies of all sizes.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 12 |
Software. Software unleashes the potential of our hardware platforms across all workloads, domains, and architectures.
▪In 2022, oneAPI adoption continued to expand across the industry. oneAPI enables developers to build cross-architecture applications using a single code base across CPUs, GPUs, and FPGAs to reduce development time and enhance productivity. Our oneAPI-based tools take advantage of unique hardware features and lower software development and maintenance costs. Developers can choose the best architecture for the problem at hand without rewriting their entire code base, accelerating their time to value.
▪We seek to accelerate adoption of oneAPI and Intel software developer tools through diverse ecosystem activities, including developer training, summits, centers of excellence, and access to Intel hardware and software through a developer cloud. The Intel® DevCloud, currently in public beta release, will host global users spanning AI, data science, high-performance computing, media and graphics, and other accelerated computing workloads.
▪We believe AI will be ubiquitous, and with our tools and the broad open software ecosystem, we are well-positioned to scale AI. We optimize for the most widely used AI frameworks and libraries, including TensorFlow, Pytorch, Scikit-learn, NumPy, XGBoost, and Spark, with certain optimizations delivering up to 100 times performance improvements to support end-to-end AI. We also develop innovative Intel software to accelerate developer productivity, such as OpenVINO™, Intel® Neural Compressor, BigDL, and AI software reference kits.
▪We seek to continually improve our system and foundational-level software in support of our client, data center, networking, and graphics products, delivering AI-optimized software across the stack, including BIOS, firmware, simulation, operating systems, and virtualization.
IP Rights
We own and develop significant IP and related IP rights around the world that support our products, services, R&D, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, mask works, and other rights. We actively seek to protect our global IP rights and to deter unauthorized use of our IP and other assets.
We have obtained patents in the US and other countries. Because of the fast pace of innovation and product development, our products are often obsolete before the patents related to them expire, and in some cases our products may be obsolete before the patents are granted. As we expand our product offerings into new areas, we also seek to extend our patent development efforts. In addition to developing patents based on our own R&D efforts, we may purchase or license patents from third parties.
The software that we distribute, including software embedded in our products, is entitled to copyright and other IP protection. To distinguish our products from our competitors' products, we have obtained trademarks and trade names for our products, and we maintain cooperative advertising programs with customers to promote our brands and to identify products containing genuine Intel components. We also protect details about our processes, products, and strategies as trade secrets, keeping confidential the information that we believe provides us with a competitive advantage.
Efforts to protect our IP can be difficult, particularly in countries that provide less protection to IP rights and in the absence of harmonized international IP standards. Competitors and others may already have IP rights covering similar products. There is no assurance that we will be able to obtain IP rights covering our own products or that we will be able to obtain IP licenses from other companies on favorable terms or at all. For a discussion of IP-related risks, see "Risk Factors" within Other Key Information. While our IP rights are important to our success, our business as a whole is not significantly dependent on any single patent, copyright, or other IP right.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 13 |
As the guardians of Moore's Law, we continuously innovate to advance the design and manufacturing of semiconductors to help address our customers' greatest challenges. This makes possible new leadership products with higher performance while balancing power efficiency, cost, and size.
Our IDM 2.0 strategy allows us to deliver leadership products using internal and external capacity while leveraging our core strengths to provide foundry services to others. IDM 2.0 combines three capabilities. First, we will continue to build most of our products in Intel fabs. Second, we expect to expand our use of third-party foundry capacity to manufacture a range of modular tiles on advanced process technologies. Third, we are building a world-class foundry business with IFS, which we expect will combine leading-edge packaging and process technology, committed capacity in the US and Europe, and a world-class IP portfolio that will include x86 cores, as well as other ecosystem IP.
Network and Supply Chain
In 2022, our factories performed well in a highly dynamic environment, where we adapted to rapid demand shifts and industry component shortages affecting us and our customers. We continue to work across our supply chain to minimize disruptions, improve productivity, and increase overall capacity and output to meet customer expectations.
Our global supply chain supports internal partners across architecture, product design, technology development, manufacturing and operations, sales and marketing, and business units, and our supply ecosystem comprises thousands of suppliers globally. Our mission is to enable product and process leadership, industry-leading total cost of ownership, and on-time and uninterrupted supply for our customers. We supplement our own manufacturing capacity through our use of third-party foundries.
As of the end of 2022, we had nine manufacturing sites in production — five wafer fabrication facilities and four assembly and test facilities. The following map shows these factory sites and the countries where we have a significant R&D and/or sales presence. In our continued response to COVID-19, we maintained the operational measures put in place in 2020 and 2021 to enable a continued safe environment for our employees and the operation of our manufacturing sites.
Our manufacturing facilities are primarily used for silicon wafer manufacturing, assembling, and testing of our platform products. We operate in a network of manufacturing facilities integrated as though they were one factory to provide the most flexible supply capacity, allowing us to better analyze our production costs and adapt to changes in capacity needs. Our new process technologies are transferred from a central development fab to each manufacturing facility. After transfer, the network of factories and the development fab collaborate to continue driving operational improvements. This enables fast ramp of the operation, quick learning, and quality control.
We are expanding manufacturing capacity across multiple sites, including Arizona, Ireland, Israel, and Oregon as well as New Mexico and Malaysia for advanced packaging. This year, we broke ground on our new site in Ohio and officially added Germany to our roadmap.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 14 |
Our human capital strategy is grounded in our belief that our people are fundamental to our success. Delivering on our strategy and growth ambitions requires attracting, developing, and retaining top talent across the world. We are committed to creating an inclusive workplace where the world’s best engineers and technologists can fulfill their dreams and create technology that improves the life of every person on the planet. We invest in our highly skilled workforce of 131,900 people by creating practices, programs, and benefits that support the evolving world of work and our employees’ needs.
Fostering a culture of empowerment, inclusion, and accountability is also core to our strategy. We are focused on reinvigorating our culture to strengthen our execution and accelerate our cadence of innovation. Our values—customer first, fearless innovation, results driven, one Intel, inclusion, quality, and integrity—inspire us and are key to delivering on our purpose. All employees are responsible for upholding these values, the Intel Code of Conduct, and Intel's Global Human Rights Principles, which form the foundation of our policies and practices and ethical business culture.
Talent Management
We continue to see significant competition for talent throughout the semiconductor industry. Though we slowed the pace of hiring in the second half of 2022 in line with macroeconomic forecasts, financial performance, and cost-cutting measures, and took actions to rebalance our workforce, the investments we are making to accelerate our process technology require continued and focused efforts to attract and retain talent—especially technical talent. Our undesired turnover rate1 was 5.6% in both 2022 and 2021.
We invest significant resources to develop the talent needed to remain at the forefront of innovation and make Intel an employer of choice. We offer extensive training programs and provide rotational assignment opportunities and are working to update our job architecture to help employees create custom learning curricula for building skills and owning their careers. To further support the growth and development of our people, we continue to increase mentoring in our technical community, drive engagement through employee resource groups, and promote health and wellness resources to all our people. Through our annual Employee Experience Survey and Manager Development Feedback Survey, employees can voice their perceptions of the company, their managers, their work experience, and their learning and development opportunities. Our employees' voices are important to enable our culture of continuous improvement, and as a result, we link a portion of our executive and employee performance bonus to participation in our Employee Experience Survey. Our performance management system is designed to support our cultural evolution and to increase our focus on disciplined OKRs. | | | | | | | |
| Inclusion | | | |
Diversity and inclusion are core elements of Intel's values and instrumental to driving innovation and positioning us for growth. Over the past decade, we have taken actions to integrate diversity and inclusion expectations into our culture, performance and management systems, leadership expectations, and annual bonus metrics. We are proud of what we have accomplished to advance diversity and inclusion, but we recognize we can achieve more, including beyond the walls of Intel. Our RISE strategy and 2030 goals set our global ambitions for the rest of the decade, including doubling the number of women in senior leadership; doubling the number of underrepresented minorities in US senior leadership; increasing the percentage of employees who self-identify as having a disability to 10%; and exceeding 40% representation of women in technical roles, including engineering positions and other roles with technical job requirements. To drive accountability, we continue to link a portion of our executive and employee compensation to diversity and inclusion metrics.
We have committed our scale, expertise, and reach through our comprehensive RISE strategy to work with customers and other stakeholders to accelerate the adoption of inclusive business practices across industries. As part of the Alliance for Global Inclusion, we worked with a coalition of technology companies to create a Global Inclusion Index Survey, which serves as a benchmark for companies to track diversity and inclusion improvements, provide information on current best practices, and highlight opportunities to improve outcomes across industries. The results of the second Global Inclusion Index Survey were published in 2022 and shared with business leaders across industries. The number of companies that completed the inclusion index in 2022 nearly doubled compared to in 2021. This collective effort will allow the industry to more clearly identify actions needed to advance progress on closing persistent gaps and advancing more inclusive practices in workplaces, industry, and society. The survey results for 2022 showed participants making progress in many of these areas. We will also continue to collaborate on initiatives that expand the diverse pipeline of talent for our industry, advance social equity, make technology fully inclusive, and expand digital readiness for millions of people around the world. | | |
| |
| |
| |
| |
| |
1 Undesired turnover includes all regular Intel employees who voluntarily left Intel, but does not include Intel contract employees, interns, or employees who separated from Intel due to divestiture, retirement, voluntary separation packages, death, job elimination, or redeployment.
2 Senior leadership refers to salary grades 10+ and equivalent grades. While we present male and female, we acknowledge this is not fully encompassing of all gender identities.
3 The term underrepresented minority (URM) is used to describe diverse populations, including Black/African American, Hispanic, and Native American employees in the US.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 15 |
Compensation and Benefits
We structure pay, benefits, and services to meet the varying needs of our employees. Our total rewards package includes market-competitive pay, broad-based stock grants and bonuses, an employee stock purchase plan, healthcare and retirement benefits, paid time off and family leave, parent reintegration, fertility assistance, flexible work schedules, sabbaticals, and on-site services. Since 2019, we have achieved gender pay equity globally and we continue to maintain race/ethnicity pay equity in the US. We achieve pay equity by closing the gap in average pay between employees of different genders or race/ethnicity in the same or similar roles after accounting for legitimate business factors that can explain differences, such as location, time at grade level, and tenure. We have also advanced transparency in our pay and representation data by publicly releasing our EEO-1 survey pay data since 2019. We believe that our holistic approach toward pay equity, representation, and creating an inclusive culture enables us to cultivate a workplace that helps employees develop and progress in their careers at all levels. Our “hybrid-first” approach to working was informed by employees surveyed around the globe and involves the majority of our employees splitting their time between working remotely and in the office. Hybrid-first and remote work options cast a wider recruitment net and support our ambition to hire the best global talent. Currently, there is no company-wide mandate on the number of days per week employees should be on site or how they should collaborate. Our goal is to enable remote and on-site work where it drives the best output, while ensuring our employees have equitable access to systems, resources, and opportunities that allow them to succeed.
Health, Safety, and Wellness
Our commitment to Intel's Environmental, Health, and Safety Policy is to provide a safe and injury-free workplace. We regularly invest in programs designed to improve physical, mental, and social well-being. We provide access to a variety of innovative, flexible, and convenient health and wellness programs, including on-site health centers, and we aim to increase awareness of and support for mental and behavioral health. In support of our RISE goals, we will continue to build our strong safety culture and drive the global expansion of our corporate wellness program through employee education and engagement activities.
| | | | | |
| Social and Relationship Capital |
We are committed to engaging in initiatives that support our communities and help us develop trusted relationships with our stakeholders. Proactive engagement with our stakeholders and investments in social impact initiatives, including those aligned with the United Nations Sustainable Development Goals, advance our position as a leading corporate citizen and create shared value for Intel, our global supply chain, and our communities.
Economic and social. The health of our business and local economies depends in part on continued investments in innovation. We provide high-skill, high-paying jobs around the world, many of which are manufacturing and R&D jobs located in our own domestic and international factories. As we expand operations in Arizona, Oregon, Ohio, and Europe, we are building a pipeline of qualified workers through our talent strategy and the many investments we are making in education. We also benefit economies through our R&D ecosystem spending, sourcing activities, employee spending, and tax payments. We make sizable capital investments and provide leadership in public-private partnerships to spur economic growth and innovation.
We stand at the forefront of new technologies that are increasingly being used to empower individuals, companies, and governments around the world to solve global challenges. We aim to empower people through education and advance social initiatives to create career pathways into the technology industry. This includes our global Intel Digital Readiness Programs, such as AI for Youth and AI for Workforce, scaled in partnership with governments and institutions to empower individuals with digital readiness and AI skills. Additionally, we invest in multi-year partnerships with historically Black colleges and universities in the US to increase the number of Black/African Americans who pursue electrical engineering, computer engineering, and computer science fields. Our employees and retirees share their expertise through volunteer initiatives in the communities where we operate, volunteering approximately 2.81 million hours over the past three years. These efforts contribute to our RISE goal to volunteer 10 million hours over a decade. COVID-19 presented challenges over the last few years for in-person volunteering, but we continued to see an outpouring of support from employees for virtual volunteering, donations, and innovative technology projects to support our communities, and in 2022, a return to more in-person volunteering. Since 2020, we announced and further expanded upon the Intel RISE Technology Initiative, which provides an expanded channel to build deeper relationships with our customers and partners aligned with our corporate purpose and work to create shared value through our RISE strategy. Specifically, we are funding projects in areas such as using technology to improve health and safety, making technology more inclusive while expanding digital readiness, and carbon-neutral computing to help address climate change.
Human rights commitment. We are committed to maintaining and improving processes to avoid complicity in human rights violations related to our operations, supply chain, and products. We have established an integrated approach to managing human rights across our business, including senior-level management involvement, with board-level oversight. We also meet throughout the year with external stakeholders and experts on human rights to continue to inform and evolve our human rights policies and oversight processes. While we do not always know, nor can we control, what products our customers create or the applications end users may develop, we do not tolerate our products being used to violate human rights. When we become aware of a concern that our products are being used by a business partner in connection with abuses of human rights, our policies require that we restrict or cease business with the third party until we have high confidence that our products are not being used to violate human rights.
1 This is a preliminary estimate. The final number will be reported in our 2022-23 Corporate Responsibility Report, to be issued later in 2023.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 16 |
Supply Chain Responsibility
We actively manage our supply chain to help reduce risk, improve product quality, achieve environmental and social goals, and improve overall performance and value creation for Intel, our customers, and our suppliers. To drive responsible and sustainable practices throughout our supply chain, we have robust programs to educate and engage suppliers that support our global manufacturing operations. We actively collaborate with other companies and lead industry initiatives on key issues such as improving transparency around climate and water impacts in the global electronics supply chain and, as part of our RISE strategy, we are advancing collaboration across our industry on responsible minerals sourcing. Through these efforts we help set electronics industry-wide standards, develop audit processes, and conduct training.
Over the past decade, we have directly engaged with our suppliers to verify compliance and build capacity to address risks of forced and bonded labor and other human rights issues. We perform supplier audits and identify critical direct suppliers to engage through capability-building programs, which help suppliers build sustainability acumen and verify compliance with the Responsible Business Alliance and our Code of Conduct. We also engage with indirect suppliers through our programs on forced and bonded labor, responsible minerals, and supplier diversity. To achieve our RISE goals, we are significantly expanding the number of suppliers covered by our engagement activities. The supply chain environmental team is also actively engaging suppliers to measure and reduce their greenhouse gas emissions footprints, and the resulting impact on our footprint, in order to meet our long-term emissions reductions goals.
Our commitment to diversity and inclusion also extends to our suppliers. We believe a diverse supply chain supports greater innovation and value for our business. We have set additional spending targets with women-owned suppliers outside the US and with minority-owned suppliers globally to accelerate progress toward our goal to increase global annual spending with diverse suppliers by 100% to reach $2 billion in annual spending by 2030. We continue to only retain or use outside law firms in the US that are above average on diversity for their equity partners and apply a similar rule to firms used by our tax department, including non-legal firms.
Driving to the lowest possible environmental footprint as we grow helps us create efficiencies, support our communities, and respond to the needs of our stakeholders. We invest in environmental projects and set company-wide environmental targets to drive reductions in greenhouse gas emissions, energy and water use, and waste generation. We build energy efficiency into our products to help our customers lower their own emissions, energy usage and costs, and we collaborate with policymakers and other stakeholders to use technology to address environmental challenges.
In April 2022, we announced our new goal to reach net-zero greenhouse gas emissions in our operations by 2040, creating an important target to strengthen our commitment to sustainable business practices. Our 2030 RISE goals continue to be important milestones to drive to higher levels of operational efficiency, including a goal of a 10% reduction in our greenhouse gas emissions on an absolute basis by 2030. We continue to take action on emissions reduction strategies focused on emissions abatement, additional investments in renewable electricity, process and equipment optimization, and energy conservation. Our RISE strategy also focuses on addressing climate change impacts upstream and downstream in the value chain. This includes improving product energy efficiency and increasing our "handprint"—the ways in which Intel technologies can help others reduce their footprints, including Internet of Things solutions that enable intelligence in machines, buildings, supply chains, and factories, and make electrical grids smarter, safer, and more efficient.
In Q3 2022, we completed our inaugural green bond issuance of $1.3 billion principal amount of senior notes. We are using the proceeds from the green bond offering to fund projects that support our investments in sustainable operations, which can include items such as green buildings, energy efficiency, circular economy and waste management, greenhouse gas emissions reductions, water stewardship, and renewable energy. The first annual green bond impact report will be published in 2023 to provide an update on the allocation of the net proceeds.
Energy
We focus on reducing our own climate change impact, and over the past two decades have reduced our direct and indirect greenhouse gas emissions associated with energy consumption. Through our RISE goals, we have committed to a goal of conserving 4 billion kWh of energy this decade. We have conserved approximately 973 million kWh1 of energy cumulatively since 2020. We also invest in renewable electricity and on-site alternative energy projects in support of our 2030 goal to achieve 100% renewable electricity use across our global operations. In 2022, continuing our practice of linking a portion of our executive and employee performance bonus to our corporate sustainability metrics, we linked a portion of the performance bonus to our 2022 target to reach 90% renewable electricity use globally. We reached our target and achieved approximately 91%1 renewable electricity usage globally in 2022.
1 This is a preliminary estimate. The final number will be reported in our 2022-23 Corporate Responsibility Report, to be issued later in 2023.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 17 |
Water Stewardship
Water is essential to the semiconductor manufacturing process. We use ultrapure water to remove impurities from our silicon wafers, and we use fresh and reclaimed water to run our manufacturing facility systems. Through our RISE goals, we have committed to achieve net positive water globally, and as part of that effort, conserve 60 billion gallons of water in this decade. Water conservation reduces the amount of water needed from fresh water sources; we have conserved approximately 26.2 billion gallons1 of water and enabled restoration of approximately 6.6 billion gallons1 of water since 2020. In 2022, we linked a portion of our executive and employee performance bonus to our targets to conserve 8.5 billion gallons of water and restore 2.5 billion gallons of water to local watersheds, both of which we achieved.
Circular Economy and Waste Management
We have long been committed to waste management, recycling, and circular economy strategies that enable the recovery and productive re-use of waste streams. Our 2030 goals include a target of zero total waste2 to landfill, as well as implementation of circular economy strategies for 60% of our manufacturing waste streams in partnership with our suppliers. We continue to focus on opportunities to upcycle waste by improving waste segregation practices and collaborating with our suppliers to evaluate new technologies for waste recovery.
Governance and Disclosure
We are committed to transparency around our carbon footprint and climate risk, and use the framework developed by the TCFD to inform our disclosure on climate governance, strategy, risk management, and metrics and targets. For governance and strategy, we follow an integrated approach to address climate change, with multiple teams responsible for managing climate-related activities, initiatives, and policies, with senior-level management involvement and board-level oversight, including the Corporate Governance and Nominating Committee. We describe our overall risk management processes in our Proxy Statement, and describe our climate-related risks and opportunities in our annual Corporate Responsibility Report, the Intel Climate Change Policy, and "Risk Factors" within this Form 10-K. In addition to what is included within this Form 10-K, information about and progress toward our RISE goals is included in our Corporate Responsibility Report. Our Corporate Responsibility Report also includes a mapping of our disclosure to the TCFD and SASB frameworks. The Corporate Responsibility Report and our CDP Climate Change Survey are available on our website and are published annually.3
1 This is a preliminary estimate. The final number will be reported in our 2022-23 Corporate Responsibility Report, to be issued later in 2023.
2 Intel defines zero waste as less than 1%.
3 The contents of our website and our Corporate Responsibility Report, Climate Change Policy, and CDP Climate Change Survey are referenced for general information only and are not incorporated by reference in this Form 10-K.
| | | | | | | | | | | |
| Fundamentals of Our Business | Our Capital | 18 |
| | | | | |
Management's Discussion and Analysis | |
| |
Our Products
We are a global IDM of CPUs and related solutions that we design, develop, manufacture, market, sell, support and service. Our CPUs and related solutions are incorporated in computing and related end products and services, and utilized globally by consumers, enterprises, governments, and educational organizations. Our customers primarily include OEMs, ODMs, cloud service providers, and other equipment manufacturers that we market and sell to directly through our global sales and marketing organizations and indirectly through channel partners. We manufacture our products at our fabrication and assembly and test facilities located throughout the world.
Our CPU and related product offerings provide end-to-end solutions, scaling from edge computing to 5G networks, the cloud, and the emerging fields of AI and autonomous driving. Products, such as our gaming CPUs, may be sold directly to end consumers, or they may be further integrated by our customers into end products such as notebooks and storage servers. Combining some of these products—for example, integrating FPGAs with Intel Xeon processors in a data center solution—enables incremental synergistic value and performance. We launched new products in 2022, such as the 12th Gen Intel Core HX processors, the final products in our Alder Lake family; Raptor Lake, our 13th Gen Intel 7 client product; and Sapphire Rapids, the first of our 4th Gen Intel Xeon Scalable processors. We also added to our graphics offerings with the introduction of Ponte Vecchio and Alchemist.
Our diverse product line includes CPU and chipset, an SoC, or a multichip package based on Intel® architecture that processes data and controls other devices in a system. The primary CPU products in CCG are our Intel Core processors, which include designs specifically for notebook and desktop applications. The primary CPU product in DCAI is our Intel Xeon processor, which includes solutions for data center compute, networking, and the intelligent edge. The primary offerings of NEX include Intel Xeon, Intel Core, and Intel Atom® processor products.
During 2022, we managed our business through the operating segments that are presented below and have included the 2022, 2021 and 2020 financial results for each segment. "Note 3: Operating Segments” within the Notes to Consolidated Financial Statements of this Form 10-K reconciles our segment revenues presented below to our total revenues, and our segment operating margin (loss) presented below to our total operating margin (loss), for each of the periods presented. We have also included a discussion of our 2022, 2021 and 2020 consolidated results of operations and related information subsequent to the operating segment discussion below.
| | | | | | | | |
| Overview | % Intel Revenue |
We are committed to advancing PC experiences by delivering an annual cadence of leadership products and deepening our relationships with industry partners to co-engineer and deliver leading platform innovation. We engage in an intentional effort focused on long-term operating system, system architecture, hardware, and application integration that enables industry-leading PC experiences. We will embrace these opportunities by simplifying and focusing our roadmap, ramping PC capabilities even more aggressively, and designing PC experiences even more deliberately. By doing this, we believe we will continue to fuel innovation across Intel, providing a growing source of IP, scale, and cash flow.
| |
| | |
| Key Developments | |
| | |
■ | Our revenue was $31.7 billion, down 23% in 2022, driven by macroeconomic weakness that negatively impacted PC TAM, particularly in the consumer, education and small/medium business markets. Operating margin was $6.3 billion, down 60% year over year primarily due to lower notebook and desktop revenue, higher unit costs, increased investments in leadership products, and higher inventory reserves. |
■ | COVID-related dynamics like work- and learn-from-home solidified the PC as an essential tool in the post-pandemic world. We launched our 12th Gen Intel Core H, S, U, and P-series processors and introduced our 13th Gen Intel Core processor family starting with our desktop processors, the second iteration of our performance hybrid architecture built on Intel 7 process technology. |
■ | We worked with industry partners to co-engineer and deliver more than 153 verified Intel® Evo™ designs and grew the commercial market segment with the launch of our Intel vPro® platform with the 12th Gen Intel Core processor and commercial offerings. |
Market and Business Overview
Market Trends and Strategy
In 2022, the PC business experienced one of the most challenging years in recent history, resulting from a softening macroeconomic environment and inflationary pressures. Despite these headwinds in 2022—which resulted in a double-digit TAM decline1—PC usage remains strong, demonstrating the increased utility and value of the PC and we believe ultimately supporting a TAM well above pre-pandemic levels, once this period of adjustment subsides. The significant behavior changes that took shape amid the pandemic solidified the PC as an essential tool in people's lives.
PC density, including PCs per household, increased during the pandemic, which irreversibly changed the way we focus, create, connect, and care for each other2. In addition, the installed base of PCs per student continues to grow compared to pre-pandemic levels. Commercial growth opportunities also remain as corporations expand the size of their PC fleets, while also replacing older devices. Currently, approximately 200 million commercial devices are more than four years old3. The experience and capabilities delivered on new PCs are dramatically better today, reinforcing the opportunity to drive a refresh cycle among enterprise customers.
As we continue on our strategy to develop more competitive products and more capabilities for customers, we are designing our product roadmap to drive product leadership grounded in a philosophy of openness and choice. We deliver value to our customers by leveraging our engineering capabilities and working with our partners across an open, innovative ecosystem to deliver technology that drives every major vector of the computing experience, including performance, battery life, connectivity, graphics, and form factors to create the most advanced PC platforms.
Products and Competition
We released our 13th Gen Intel Core desktop processors, the second generation of our performance hybrid architecture, which combines efficient-cores and performance-cores to deliver performance and experiences that are scalable across all PC market segments. The 13th Gen processor family is expected to deliver uncompromised computing performance for every PC segment and out to the edge. In total, we expect to deliver more than 500 designs from partners across major multinational corporations and leading manufacturers.
We operate in a particularly competitive market. In processors, we compete with AMD and vendors who design applications processors based on ARM architecture, such as Qualcomm Inc. (Qualcomm), and, increasingly, Apple Inc. (Apple), with its M1 and M2 products. We expect this competitive environment to continue to intensify in 2023.
Our role as a technology leader is more important than ever, and our commitment to creating an open ecosystem is critical to delivering on our ambition. This is why we embrace and collaborate with a vibrant ecosystem of OEM partners to identify innovation vectors and deliver leadership technologies together. The breadth of a robust ecosystem like Microsoft Windows/x86 is a powerful combination, bringing together hundreds of companies around the globe and creative and innovative advancements that are not possible for one company to deliver alone.
Unique to Intel, we innovate beyond the CPU to deliver premium PC experiences with Intel Evo and Intel vPro platforms. More than 150 advanced laptop designs have been built on the Intel Evo platform, and we test and verify these to confirm they deliver key experience indicators such as responsiveness, battery life, instant wake, and connectivity. Intel vPro is designed for enterprise needs and delivers increased productivity improvements, connectivity, security features, and remote manageability.
Through our efforts to increase internal and external capacity, supply availability for our products has improved, which enables us to service our customers in a more consistent and responsive manner. We have also seen near-term improvements in industry-wide constraints, which include improvements in third-party component availability and a stabilization of lead times for those components. We remain committed to further remove bottlenecks of third-party components and prepare for longer term demand growth.
1 Source: Intel calculated 2022 TAM derived from industry analyst reports.
2 Source. Intel calculated PC density from industry analyst reports.
3 Source: Intel calculated volume of devices over four years old from industry analyst reports and internal data.
Financial Performance
| | | | | | | | | | | | | | |
| CCG Revenue $B | | CCG Operating Income $B | |
| | | | | | | | | | | | | | |
■ | ■ Notebook | ■ | ■ Desktop | ■ | ■ Other | |
2022 vs. 2021
▪Notebook revenue was $18.8 billion, down $6.7 billion from 2021. Notebook unit sales decreased 36%, driven by lower demand in the consumer and education market segments, and notebook ASPs increased 15% due to an increased mix of commercial and consumer products and a lower mix of education products.
▪Desktop revenue was $10.7 billion, down $1.8 billion from 2021. Desktop unit sales decreased 19%, driven by lower demand in the consumer and education market segments, and desktop ASPs increased 5%, primarily from an increased mix of commercial products.
▪Other revenue was $2.3 billion, down $923 million from 2021, primarily driven by the continued ramp down from the exit of our 5G smartphone modem business and lower demand for our wireless and connectivity products.
2021 vs. 2020
▪Notebook revenue increased $546 million. Notebook unit sales increased 8%, driven by consumer and commercial recovery from COVID-19 lows offset by 6% lower ASPs due to strength in consumer and education market segments.
▪Desktop revenue increased $1.3 billion. Desktop unit sales increased 8%, driven by recovery in desktop demand driven by consumer and commercial recovery from COVID-19 lows, and ASP increased 3%, driven by commercial recovery from COVID-19.
▪Other revenue decreased $1.3 billion, primarily driven by the continued ramp down from the exit of our 5G smartphone modem and Home Gateway Platform businesses, partially offset by strength in wireless and connectivity.
Operating income decreased 60% year over year, and operating margin was 20% in 2022 and 38% in 2021.
| | | | | | | | | | | | | | |
| (In Millions) | | | | |
| $ | 6,266 | | | 2022 Operating Income | | |
| (3,047) | | | Lower gross margin from notebook revenue | | |
| (2,183) | | | Higher notebook and desktop unit cost primarily from increased mix of Intel 7 products | | |
| (1,306) | | | Lower gross margin from desktop revenue | | |
| (1,284) | | | Higher operating expenses driven by increased investments in leadership products | | |
| (969) | | | Higher period charges primarily driven by inventory reserves taken in 2022 | | |
| (320) | | | Lower CCG other product gross margin driven by lower demand for our wireless and connectivity products and the continued ramp down from the exit of our 5G smartphone modem business | | |
| (262) | | | Higher period charges primarily associated with the ramp of Intel 4 | | |
| (162) | | | Higher period charges related excess capacity charges | | |
| 192 | | | Lower period charges due to a benefit related to insurance proceeds received for business interruption and property damage that occurred in 2020 | | |
| (97) | | | Other | | |
| $ | 15,704 | | | 2021 Operating Income | | |
| (840) | | | Higher period charges primarily associated with ramp up of Intel 4 and subsequent ramp down of 14nm | | |
| (675) | | | Higher operating expenses driven by increased investment in leadership products | | |
| (290) | | | Lower gross margin from notebook revenue | | |
| (140) | | | Higher period charges driven by less sell-through of reserves on products in 2021 as compared to in 2020, and additional reserves taken in 2021 | | |
| 1,080 | | | Higher gross margin from desktop revenue | | |
| 660 | | | Lower unit cost primarily due to cost improvements in 10nm SuperFin | | |
| 165 | | | Lower period charges primarily driven by a decrease in engineering samples | | |
| (56) | | | Other | | |
| $ | 15,800 | | | 2020 Operating Income | | |
| | | | | | | | |
| Overview | % Intel Revenue |
DCAI delivers industry-leading workload-optimized solutions to cloud service providers and enterprise customers, along with silicon devices for communications service providers and high-performance computing customers. We are uniquely positioned to deliver solutions to help solve our customers’ most complex challenges with the depth and breadth of our hardware and software portfolio combined with silicon and platforms, advanced packaging, and at-scale manufacturing made possible by being the world’s only IDM at scale. Our customers and partners include cloud hyperscalers, MNCs, small and medium-sized businesses, independent software vendors, systems integrators, communications service providers, and governments around the world. | |
| | |
| Key Developments | |
| | |
■ | Our revenue was $19.2 billion, down 15% in 2022, driven by challenging macroeconomic conditions and industry supply constraints, that both negatively impacted TAM, in addition to competitive pressures and product execution delays. Operating margin was $2.3 billion, down 73% year over year, primarily due to top-line headwinds paired with process node acceleration and increased investments in leadership products. |
■ | We began high-volume manufacturing of 4th Gen Intel Xeon Scalable processors and started shipping to customers, including Amazon Web Services and Google Cloud. |
■ | We launched five new Intel FPGA products, including the Intel® Agilex™ FPGA, which extends capabilities to cost-optimized, lower-power, and small-form factor applications, including embedded and edge. We also launched Habana Gaudi2 and Habana Greco, our second-generation deep-learning processors for training and inference. |
■ | We introduced an innovative service-based security implementation, named Project Amber, which provides customers and partners with a secure foundation for confidential computing, secure and responsible AI, and quantum-resistant crypto in the quantum era. |
| | |
| | |
Market and Business Overview
Market Trends and Strategy
Data is a significant force in society and is generated daily at an unprecedented pace. The desire to harness insights from data to drive better outcomes for businesses and society is ever-expanding. AI is nearly pervasive in all applications, creating the potential for intelligence everywhere, and enabling powerful new uses of compute resources across all market segments. The installed base of Intel Xeon processors combined with our rich portfolio of heterogeneous compute solutions (FPGAs, GPUs, IPUs, and AI accelerators) position us to lead in this high-growth area. DCAI is integral to our growth in AI through deep investments in the AI ecosystem, developer tools, frameworks, technologies, and open standards to drive a scalable path forward.
We take a system-level approach that supplies the necessary hardware and software that are optimized for power and performance.
Our technology is differentiated at the system level and in high-growth workloads based on our integrated hardware acceleration engines and software. For example, architected into our Intel Xeon processors are Intel® Advanced Matrix Extensions (Intel® AMX) for AI acceleration; Intel® Software Guard Extensions (Intel® SGX), providing enclaves of protected memory to deliver enhanced security for sensitive data; and Intel® Crypto Acceleration that delivers breakthrough performance across a host of important cryptographic algorithms. This is the type of acceleration and differentiated performance that we believe will continue to drive our value and growth across our customer base.
Products and Competition
Our products and services include:
| | | | | |
■ | A portfolio of hardware, including Intel Xeon processors, Intel Agilex and Intel® Stratix® FPGAs, Intel® eASIC™ devices, Habana Gaudi and Habana Greco AI accelerators. |
■ | Platform enabling and validation in partnership with ODMs, OEMs, and independent software vendors. |
■ | Optimized solutions for leading workloads such as AI, cryptography, security, and networking, leveraging differentiated features supporting diverse compute environments. |
We offer customers a broad portfolio of silicon and software designed to provide workload-optimized performance. Our hardware portfolio comprises CPUs, domain-specific accelerators, and FPGAs. Each of these is designed to support the performance, agility, and security that our customers demand. This hardware portfolio strategy and investment in complementary software enable users to execute their workloads with low latency and on the most appropriate hardware for their needs.
Our competitors include AMD, providers of GPU products such as NVIDIA, companies developing their own custom silicon, and new entrants developing ARM- and RISC-V-based products customized for specific data center workloads. We expect this competitive landscape to continue.
The Intel Xeon Scalable processor family delivers advanced CPUs for the data center, the network, and edge, driving industry-leading performance, manageability, and security with differentiated features and capabilities. All major hyperscale customers have deployed services using 3rd Gen Intel Xeon processors. The 4th Gen Intel Xeon Scalable processors will ramp up throughout 2023. Our 4th generation introduces new accelerators to provide more options for developers to adapt to changes and optimize for workloads, such as AI, analytics, networking, storage, and high-performance computing.
Our Habana Gaudi AI training accelerator is at the forefront of AI solutions for data centers and in 2022, the second generation of deep learning processors for training and inference were launched with Habana Gaudi2 and Habana Greco. These new processors address an industry gap by providing customers with high-performance, high-efficiency deep learning compute choices for both training workloads and inference deployments in the data center while lowering the AI barrier to entry for companies of all sizes.
Our FPGA and structured ASIC portfolio enhances Intel’s ability to meet the needs of customers in the data center, across the network, and at the edge. We are shipping our Intel Agilex FPGA family, featuring industry-leading FPGA fabric performance, power efficiency, and transceiver performance. We released our Intel eASIC N5X device family (Diamond Mesa) for low-latency 5G network acceleration, hyperscale acceleration and storage, AI, and edge applications. We also introduced an FPGA-based IPU (Oak Springs Canyon) that enables superior security capabilities and allows our hyperscale customers to isolate the infrastructure from the tenant workloads running on Intel Xeon.
The ubiquity of Intel Xeon in the installed base, along with our heterogeneous compute solutions combined with software that unlocks the value of our hardware, enable our customers to develop highly differentiated solutions. Our integrated approach has created significant value for Intel, our customers and our partners by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities to apply our technology to address our customers' and society’s most complex issues.
Financial Performance
| | | | | | | | | | | | | | |
| DCAI Revenue $B | | DCAI Operating Income $B | |
2022 vs. 2021
Revenue was $19.2 billion, down $3.5 billion from 2021, due to a decrease in server revenue, partially offset by higher other DCAI revenue. Server volume decreased 16% from 2021, led by enterprise customers in a competitive environment, and due to customers tempering purchases to reduce existing inventories in a softening data center market. Server ASPs decreased 5% from 2021, driven by a higher mix of revenue from hyperscale customers. Other DCAI revenue increased 14% due to growth in our FPGA business.
2021 vs. 2020
Revenue was $22.7 billion, down $722 million, primarily due to lower server revenue, partially offset by increased revenue from other DCAI products. Server volume decreased 4%, driven by an increasingly competitive environment, partially offset by recovery in government and broader market products.
Operating income decreased 73% year over year, and operating margin was 12% in 2022 and 37% in 2021.
| | | | | | | | | | | | | | |
| (In Millions) | | | | |
| $ | 2,288 | | | 2022 Operating Income | | |
| (3,330) | | | Lower gross margin from server revenue | | |
| (1,139) | | | Higher period charges primarily associated with the ramp up of Intel 4 | | |
| (1,001) | | | Higher operating expenses driven by increased investments in leadership products | | |
| (671) | | | Higher server unit cost from increased mix of 10nm SuperFin products | | |
| (441) | | | Higher period charges driven by inventory reserves taken in 2022 | | |
| (305) | | | Higher other period charges primarily related to product development costs | | |
| (189) | | | Higher period charges related to excess capacity charges | | |
| 702 | | | Higher gross margin from DCAI other product revenue | | |
| 223 | | | Lower period charges due to a benefit related to insurance proceeds received for business interruption and property damage that occurred in 2020 | | |
| $ | 8,439 | | | 2021 Operating Income | | |
| (1,050) | | | Higher DCAI server unit cost primarily from increased mix of 10nm SuperFin products | | |
| (820) | | | Higher period charges primarily driven by ramp up of Intel 4 and subsequent ramp down of 14nm | | |
| (725) | | | Lower gross margin from server revenue | | |
| (475) | | | Higher operating expenses driven by investment in leadership products | | |
| (65) | | | Higher period charges driven by increased engineering samples | | |
| 375 | | | Higher gross margin from other DCAI product revenue | | |
| 130 | | | Lower period charges driven by absence of reserves taken in 2020, partially offset by reserves recorded in 2021 | | |
| (7) | | | Other | | |
| $ | 11,076 | | | 2020 Operating Income | | |
| | | | | | | | |
| Overview | % Intel Revenue |
NEX lifts the world's networks and edge compute systems from inflexible fixed-function hardware to general-purpose compute, acceleration, and networking devices running cloud native software on programmable hardware. We work with partners and customers to deliver and deploy intelligent edge platforms that allow software developers to achieve agility and to drive automation using AI for efficient operations while securing the integrity of their data at the edge. We have a broad portfolio of hardware and software platforms, tools, and ecosystem partnerships for the rapid digital transformation happening from the cloud to the edge. We are leveraging our core strengths in process, software, and manufacturing at scale to grow traditional markets and to accelerate entry into emerging ones. | |
| | |
| Key Developments | |
| | |
■ | Our revenue was $8.9 billion, up 11% in 2022, driven by the cloud networking and telecommunications market segments. Most notably, we saw strength in our Ethernet ASPs and in 5G product demand. Operating margin was $740 million, down $971 million year over year primarily due to higher investments in product roadmap leadership and process node acceleration, and higher inventory reserves. |
■ | We announced the Mount Evans IPU, Intel's first dedicated ASIC-based IPU, the Intel Xeon D-1700 series, the Intel Xeon D-2700 series, and the 4th Gen Intel Xeon processor with Intel® vRAN Boost. |
■ | We continue to update solutions to improve developers' digital strategies and to accelerate market adoption of edge and AI applications. We announced 12th Gen Intel Core Processors for Internet of Things Edge and the Intel® Geti™ computer vision platform with OpenVINO toolkit built in. |
■ | We continue to work with our ecosystem partners like Ericsson, Nokia, Cisco, Dell Technologies, HPE, Lenovo, Amazon, Google, and Microsoft to drive the software defined transformation of the world’s network and edge infrastructure and accelerate AI driven automation of physical operations. |
Market and Business Overview
Market Trends and Strategy
The Internet is undergoing a shift toward a cloud-to-edge infrastructure, combining unrivaled scale and capacity in the cloud with faster response times at nearby edges. As AI inference is transforming and automating every industry—from factories to smart cities and hospitals—the demand for high-performance computing at the edge has expanded exponentially. Networks are moving toward software, becoming more programmable and flexible.
Our network and edge solutions aim to (1) move the world's networks to run in software on Intel technologies at the core of cloud data centers, the public Internet, and public and private 5G/6G networks; (2) deploy and run software that monitors and controls factories, cities, commerce, energy, and healthcare on Intel technologies; and (3) run every workload at the edge, between the cloud and the end user, whether deployed by a CSP, CoSP, or an alternative service provider.
Products and Competition
With a greater emphasis on systems and solutions designed to harness the growth of data processed at the edge to yield insights, our competitive landscape has shifted beyond application-specific standard product vendors to include cloud, network, and AI computing platform providers.
Today, we speed the deployment of network and edge computing solutions based on our open software frameworks and broad silicon portfolio to address a broad range of applications in many markets.
Cloud Networking: Our cloud customers require uncompromised data center network performance and reliability. Intel® Intelligent Fabric allows customers to program network behavior from end to end, from one Intel Xeon server to the next, through Intel® Ethernet NICs, IPUs, and Ethernet Switch ASICs. This control gives customers the ability to advance and differentiate their cloud infrastructure based on the unique needs of their business. The IPU, a new class of product introduced by Intel, is an open and programmable compute platform that frees up more compute cycles for customers by running infrastructure workloads in a separate, secure, and isolated set of CPU cores. Our Intel® Silicon Photonics Optical Transceivers are the backbone of the data center network, building reliable optical links on an industry-leading manufacturing process.
Telecommunications Networks: Intel led the world’s shift to running networking workloads in software and created network function virtualization, providing customers with more efficient, cost-effective, and programmable platforms. Now we are leading the first wave of 5G core network deployments and demonstrating that 5G base stations can be almost entirely built from software running on Intel Xeon processors with Intel vRAN Boost.
Our growth comes from moving fixed-function networks onto Intel Xeon Scalable processors and Intel Xeon D processors running our FlexCore and FlexRAN™ software. Our customers are tier-one global communication service providers and their equipment suppliers. Our software-based cloud RAN platform allows operators to deploy the fastest cloud-native 5G infrastructure quickly and efficiently at scale to meet the needs of their end customers.
On-premises Edge: More than just a silicon provider, we partner with companies to design and deliver solutions to help a wide range of customers transform their businesses and take advantage of the rapidly increasing number of connected devices and customers. We develop high-performance compute platforms that solve for technology and business use cases that scale across vertical industries and embedded markets such as retail, banking, hospitality, education, manufacturing, energy, healthcare, and medical.
A common architecture from intelligent edge platforms based on our Intel Xeon, Intel Core, Intel Atom and vision processing unit silicon portfolio reduces complexity in the ecosystem and helps our customers create, store, and process data at the edge, analyzing it faster and acting on it sooner. Software frameworks like the OpenVINO toolkit enable software developers to deploy new automation solutions on Intel hardware, particularly for those running AI inference workloads.
Software and Platforms: Our customers’ need for flexibility, programmability, and versatility drives workloads toward software and away from fixed-function hardware. As networking in the cloud, core network, 5G, and private networks move to software, and as our edge customers increasingly deploy AI inference applications, we aim to simplify innovation on Intel hardware. We support our customers with open, containerized software frameworks, such as Intel® Smart Edge, the OpenVINO toolkit, and the Infrastructure Programmer Developer Kit, enabling the network to continue to improve and evolve without locking customers into a single solution. Intel Geti software is designed to enable teams to rapidly develop AI models, and its intuitive computer vision solution is designed to reduce the time needed to build models by easing the complexities of model development and harnessing greater collaboration between teams at the edge.
Financial Performance
| | | | | | | | | | | | | | |
| NEX Revenue $B | | NEX Operating Income $B | |
2022 vs. 2021
Revenue was $8.9 billion, up $897 million from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Ethernet demand declined in Q4 2022 due to lower server demand, and Edge demand declined in Q4 2022 due to macroeconomic factors.
2021 vs. 2020
Revenue was $8.0 billion, up $844 million, primarily driven by higher demand for Edge products amid recovery from the economic impacts of COVID-19, as well as a recovery in cloud networking revenue. These increases were partially offset by a reduction in the 5G networking volume from elevated levels in 2020.
Operating income decreased 57% year over year, and operating margin was 8% in 2022 and 21% in 2021.
| | | | | | | | | | | | | | |
| (In Millions) | | | | |
| $ | 740 | | | 2022 Operating Income | | |
| (530) | | | Higher operating expenses driven by increased investments in leadership products | | |
| (461) | | | Higher period charges primarily associated with the ramp up of Intel 4 | | |
| (359) | | | Higher period charges driven by reserves taken in 2022 and lack of sell-through of reserves compared to 2021 | | |
| (150) | | | Higher period charges primarily due to other product enhancements | | |
| (98) | | | Lower gross margin from Network Xeon revenue | | |
| 522 | | | Higher gross margin from Ethernet revenue | | |
| 191 | | | Lower unit cost primarily from10nm SuperFin products | | |
| | | | |
| (86) | | | Other | | |
| $ | 1,711 | | | 2021 Operating Income | | |
| 895 | | | Lower NEX unit cost due to cost improvements in the 10nm SuperFin process | | |
| 285 | | | Lower period charges due to reserve sell through and a decrease in engineering samples | | |
| 215 | | | Higher gross margin from NEX revenue, primarily driven by Ethernet and Edge | | |
| (300) | | | Higher operating expenses primarily due to roadmap investments | | |
| (220) | | | Higher period charges primarily associated with the ramp of Intel 4 | | |
| (10) | | | Other | | |
| $ | 846 | | | 2020 Operating Income | | |
| | | | | | | | |
| Overview | % Intel Revenue |
Mobileye is a global leader in driving assistance and self-driving solutions. Our product portfolio is designed to encompass the entire stack required for assisted and autonomous driving, including compute platforms, computer vision, and machine learning-based perception; mapping and localization, driving policy, and active sensors in development. We pioneered ADAS technology more than 20 years ago, and have continuously expanded the scope of our ADAS offerings while leading the evolution to autonomous driving solutions. Our unique assets in ADAS allow for building a scalable self-driving stack that meets the requirements for both robotaxi and consumer-owned autonomous vehicles. Our customers and strategic partners include major global OEMs, Tier 1 automotive system integrators, and public transportation operators. | |
| | |
| Key Developments | |
| | |
■ | We achieved record revenue in 2022 of $1.9 billion, up 35%, primarily driven by higher demand for EyeQ® products and the introduction of Mobileye SuperVision*. Operating income was $690 million, up 25%, primarily due to higher revenues partially offset by increased investments in leadership products. |
■ | 2022 was a very active year as we launched EyeQ-based systems into 233 different vehicle models, achieved a record-setting volume of projected future design wins, including wins for our next-generation EyeQ6 chip, and advanced solutions such as Cloud-enhanced ADAS and Mobileye SuperVision*. |
■ | On October 26, 2022, we completed the IPO of Mobileye class A common shares (class A shares), and certain other equity financing transactions, which represented approximately 6% of the capital stock of Mobileye, and our class A shares began trading on the Nasdaq Global Select Market under the symbol “MBLY”. |
| | |
| | |
| | |
| | |
| | |
Market and Business Overview
Market Trends and Strategy
While the automotive industry has moderately recovered from the effects of the COVID-19 pandemic and from acute supply chain shortages, with approximately 6% growth in global vehicle production year over year, production in 2022 was still roughly 8% below 2019 levels. We expect ADAS volumes to continue to grow faster than overall global vehicle production in the coming years and anticipate long-term ADAS growth from continued increases in the percentage of vehicles that are equipped with basic ADAS features from the factory. In addition to potential volume growth, our portfolio of advanced solutions has the potential to drive higher average system price over time.
Beyond ADAS solutions, we believe that the availability of AVs will cause a significant transformation in mobility, including vehicle ownership and utilization. We expect that AV technology will eventually be accessed by consumers through shared-vehicle MaaS networks and in consumer-owned and operated AVs. We are pursuing this market trend by using our eyes-on/hands-off Mobileye SuperVision* solution as a baseline to scale to our eyes-off/hands-off Chauffeur* consumer AV product in a variety of operational design domains. As it relates to AMaaS, we intend to primarily go to market by supplying Mobileye Drive* self-driving system to transportation network companies, public transit operators, and suppliers of AV-ready vehicle platforms. In some cases, we expect to bundle our Mobileye Drive self-driving system with Moovit’s urban mobility and transit intelligence application and its global user base.
Products and Competition
We currently ship a variety of ADAS solutions to a large number of global automakers. We are recognized for our top-rated safety solutions globally, and since 2007, we have introduced numerous industry-first ADAS products.
We are building a robust portfolio of end-to-end ADAS and autonomous driving solutions to provide the capabilities needed for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies. We pioneered “base” ADAS features to enhance vehicle safety and to meet global regulatory requirements and safety ratings with our driver assist solution and we have since created new categories of ADAS with our cloud-enhanced driver assist and premium driver assist offerings such as Mobileye SuperVision*. By leveraging Mobileye SuperVision’s full-surround computer vision and True Redundancy*, we are developing Chauffeur, our consumer AV solution and Mobileye Drive, our Level 4 autonomous driving solution designed for fleet deployment. Though our current offerings to Tier 1 and OEM customers do not include cameras, radars, lidar systems, or other sensors (except in particular cases), we have radar and lidar products that are currently in advanced development stages, which we intend to offer to customers in the future.
The ADAS and autonomous driving industries are highly competitive. In the ADAS and consumer AV market, we face competition primarily from other external providers, including Tier 1 automotive suppliers and silicon providers, and in-house solutions developed by OEMs. Our Tier 1 customers may be developing or may in the future develop competing solutions. In the autonomous driving market, including AMaaS and consumer AV, we face competition from technology companies; internal development teams from the automakers themselves, sometimes in combination with investments in early-stage autonomous vehicle technology companies, Tier 1 automotive companies, and robotaxi providers.
Financial Performance
| | | | | | | | | | | | | | |
| Mobileye Revenue $B | | Mobileye Operating Income $B | |
| | |
| Revenue and Operating Income Summary |
2022 vs. 2021
Revenue was $1.9 billion, up $483 million from 2021, primarily driven by higher demand for EyeQ products and Mobileye SuperVision* systems. Operating income was $690 million, up $136 million from 2021, primarily due to higher revenue, partially offset by increased investments in leadership products.
2021 vs. 2020
Revenue was $1.4 billion, up $419 million, driven by improvement in global vehicle production, recovery from the economic impacts of COVID-19, and increasing adoption of ADAS compared to 2020. Operating income was $554 million, up $231 million, due to higher revenue driven by improvement in global vehicle production, recovery from the economic impacts of COVID-19, and increasing adoption of ADAS compared to 2020.
| | | | | | | | |
| Overview | % Intel Revenue |
AXG delivers products and technologies designed to help our customers solve the toughest computational problems. Our vision is to enable persistent and immersive computing, at scale and accessible by billions of people within milliseconds, which drives an incredible demand for compute—from endpoints to data centers. Our portfolio includes CPUs for high-performance computing and GPUs targeted for a range of workloads and platforms, from gaming and content creation on client devices to delivering media and gaming in the cloud, and the most demanding high-performance computing and AI workloads on supercomputers. To address new market opportunities and emerging workloads, we also develop solutions such as custom accelerators with blockchain acceleration. | |
| | |
| | |
| Key Developments | |
| | |
■ | Our revenue was $837 million, up 8% in 2022. Operating loss was $1.7 billion, compared to a loss of $1.2 billion in 2021, primarily due to increased inventory reserves taken and investments in our product roadmap. |
■ | We launched our Intel Arc A-series GPUs, also known as Alchemist, which offer industry-leading advanced features, including hardware accelerated ray tracing, Xe Super Sampling AI-driven upscaling technology, and Intel® Deep Link technology. |
■ | We launched Ponte Vecchio, the first Xe-based GPU optimized for high-performance computing and AI workloads. |
Market and Business Overview
Market Trends and Strategy
We are surrounded by immersive and visual content. Technology has made great advances in computer graphics, gaming and media, and AI supercomputing technologies that have enabled us to push toward simulating everything. The pursuit of simulating everything is driving the demand for accelerated computing. To address that opportunity, we are developing products that cover gaming and content creation, and that can enable consumers to experience immersive, photo-realistic virtual worlds. Our high-performance computing products are intended to power supercomputers that simulate our world from submicron levels to the entire galaxy. We are also building tailored products and have custom design services that we believe will unlock additional market opportunities.
We leverage Intel’s expansive portfolio of IP cores and technologies, from our process and packaging to our x86 architecture and a rich set of open software tools, libraries, drivers, and operating systems. We build upon the core foundation and combine our scalable Xe Architecture and acceleration IP blocks to address the accelerated computing market.
Products and Competitiveness
We operate in a very competitive market. NVIDIA is a competitor in the GPU and CPU market for high-performance computing and AI, as well as graphics solutions for content creation and gaming. AMD is also a competitor in the client and server segments with its line of GPUs and CPUs. CSPs are both customers and indirect competitors as they integrate vertically.
Our advanced and groundbreaking Xe Architecture excels at rendering content and accelerating computing that scales from the client to the data center. We empower the industry with open and scalable toolkits and software libraries that enable heterogeneous compute through our oneAPI programming model. Intel Arc graphics is our high-performance graphics offering for gaming, content creation, and emerging opportunities to enable persistent and immersive computing. To provide a valuable user experience and bring Intel Arc graphics to market, we work with hundreds of software partners to deliver games and applications that are designed to work seamlessly with our products. We also collaborate with the ecosystem to integrate new functionality and features that take advantage of both our hardware and software technologies to boost performance and enable high-quality rendering and fluid frame rates.
High-performance computing takes advantage of our CPUs and GPUs to power supercomputers that tackle the most computationally challenging problems of our increasingly complex world. Today, many of the world’s supercomputers are based on Intel Xeon processors. Our CPU roadmap strategy is to build upon this foundation and extend to higher compute and memory bandwidth for workloads with increasingly large data sets.
Our flagship data center GPU, Ponte Vecchio, is designed to take on the most demanding AI and high-performance computing workloads. Combining Ponte Vecchio with Intel Xeon processors can supercharge a platform’s compute density. Our oneAPI cross-architecture programming model is architected to leverage the broad software ecosystem of Intel Xeon processors so that software developers can work across a range of CPUs and accelerators with a single code base.
With a rich portfolio and a strong roadmap for leadership in visual computing, supercomputing, and custom computing, we have a unique opportunity to define the future of computing and accelerate growth for Intel.
Financial Performance
| | | | | | | | | | | | | | |
| AXG Revenue $B | | AXG Operating Income (Loss) $B | |
| | |
| Revenue and Operating Income (Loss) Summary |
2022 vs. 2021
Revenue was $837 million, up $63 million from 2021. We had an operating loss of $1.7 billion, compared to an operating loss of $1.2 billion in 2021, due to increased inventory reserves taken and investments in our product roadmap.
2021 vs. 2020
Revenue was $774 million, up $123 million primarily due to increased demand for our integrated graphics portfolio. We had an operating loss of $1.2 billion, compared to an operating loss of $403 million in 2020, primarily driven by a charge incurred on a federal contract of $333 million and ongoing investments in the business.
| | | | | | | | | |
| Overview | % Intel Revenue |
| As the first Open System Foundry, we offer customers differentiated full stack solutions created from the best of Intel and the foundry industry ecosystem, delivered from a secure and sustainable source of supply with an array of flexible business models to enable customers to lead in their industry. In addition to a world-class foundry offering enabled by a rich ecosystem, customers have access to our expertise and technologies, including cores, accelerators, and advanced packaging such as EMIB. Our early customers and strategic partners include traditional fabless customers, cloud service providers, automotive customers, and military, aerospace, and defense firms. We also offer mask-making equipment for advanced lithography used by many of the world’s leading-edge foundries.
| |
| | | |
| Key Developments | |
| | | |
| ■ | Our revenue was $895 million, up 14% in 2022, primarily driven by higher sales of MBMW tools. Operating loss was $320 million, compared to a loss of $23 million in 2021, primarily due to increased spending to drive strategic growth. |
| ■ | We have secured anchor customers and are engaged with seven of ten of the industry’s largest foundry customers. Since beginning production in late 2021 with Amazon Web Services as our lead customer, our packaging business expanded to other customers during the year. We expect Mediatek to be a lead silicon customer using Intel 16 process technology to create smart edge devices, with production expected to begin in 2024. |
| ■ | We launched the IFS Accelerator program, a comprehensive ecosystem alliance designed to help foundry customers seamlessly bring their silicon products from idea to implementation. IFS Accelerator taps the leading capabilities available in the industry to accelerate customer innovation on IFS manufacturing platforms. It features innovative ecosystem partner companies across each of the five alliances of the program: EDA, IP, Design Services, Cloud, and USMAG Alliances. |
| ■ | In Q1 2022, we entered into a definitive agreement to acquire Tower in a cash-for-stock transaction. The acquisition is expected to advance our IDM 2.0 strategy by accelerating our global end-to-end open systems foundry business. While we continue to work to close within the first quarter of 2023, the transaction may close in the first half of 2023, subject to certain regulatory approvals and customary closing conditions. Tower is a leading foundry for analog semiconductor solutions. |
| ■ | We continue to grow the Foundry organization and have hired over 50 leaders from the foundry and fabless industry to complement the talent recruited within Intel. The pending acquisition of Tower would further expand our talent pool. This combination of internal and external talent will help us deliver the best of Intel and the foundry industry to our customers. |
| | | |
Market and Business Overview
Market Trends and Strategy
The chip industry is undergoing a structural transformation driven by:
▪The digitization of everything, accelerated by the five superpowers: compute, pervasive connectivity, cloud-to-edge infrastructure, AI, and sensing.
▪A generational shift in computer architectures: a move from SoC to chiplets, increased tailoring of chips to workloads, and instruction set diversification.
▪The vertical integration into chip making by OEMs and CSPs.
▪Increasing costs of R&D and capacity for advanced node technologies.
▪Supply chain risk highlighted by the pandemic and geo-political issues.
These transformation trends are driving significant semiconductor market growth in leading-edge advanced nodes driven by Mobile, Compute, and Automotive applications. The increasing heterogeneity of chips increases the complexity of designing chips with optimized PPAC that are manufacturable with high yield. Additionally, integrating these diverse chips into systems becomes more complex and requires optimized interconnects and a software stack that can easily accept this diversity of chips without compromising PPAC. This is causing a paradigm shift from focusing on optimizing devices to focusing on optimizing the system, known as system technology co-optimization. In this new paradigm, customers require solutions that address every layer of the application stack, rather than just the chip itself.
Additionally, the COVID-19 pandemic and recent geo-political issues have highlighted the world’s dependence on semiconductors and the vulnerable supply chain that underpins the industry. Approximately 88% of the world’s semiconductor manufacturing capacity is in Asia, and only 4.5% is in the US1.
Products and Competition
We seek to address this tectonic shift in the industry by creating an open system foundry that enables our customers to lead in their industries by creating full-stack solutions from their choice of the best of Intel and the ecosystem. The open system foundry has four components: wafer fabrication, packaging, chiplet standard, and software. The open system foundry involves engaging with customers at multiple levels, from basic wafer manufacturing to helping define and implement their desired system architecture. We intend to build our customers' silicon design and deliver full end-to-end capabilities to produce their products, built with our advanced packaging technology and delivered from a resilient, geo-diverse and sustainable source of supply.
The foundation of our IFS strategy is a world-class foundry offering consisting of process technologies complemented by a robust ecosystem for IP, EDA, and design services. Chips created with IFS can be packaged using our advanced packaging technologies or by OSATs and connected by optimized interconnects that we will help drive as standard for the industry, such as, UCIe. We expect to accelerate our customers' designs by providing services and software that leverage our vast experience in designing systems of chips, and by providing cores from Intel and the ecosystem that are optimized for Intel process technologies. The combination of cores and accelerators can be seamlessly integrated into systems using oneAPI. These offerings will accelerate customer time to value with PPAC-optimized systems delivered from a reliable supply chain.
Our competitors are mostly pure-play foundries that focus on delivering a pure-play foundry offering from fabrication plants based in Asia. Of the five major semiconductor foundries, Taiwan Semiconductor Manufacturing Corporation (TSMC), Samsung, Global Foundries (GF), United Microelectronics Corporation (UMC) and Semiconductor Manufacturing International Corporation, only Samsung is an IDM and foundry, and only GF is headquartered in the US. TSMC and Samsung are the only companies with advanced technologies below 10nm, and TSMC leads the market with 53% market share, followed by Samsung at 18% in 20212. Neither Samsung nor TSMC currently offer its most advanced nodes outside of Asia and both have limited advanced-node capacity in the US.
We believe the open system foundry model will deliver differentiated capabilities to help our customers lead in their industries while bringing stability to the global semiconductor supply chain. The interest we are seeing from customers demonstrates that our strategy and offerings are resonating, and we look to continue to build on this in 2023 and in prospective periods.
1Source: 2022 Gartner Worldwide Foundry Capacity Forecast by Region, 2020-2026.
2Source: TrendForce.
Financial Performance
| | | | | | | | | | | | | | |
| IFS Revenue $B | | IFS Operating Income (Loss) $B | |
| | |
| Revenue and Operating Income (Loss) Summary |
2022 vs. 2021
Revenue was $895 million, up $109 million from 2021, primarily driven by higher sales of MBMW tools. We had an operating loss of $320 million, compared to an operating loss of $23 million from 2021, primarily due to increased spending to drive strategic growth.
2021 vs. 2020
Revenue was $786 million, up $71 million from 2020, primarily due to higher revenue from certain design services. We had an operating loss of $23 million, compared to operating income of $45 million in 2020, due to ongoing investments in the business.
| | | | | |
Consolidated Results of Operations | |
| |
For additional key highlights of our results of operations, see "A Year in Review."
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Years Ended
(In Millions, Except Per Share Amounts) | | December 31, 2022 | | December 25, 2021 | | December 26, 2020 |
| Amount | | % of Net
Revenue | | Amount | | % of Net
Revenue | | Amount | | % of Net
Revenue |
| Net revenue | | $ | 63,054 | | | 100.0 | % | | $ | 79,024 | | | 100.0 | % | | $ | 77,867 | | | 100.0 | % |
| Cost of sales | | 36,188 | | | 57.4 | % | | 35,209 | | | 44.6 | % | | 34,255 | | | 44.0 | % |
| Gross margin | | 26,866 | | | 42.6 | % | | 43,815 | | | 55.4 | % | | 43,612 | | | 56.0 | % |
| Research and development | | 17,528 | | | 27.8 | % | | 15,190 | | | 19.2 | % | | 13,556 | | | 17.4 | % |
| Marketing, general and administrative | | 7,002 | | | 11.1 | % | | 6,543 | | | 8.3 | % | | 6,180 | | | 7.9 | % |
| Restructuring and other charges | | 2 | | | — | % | | 2,626 | | | 3.3 | % | | 198 | | | 0.3 | % |
| | | | | | | | | | | | |
| Operating income | | 2,334 | | | 3.7 | % | | 19,456 | | | 24.6 | % | | 23,678 | | | 30.4 | % |
| Gains (losses) on equity investments, net | | 4,268 | | | 6.8 | % | | 2,729 | | | 3.5 | % | | 1,904 | | | 2.4 | % |
| Interest and other, net | | 1,166 | | | 1.8 | % | | (482) | | | (0.6) | % | | (504) | | | (0.6) | % |
| Income before taxes | | 7,768 | | | 12.3 | % | | 21,703 | | | 27.5 | % | | 25,078 | | | 32.2 | % |
| Provision for (benefit from) taxes | | (249) | | | (0.4) | % | | 1,835 | | | 2.3 | % | | 4,179 | | | 5.4 | % |
| Net income | | 8,017 | | | 12.7 | % | | 19,868 | | | 25.1 | % | | 20,899 | | | 26.8 | % |
| Less: Net income attributable to non-controlling interests | | 3 | | | — | | | — | | | — | | | — | | | — | |
| Net income attributable to Intel | | $ | 8,014 | | | — | | | $ | 19,868 | | | — | | | $ | 20,899 | | | — | |
| Earnings per share attributable to Intel—diluted | | $ | 1.94 | | | | | $ | 4.86 | | | | | $ | 4.94 | | | |
2022 results were impacted by an uncertain macroeconomic environment, with slowing consumer and enterprise demand, persistent inflation, and higher interest rates, which we believe impacts our target markets and creates a high level of uncertainty with our customers. We expect the macroeconomic uncertainty and the challenging market environment will extend into 2023.
2022 vs. 2021
2022 revenue was $63.1 billion, down $16.0 billion, or 20%, from 2021. CCG revenue was down 23% from 2021 due to lower notebook and desktop volume in the consumer and education market segments, and lower revenue due to the continued ramp down from the exit of our 5G smartphone modem business and lower demand for our wireless and connectivity products. Notebook volume decreased, driven by lower demand in the consumer and education market segments, while ASPs increased due to the resulting product mix. Desktop volume decreased, driven by lower demand in the consumer and education market segments while ASPs increased due to an increased mix of commercial products. DCAI revenue decreased 15% from 2021 due to lower server demand from enterprise customers, and due to customers tempering purchases to reduce existing inventories in a softening data center market. The decrease was partially offset by higher revenue from our FPGA business. Server ASPs decreased due to customer and product mix. NEX revenue increased 11% from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Mobileye revenue increased 35% from 2021, primarily driven by higher demand for EyeQ products and Mobileye Supervision* systems. The decrease in our "all other" revenue was due to revenue from the divested NAND memory business of $4.3 billion recognized in 2021, for which historical results are recorded in “all other,” and $584 million of revenue recognized in 2021 from a prepaid customer supply agreement.
Incentives offered to certain customers to accelerate purchases and to strategically position our products with customers for market segment share purposes, particularly in CCG, contributed approximately $1.7 billion to our revenue during Q4 2022, the impacts of which were contemplated in our financial guidance for Q1 2023, as included in our Form 8-K dated January 26, 2023. We expect CCG demand in Q1 2023 to be impacted as customers work through additional inventory.
2021 vs. 2020
2021 revenue was $79.0 billion, up $1.2 billion, or 1%, from 2020. NEX revenue increased 12% from 2020, primarily driven by higher demand for edge products amid recovery from the economic impacts of COVID-19 as well as a recovery in cloud networking revenue, partially offset by a reduction in the 5G networking volume from elevated levels in 2020. CCG revenue was up 1% from 2020, due to higher notebook and desktop volume driven by consumer and commercial recovery from COVID-19 lows, partially offset by lower revenue due to the continued ramp down from the exit of our 5G smartphone modem business. Notebook ASPs decreased due to the resulting product mix from higher demand in the consumer and education market segments, while desktop ASPs increased driven by commercial recovery from COVID-19. Mobileye revenue increased 43% from 2020, driven by improvement in global vehicle production, recovery from the economic impacts of COVID-19, and increasing adoption of ADAS. DCAI revenue decreased 3% from 2020 due to lower server revenue, partially offset by increased revenue from other DCAI products. Server volume decreased due to an increasingly competitive environment, partially offset by recovery in government and broader market products.
Gross Margin
We derived most of our overall gross margin in 2022 from the sale of products in the CCG and DCAI operating segments. Our overall gross margin dollars in 2022 decreased by $16.9 billion, or 39%, compared to 2021, and in 2021 increased by $203 million, or approximately flat, compared to 2020.
| | | |
| Gross Margin $B |
| (Percentages in chart indicate gross margin as a percentage of total revenue) |
| | | | | | | | |
| (In Millions) | | |
| $ | 26,866 | | | 2022 Gross Margin |
| (4,673) | | | Lower gross margin from CCG revenue, driven by notebook and desktop revenue |
| (3,330) | | | Lower gross margin from DCAI server revenue |
| (2,663) | | | Higher unit cost primarily from increased mix of Intel 7 products and 10nm SuperFin |
| (2,159) | | | Higher period charges primarily driven by inventory reserves taken in 2022 |
| (2,012) | | | Higher period charges primarily associated with the ramp up of Intel 4 and other product enhancements |
| (1,995) | | | Lower gross margin related to the divested NAND memory business |
| (723) | | | Optane inventory impairment related to the wind down of our Intel Optane memory business |
| (584) | | | Lack of revenue recognized in Q1 2021 from a prepaid customer supply contract |
| (313) | | | Higher stock-based compensation |
| (423) | | | Higher period charges due to excess capacity charges |
| (204) | | | Corporate charges from patent settlement |
| 484 | | | Lower period charges due to a benefit related to insurance proceeds received for business interruption and property damage that occurred in 2020 |
| 522 | | | Higher gross margin from NEX Ethernet revenue |
| 702 | | | Higher gross margin from DCAI other product revenue |
| 422 | | | Other |
| $ | 43,815 | | | 2021 Gross Margin |
| 790 | | | Higher gross margin from CCG revenue, driven by desktop revenue partially offset by notebook |
| 584 | | | Prepaid customer supply agreement settled and recognized to revenue in Q1 2021 |
| 505 | | | Lower unit cost primarily due to cost improvements in 10nm SuperFin |
| 471 | | | Higher gross margin related to the NAND memory business |
| 375 | | | Higher gross margin from DCAI other product revenue |
| 262 | | | Lower period charges due to reserve sell through, partially offset by reserves taken in 2021 |
| 215 | | | Higher gross margin from NEX revenue, primarily driven by Ethernet and Edge |
| (1,880) | | | Higher period charges primarily associated with ramp up of Intel 4 and subsequent ramp down of 14nm |
| (725) | | | Lower gross margin from DCAI server revenue |
| (394) | | | Other |
| $ | 43,612 | | | 2020 Gross Margin |
In 2022, we made, and in the next several years we expect to continue to make, capital investments in furtherance of our IDM 2.0 strategy. As of December 31, 2022, our capital investments classified as construction in progress totaled $36.7 billion. These assets are ready for use but have not yet been placed into service and have not yet begun depreciating. As these construction in progress assets are placed into service, we expect to incur depreciation expense that impacts future production costs and, ultimately, cost of sales. To the extent we are unable to grow our revenues to offset these production costs, our gross margin and operating income will be unfavorably affected. Additionally, we could incur asset impairments on property, plant and equipment assets if our IDM 2.0 strategy is not successful.
Effective January 2023, we increased the estimated useful life of certain production machinery and equipment from 5 years to 8 years. We made this change to better reflect the economic value of our machinery and equipment over time. We considered several factors in making this determination, including current usage and expected re-use of machinery and equipment, changes in machinery and equipment technology, future planned cadence between node transitions, a shift to longer duration on trailing-edge technologies, and overall changes in our technology roadmap. Our analysis supported a change in useful life and is consistent with the execution of our IDM 2.0 strategy. This change in estimate will be applied prospectively beginning Q1 2023. When compared to the estimated useful life in place as of the end of 2022, we expect total depreciation expense in 2023 to be reduced by as much as $4.2 billion. We expect this change will result in an approximately $2.6 billion increase to gross margin, a $400 million decrease in R&D expenses, and a $1.2 billion decrease in ending inventory values.
Operating Expenses
Total R&D and MG&A expenses for 2022 were $24.5 billion, up 13% compared to 2021. These expenses represent 38.9% of revenue for 2022 and 27.5% of revenue for 2021. In support of our strategy, we continue to make significant investments to accelerate our process technology roadmap. This requires increased investments in R&D and continued focused efforts to attract and retain talent. In the second half of 2022, we implemented certain cost-cutting measures, including a slower pace of hiring and other restructuring actions, while at the same time continued to improve our product execution in response to the continued decline in the broader macroeconomic environment.
| | | | | | | | |
| Research and Development $B | | Marketing, General and Administrative $B |
| (Percentages indicate expenses as a percentage of total revenue) |
| | | | | | | |
| 2022 vs. 2021 | | |
| | | |
| R&D spending increased by $2.3 billion, or 15%, driven by the following: | | |
| | | |
| + | Investments in our process technology | | |
| + | Increase in corporate spending | | |
| + | Investments in our businesses to drive strategic growth | | |
| - | Incentive-based cash compensation | | |
| | | |
| 2021 vs. 2020 | | |
| | | |
| R&D spending increased by $1.6 billion, or 12%, driven by the following: | | |
| | | |
| + | Investments in our businesses to drive strategic growth | | |
| + | Investments in our process technology | | |
| + | Incentive-based cash compensation | | |
| | | |
| | | |
| | |
| Marketing, General and Administrative |
| | | | | | | |
| 2022 vs. 2021 | | |
| | | |
| MG&A spending increased by $459 million, or 7%, driven by the following: | | |
| | | |
| + | Increase in corporate spending | | |
| - | Incentive-based cash compensation | | |
| | | |
| | | |
| | | |
| 2021 vs. 2020 | | |
| | | |
| MG&A spending increased by $363 million, or 6%, driven by the following: | | |
| | | |
| + | Increase in corporate spending | | |
| + | Incentive-based cash compensation | | |
| | | |
| | | |
| | | |
Restructuring and Other Charges
| | | | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 31, 2022 | | Dec 25, 2021 | | Dec 26, 2020 | | |
| Employee severance and benefit arrangements | | $ | 1,038 | | | $ | 48 | | | $ | 124 | | | |
| Litigation charges and other | | (1,187) | | | 2,291 | | | 67 | | | |
| Asset impairment charges | | 151 | | | 287 | | | 7 | | | |
| Total restructuring and other charges | | $ | 2 | | | $ | 2,626 | | | $ | 198 | | | |
In the third quarter of 2022, the 2022 Restructuring Program was approved to rebalance our workforce and operations to create efficiencies and improve our product execution in alignment with our strategy. We expect that our 2022 Restructuring Plan, in conjunction with other initiatives, will reduce our cost structure and allow us to reinvest certain of these cost savings in resources and capacity to develop, manufacture, market, sell, and deliver our products in furtherance of our strategy. We expect these actions to be substantially completed by the end of 2023, but this is subject to change.
Litigation charges and other includes a $1.2 billion benefit in 2022 from the annulled penalty related to an EC fine that was recorded and paid in 2009, and a charge of $2.2 billion in 2021 related to the VLSI litigation.
Gains (Losses) on Equity Investments and Interest and Other, Net
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 31, 2022 | | Dec 25, 2021 | | Dec 26, 2020 |
| Ongoing mark-to-market adjustments on marketable equity securities | | $ | (787) | | | $ | (130) | | | $ | (133) | |
| Observable price adjustments on non-marketable equity securities | | 299 | | | 750 | | | 176 | |
| Impairment charges | | (190) | | | (154) | | | (303) | |
Sale of equity investments and other | | 4,946 | | | 2,263 | | | 2,164 | |
| Gains (losses) on equity investments, net | | $ | 4,268 | | | $ | 2,729 | | | $ | 1,904 | |
| | | | | | |
| Interest and other, net | | $ | 1,166 | | | $ | (482) | | | $ | (504) | |
Gains (Losses) on Equity Investments, Net
Ongoing mark-to-market adjustments recognized in 2022 and 2021 were primarily driven by our investment in Montage Technology, Co. Ltd. (Montage); mark-to-market adjustments recognized in 2020 were primarily driven by our investments in Montage and Cloudera. We sold our interest in Cloudera in 2020.
In 2021, we recognized $471 million in observable price adjustments related to our investment in Beijing Unisoc Technology Ltd.
In 2022, the sale of McAfee Corp. (McAfee) consumer business was completed and we received $4.6 billion in cash for the sale of our remaining share of McAfee, recognizing a $4.6 billion gain in Sale of equity investments and other. In 2021, we recognized McAfee dividends of $1.3 billion, which included a special dividend of $1.1 billion paid in connection with the sale of McAfee's enterprise business, and recognized $228 million related to the partial sale of our investment in McAfee. We recognized McAfee dividends of $126 million in 2020.
In 2022, we also recognized $278 million of initial fair value adjustments in Sale of equity investments and other related to five companies that went public; in 2021, we recognized $447 million of initial fair value adjustments related to four companies that went public; in 2020, we recognized $1.1 billion from Montage becoming marketable and $606 million related to four other equity investments that went public.
Interest and Other, Net
In 2022, we recognized a gain of $1.0 billion from the first closing of the divestiture of our NAND memory business.
Provision for (Benefit from) Taxes
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (Dollars in Millions) | | Dec 31, 2022 | | Dec 25, 2021 | | Dec 26, 2020 |
| Income before taxes | | $ | 7,768 | | | $ | 21,703 | | | $ | 25,078 | |
| Provision for (benefit from) taxes | | $ | (249) | | | $ | 1,835 | | | $ | 4,179 | |
| Effective tax rate | | (3.2) | % | | 8.5 | % | | 16.7 | % |
Our effective tax rate decreased in 2022 compared to 2021, primarily driven by a higher proportion of our income being taxed in non-US jurisdictions and a change in tax law from 2017 Tax Reform related to the capitalization of R&D expenses that went into effect in January 2022. In 2022 we recognized a benefit from taxes as compared to a provision for taxes in 2021 as the higher proportion of our income being taxed in non-US jurisdictions and the change in tax law from 2017 Tax Reform were only partially offset by the tax costs associated with the gains recognized from the equity sale of McAfee and the divestiture of our NAND memory business.
Our effective tax rate decreased in 2021 compared to 2020, primarily driven by one-time tax benefits due to the restructuring of certain non-US subsidiaries as well as a higher proportion of our income in non-US jurisdictions. As a result of the restructuring, we established deferred tax assets and released the valuation allowances of certain foreign deferred tax assets. The majority of these deferred tax assets established in 2021 fully offset the deferred tax liabilities recognized in 2020 driven by a change in our permanent reinvestment assertion with respect to undistributed earnings in China, as a result of our divestiture of our NAND memory business.
Liquidity and Capital Resources
We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in the longer term. Cash generated by operations, supplemented by our total cash and investments1, is our primary source of liquidity for funding our strategic business requirements. Our short-term funding requirements include capital expenditures for worldwide manufacturing and assembly and test, including investments in our process technology roadmap; working capital requirements; and potential and pending acquisitions, strategic investments, and dividends. This includes a commitment of $5.4 billion associated with our pending acquisition of Tower. See “Note 10: Acquisitions and Divestitures” within the Notes to Consolidated Financial Statements for further information. Our long-term funding requirements incrementally contemplate investments in significant manufacturing expansion plans and investments to accelerate our process technology. These plans include an investment to build two new fabs in Arizona and capacity expansions in Ohio and Europe and involve utilizing SCIP and smart capacity investments, both elements of our Smart Capital strategy. We also expect to benefit from government incentives; any incentives above our current expectations would enable us to increase the pace and size of our investments. Conversely, incentives below our expectations would increase our anticipated cash requirements. We expect our planned capital investments to continue to put pressure on our adjusted free cash flow in the short term.
As we invest in multiple expansions, we expect our capital expenditures to continue to be higher than historical levels for the next several years. We expect to adjust the cadence of our investments based on the execution of our roadmap and changing business conditions. As of December 31, 2022, we had commitments for capital expenditures of $22.7 billion for 2023 and had $8.3 billion in capital expenditures committed in the long term. As of December 31, 2022, other purchase obligations and commitments in 2022 under our binding commitments for purchases of goods and services were $3.1 billion, with an additional $7.6 billion committed in the long term.
Additionally, as we have faced industry shortages of substrates and other components, we have increasingly entered into long-term agreements with suppliers and foundry service providers, some of which involve prepayments that will help us secure future supply. These prepayments accelerate cash outflows into the near term, and we expect to apply the prepayments to future purchases, resulting in a positive impact on our liquidity in subsequent periods.
We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services. For example, see "Note 19: Commitments and Contingencies" within the Notes to Consolidated Financial Statements for information about our lease obligations, which include supply agreements structured as leases, "Note 8: Income Taxes" within the Notes to Consolidated Financial Statements for information about our tax obligations including impacts from Tax Reform enacted in 2017 for the one-time transition tax on previously untaxed foreign earnings, and "Note 13: Borrowings" within the Notes to Consolidated Financial Statements for information about our debt obligations. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included in the amounts above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons.
When assessing our current sources of liquidity, we include our total cash and investments1 as shown in the following table:
| | | | | | | | | | | | | | |
| (In Millions) | | Dec 31, 2022 | | Dec 25, 2021 |
| Cash and cash equivalents | | $ | 11,144 | | | $ | 4,827 | |
| Short-term investments | | 17,194 | | | 24,426 | |
| | | | |
| | | | |
| Loans receivable and other | | 463 | | | 240 | |
Total cash and investments1 | | $ | 28,801 | | | $ | 29,493 | |
| Total debt | | $ | 42,051 | | | $ | 38,101 | |
| | | | |
| | | | |
1 See "Non-GAAP Financial Measures" within MD&A
We maintain a diverse investment portfolio that we continually analyze based on issuer, industry, and country. Substantially all of our investments in debt instruments are in investment-grade securities.
Other potential sources of liquidity include our commercial paper program and our automatic shelf registration statement on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, other securities, and non-recourse factoring arrangements with third-party financial institutions. Under our commercial paper program, we have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion and, as of December 31, 2022, we had $3.9 billion of commercial paper obligations outstanding. During 2022, we issued a total of $6.0 billion aggregate principal amount of senior notes, including our inaugural green bond issuance of $1.3 billion principal amount. We are using the proceeds from the green bond offering to fund projects that support our investments in sustainable operations. We intend to use the proceeds from the remainder of the offering for general corporate purposes, including, but not limited to, refinancing our outstanding debt and funding for working capital and capital expenditures. We received proceeds of $600 million in the aggregate from the sale of bonds issued by the Industrial Development Authority of the City of Chandler, Arizona (CIDA). We amended our $5.0 billion variable-rate revolving credit facility, extending that maturity date by one year to March 2027 and transitioning the interest terms from LIBOR to term SOFR. In November 2022, we entered into a $5.0 billion, 364-day variable rate revolving credit facility. We repaid $1.6 billion of our senior notes that matured in May 2022; $1.0 billion due July 2022; $1.9 billion due December 2022; and $400 million due November 2023. We settled $138 million bonds issued by the Oregon Business Development Commission in March 2022. As of December 31, 2022, we had no borrowings outstanding on the revolving credit facilities.
Our sources of liquidity in 2022 also included total net proceeds of $1.0 billion from the completion of Mobileye's IPO in the fourth quarter of 2022, after which we retained 94% of Mobileye’s capital stock.
Our cash and investments and related cash flows may be affected by certain discretionary actions we may take with customers and suppliers to accelerate or delay certain cash receipts or payments to manage liquidity for our strategic business requirements. In the second half of 2022 these actions included, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivable on a non-recourse basis to third-party financial institutions. While such actions have benefited, and may further benefit, cash flow in the near term, we may experience a corresponding detriment to cash flow in future periods as these actions cease or as the impact of these actions reverse or normalize.
Our cash flows for each period were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 31, 2022 | | Dec 25, 2021 | | Dec 26, 2020 |
| Net cash provided by operating activities | | $ | 15,433 | | | $ | 29,456 | | | $ | 35,864 | |
| Net cash used for investing activities | | (10,477) | | | (24,449) | | | (21,524) | |
| Net cash provided by (used for) financing activities | | 1,361 | | | (6,045) | | | (12,669) | |
| | | | | | |
| Net increase (decrease) in cash and cash equivalents | | $ | 6,317 | | | $ | (1,038) | | | $ | 1,671 | |
Operating Activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.
For 2022 compared to 2021, the $14.0 billion decrease in cash provided by operating activities was primarily driven by lower 2022 net income after adjusting for non-cash items, including the gain on the sale of McAfee and the pre-tax gain from the divestiture of our NAND business; partially offset by 2022 cash-favorable working capital changes compared to 2021.
For 2021 compared to 2020, the $6.4 billion decrease in cash provided by operating activities was primarily driven by a decrease in net working capital contributions and cash paid to settle a prepaid customer supply agreement in Q1 2021, partially offset by a McAfee special dividend received in Q3 2021.
Investing Activities
Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; cash used for acquisitions; and proceeds from divestitures. Our capital expenditures were $24.8 billion in 2022 ($18.7 billion in 2021 and $14.3 billion in 2020).
The decrease in cash used for investing activities in 2022 compared to 2021 was primarily due to increased maturities and sales of short-term investments, proceeds from the divestiture of our NAND business, and proceeds from the sale of our remaining share of McAfee, partially offset by an increase in capital expenditures.
The increase in cash used for investing activities in 2021 compared to 2020 was primarily due to an increase in capital expenditures, partially offset by lower 2021 purchases of short-term investments, net of maturities and sales.
Financing Activities
Financing cash flows consist primarily of payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, repurchases of common stock, and proceeds from the sale of shares of common stock through employee equity incentive plans.
Cash provided by financing activities in 2022 compared to cash used for financing activities in 2021 primarily due to higher commercial paper and debt issuances, our 2022 curtailment of common stock repurchases, proceeds from the Mobileye IPO, and partner contributions for joint investments; partially offset by higher 2022 debt repayments. Our total dividend payments were $6.0 billion in 2022 compared to $5.6 billion in 2021. We have paid a cash dividend in each of the past 121 quarters.
The decrease in cash used for financing activities in 2021 compared to 2020 was primarily due to a decrease in repurchases of common stock and a decrease in repayments of debt and debt conversions, partially offset by a decrease in cash provided by long-term debt issuances.
Critical Accounting Estimates
The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make assumptions that were uncertain when the judgment was made, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we report in our Consolidated Financial Statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made.
Refer to "Note 2: Accounting Policies" within the Notes to Consolidated Financial Statements for further information on our critical accounting estimates, which are as follows, as well as our significant accounting policies:
▪Inventories—the transition of manufacturing costs to inventory, net of factory excess capacity costs. Inventory reflected at the lower of cost or net realizable value considering forecasted future demand and market conditions;
▪Long-lived assets—the valuation methods and assumptions used in assessing the impairment and evaluation of useful lives of property, plant and equipment, identified intangibles, and impairment of goodwill, including the determination of asset groupings and the identification and allocation of goodwill to reporting units;
▪Non-marketable equity investments—the valuation estimates and assessment of impairment and observable price adjustments; and
▪Loss contingencies—the estimation of when a loss is probable and reasonably estimable.
Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with US GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance. These non-GAAP financial measures are used in our performance-based RSUs and our cash bonus plans.
Starting in the first quarter of 2022, we incrementally exclude from our non-GAAP results share-based compensation and all gains and losses on equity investments. The adjustment for all gains and losses on equity investments includes the ongoing mark-to-market adjustments previously excluded from our non-GAAP results.
Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated using an appropriate tax rate for each adjustment, as applicable. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with US GAAP, and the financial results calculated in accordance with US GAAP and reconciliations from these results should be carefully evaluated.
| | | | | | | | |
| Non-GAAP adjustment or measure | Definition | Usefulness to management and investors |
| NAND memory business | We completed the first closing of the divestiture of our NAND memory business to SK hynix on December 29, 2021 and fully deconsolidated our ongoing interests in the NAND OpCo Business in the first quarter of 2022. | We exclude the impact of our NAND memory business in certain non-GAAP measures. While the second closing of the sale is still pending and subject to closing conditions, we deconsolidated this business in Q1 2022 and management does not view the historical results of the business as a part of our core operations. We believe these adjustments provide investors with a useful view, through the eyes of management, of our core business model and how management currently evaluates core operational performance. In making these adjustments, we have not made any changes to our methods for measuring and calculating revenue or other financial statement amounts. |
| | | | | | | | |
| Non-GAAP adjustment or measure | Definition | Usefulness to management and investors |
| Acquisition-related adjustments | Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. Charges related to the amortization of these intangibles are recorded within both cost of sales and MG&A in our US GAAP financial statements. Amortization charges are recorded over the estimated useful life of the related acquired intangible asset, and thus are generally recorded over multiple years. | We exclude amortization charges for our acquisition-related intangible assets for purposes of calculating certain non-GAAP measures because these charges are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. These adjustments facilitate a useful evaluation of our current operating performance and comparison to our past operating performance and provide investors with additional means to evaluate cost and expense trends. |
| Share-based compensation | Share-based compensation consists of charges related to our employee equity incentive plans. | We exclude charges related to share-based compensation for purposes of calculating certain non-GAAP measures because we believe these adjustments provide better comparability to peer company results and because these charges are not viewed by management as part of our core operating performance. We believe these adjustments provide investors with a useful view, through the eyes of management, of our core business model, how management currently evaluates core operational performance, and additional means to evaluate expense trends, including in comparison to other peer companies. |
| Patent settlement | A portion of the charge from our IP settlements represents a catch-up of cumulative amortization that would have been incurred for the right to use the related patents in prior periods. This charge related to prior periods is excluded from our non-GAAP results; amortization related to the right t |
