Annual report pursuant to Section 13 and 15(d)

Operating Segments

Operating Segments
12 Months Ended
Dec. 31, 2022
Segment Reporting [Abstract]  
Operating Segments
Note 3 : Operating Segments
We previously announced several organizational changes that would accelerate the execution and innovation of our company by allowing us to capture growth in both large traditional markets and high-growth emerging markets. This includes reorganization of our business units to capture this growth and to provide increased transparency, focus, and accountability. As a result, we modified our segment reporting in the first quarter of 2022 to align to the previously announced business reorganization. All prior-period segment data has been retrospectively adjusted to reflect the way our CODM internally receives information and manages and monitors our operating segment performance starting in fiscal year 2022.
We manage our business through the following operating segments:
Client Computing Group
Data Center and AI
Network and Edge
Accelerated Computing Systems and Graphics
Intel Foundry Services
We derive a substantial majority of our revenue from our principal products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package, which are based on Intel architecture.
CCG, DCAI, NEX and AXG are our reportable operating segments. Mobileye, and IFS do not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments. AXG revenue includes integrated graphics royalties from our CCG and NEX operating segments and are recorded as if the sales or transfers were to third parties at prices that approximate market-based selling prices. When we enter into federal contracts, they are aligned to the sponsoring operating segment.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.
We have an "all other" category that includes revenue, expenses, and charges such as:
historical results of operations from divested businesses;
results of operations of start-up businesses that support our initiatives;
amounts included within restructuring and other charges;
employee benefits, compensation, impairment charges, and other expenses not allocated to the operating segments (beginning the first quarter of 2022, this includes all of our stock-based compensation); and
acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The CODM, who is our CEO, allocates resources to and assesses the performance of each operating segment using information about the operating segment's revenue and operating income (loss). The CODM does not evaluate operating segments using discrete asset information and we do not identify or allocate assets by operating segments. Based on the interchangeable nature of our manufacturing and assembly and test assets, most of the related depreciation expense is not directly identifiable within our operating segments, as it is included in overhead cost pools and subsequently absorbed into inventory as each product passes through our manufacturing process. Because our products are then sold across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of each operating segment's operating income (loss) results. We do not allocate gains and losses from equity investments, interest and other income, share-based compensation, or taxes to our operating segments. Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. The accounting policies for segment reporting are the same as for Intel as a whole.
Net revenue and operating income (loss) for each period were as follows:
Years Ended (In Millions) Dec 31, 2022 Dec 25, 2021 Dec 26, 2020
Operating segment revenue:
Client Computing
Desktop $ 10,661  $ 12,437  $ 11,179 
Notebook 18,783  25,443  24,897 
Other 2,264  3,187  4,459 
31,708  41,067  40,535 
Data Center and AI 19,196  22,691  23,413 
Network and Edge 8,873  7,976  7,132 
Mobileye 1,869  1,386  967 
Accelerated Computing Systems and Graphics 837  774  651 
Intel Foundry Services 895  786  715 
All other 196  5,019  5,091 
Total operating segment revenue $ 63,574  $ 79,699  $ 78,504 
Operating income (loss):
Client Computing $ 6,266  $ 15,704  $ 15,800 
Data Center and AI 2,288  8,439  11,076 
Network and Edge 740  1,711  846 
Mobileye 690  554  323 
Accelerated Computing Systems and Graphics (1,716) (1,207) (403)
Intel Foundry Services (320) (23) 45 
All other (5,614) (5,722) (4,009)
Total operating income $ 2,334  $ 19,456  $ 23,678 
The following table presents intersegment revenue before eliminations:
Total operating segment revenue $ 63,574  $ 79,699  $ 78,504 
Less: Accelerated Computing Systems and Graphics intersegment revenue (520) (675) (637)
Total net revenue $ 63,054  $ 79,024  $ 77,867 
In 2022, we initiated the wind-down of our Intel Optane memory business, which is part of our DCAI operating segment. While Intel Optane is a leading technology, it was not aligned to our strategic priorities. Separately, we continue to embrace the CXL standard. As a result, we recognized an inventory impairment of $723 million in cost of sales on the Consolidated Statements of Income in 2022. The impairment charge is recognized as a Corporate charge in the "all other" category presented above. As we wind down the Intel Optane business, we expect to continue to meet existing customer commitments.
In 2022, our three largest customers accounted for 42% of our net revenue (43% in 2021 and 39% in 2020), with Dell Inc. accounting for 19% (21% in 2021 and 17% in 2020), Lenovo Group Limited accounting for 12% (12% in 2021 and 12% in 2020), and HP Inc. accounting for 11% (10% in 2021 and 10% in 2020). Substantially all of the revenue from these customers was from the sale of platforms and other components by the CCG and DCAI operating segments.
Net revenue by region, based on the billing location of the customer, was as follows:
Years Ended (In Millions) Dec 31, 2022 Dec 25, 2021 Dec 26, 2020
China $ 17,125  $ 22,961  $ 20,257 
Singapore 9,664  18,096  17,845 
United States 16,529  14,322  16,573 
Taiwan 8,287  11,418  11,605 
Other regions 11,449  12,227  11,587 
Total net revenue $ 63,054  $ 79,024  $ 77,867 
The 2021 net revenue by region presented in the table above has been adjusted from our Form 10-K filed January 27, 2022 to reflect the correct allocation to each region.