Quarterly report pursuant to Section 13 or 15(d)

Operating Segments

v3.24.3
Operating Segments
 9 Months Ended
Sep. 28, 2024
Segment Reporting [Abstract]  
Operating Segments
Note 2 : Operating Segments
We previously announced the implementation of our internal foundry operating model, which took effect in the first quarter of 2024, and creates a foundry relationship between our Intel Products business (collectively CCG, DCAI, and NEX) and our Intel Foundry business. Intel Products consists substantially of design and development of CPUs and related solutions for third party customers. Intel Foundry consists substantially of process engineering, manufacturing, and foundry services groups that provide manufacturing, test, and assembly services to our Intel Products business and to third party customers. Both businesses utilize marketing, sales, and other support functions.
Our internal foundry model is a key component of our strategy and is designed to reshape our operational dynamics and drive greater transparency, accountability, and focus on costs and efficiency. We also previously announced our intent to operate Altera as a standalone business, with segment reporting beginning in the first quarter of 2024. Altera was previously included in our DCAI segment results. As a result of these changes, we modified our segment reporting in the first quarter of 2024 to align to this new operating model. All prior period segment data has been retrospectively adjusted to reflect the way our Chief Operating Decision Maker (CODM) internally receives information and manages and monitors our operating segment performance starting in fiscal year 2024. There are no changes to our consolidated financial statements for any prior periods.
We organize our business as follows:
▪Intel Products:
▪Client Computing Group (CCG)
▪Data Center and AI (DCAI)
▪Network and Edge (NEX)
▪Intel Foundry
▪All other
▪Altera
▪Mobileye
▪Other
CCG, DCAI, and Intel Foundry qualify as reportable operating segments. NEX, Altera, and Mobileye do not qualify as reportable operating segments; however, we have elected to disclose their results. When we enter into federal contracts, they are aligned to the sponsoring operating segment.
The accounting policies applied to our segments follow those applied to Intel as a whole. A summary of the basis for which we report our operating segment revenues and operating margin is as follows:
Intel Products: CCG, DCAI, and NEX
▪Segment revenue: consists of revenues from third party customers. The Intel Products operating segments represent a substantial majority of Intel consolidated revenue and are derived 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.
▪Segment expenses: consists of intersegment charges for product manufacturing and related services from Intel Foundry, external foundry and other manufacturing expenses, product development costs, allocated expenses as described below, and direct operating expenses.
Intel Foundry
▪Segment revenue: consists substantially of intersegment product and services revenue for wafer fabrication, substrates and other related products, and services sold to Intel Products, Altera, and certain other Intel internal businesses. We recognize intersegment revenue based on the completion of performance obligations. Product revenue is recognized upon delivery and transfer of ownership which is generally at the completion of wafer sorting. Backend service revenue is recognized upon the completion of assembly and test milestones, which approximates the recognition of revenue over the service period. Intersegment sales are recorded at prices that are intended to approximate market pricing. Intel Foundry also includes certain third party foundry and assembly and test revenues from external customers that were $67 million in the three months ended September 28, 2024 and $171 million in the first nine months of 2024, compared to $312 million in the three months ended September 30, 2023 and $661 million in the first nine months of 2023.
▪Segment expenses: consists of direct expenses for technology development, product manufacturing and services provided by Intel Foundry to internal and external customers, allocated expenses as described below, and direct operating expenses. Direct expenses for product manufacturing includes excess capacity charges.
All Other: Altera & Mobileye
▪Segment revenue: consists of product revenues from third party customers. Altera revenue is derived from programmable semiconductors, primarily FPGAs, CPLDs, acceleration platforms, software, IP, and related products. Mobileye revenue is derived from advanced driver-assistance systems (ADAS) and autonomous driving technologies and solutions.
▪Segment expenses: Altera expenses consist of intersegment charges for product manufacturing and related services from Intel Foundry, third party manufacturing expenses, allocated expenses as described below, and direct operating expenses. Mobileye expenses consists of third party direct expenses for product manufacturing and related services for the manufacturing of Mobileye products and direct operating expenses.
Our "all other" category also consists of "other", which includes:
▪results of operations from non-reportable segments not otherwise presented, and from start-up businesses that support our initiatives; and
▪historical results of operations from divested businesses.
We allocate operating expenses from our sales and marketing group to the Intel Products operating segments and allocate operating expenses from our finance and administration groups to all of our operating segments, except Mobileye.
We estimate that the substantial majority of our consolidated depreciation expense was incurred by Intel Foundry in the first nine months of 2024 and 2023. Intel Foundry depreciation expense is substantially included in overhead cost pools and then combined with other costs, and subsequently absorbed into inventory as each product passes through the manufacturing process and is sold to Intel Products or other customers. As a result, it is impracticable to determine the total depreciation expense included as a component of each Intel Products operating segment's operating income (loss).
We do not allocate to our operating segments corporate operating expenses that primarily consist of:
▪restructuring and other charges;
▪share-based compensation;
▪certain impairment charges; and
▪certain acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
We do not allocate to our operating segments non-operating items such as:
▪gains and losses from equity investments;
▪interest and other income; and
▪income taxes.
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). Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. The measures regularly provided to and used by our CODM under our new operating model continue to evolve; currently, our CODM does not regularly review or receive discrete asset information by segment.
Intersegment eliminations: Intersegment sales and related gross margin on inventory recorded at the end of the period or sold through to third party customers is eliminated for consolidation purposes. The Intel Products operating segments and Intel Foundry are meant to reflect separate fabless semiconductor and foundry companies, respectively. Thus, certain intersegment activity is captured within the intersegment eliminations upon consolidation and presented at the Intel consolidated level. This activity primarily relates to inventory reserves, which are determined and recorded based on our accounting policies for Intel as a whole but are only recorded by the Intel Products operating segments upon transfer of inventory from Intel Foundry. If a reserve is identified which relates to neither Intel Products operating segments nor Intel Foundry, the reserve is recognized as activity within the intersegment eliminations for Intel on a consolidated basis.
Operating segment and consolidated net revenue and operating income (loss) for each period were as follows:
Three Months Ended Nine Months Ended
(In Millions) Sep 28, 2024 Sep 30, 2023 Sep 28, 2024 Sep 30, 2023
Operating segment revenue:
  Intel Products:
   Client Computing Group
     Desktop
 $ 2,070  $ 2,753  $ 7,058  $ 7,002 
     Notebook
 4,888  4,503  14,049  11,806 
     Other
 372  611  1,166  1,606 
7,330  7,867  22,273  20,414 
  Data Center and AI
 3,349  3,076  9,430  9,132 
  Network and Edge
 1,511  1,450  4,219  4,303 
Total Intel Products revenue $ 12,190  $ 12,393  $ 35,922  $ 33,849 
Intel Foundry $ 4,352  $ 4,732  $ 13,041  $ 13,735 
All other
     Altera
 412  735  1,115  2,399 
     Mobileye
 485  530  1,164  1,442 
     Other
 142  187  503  470 
  Total all other revenue
 1,039  1,452  2,782  4,311 
Total operating segment revenue
 $ 17,581  $ 18,577  $ 51,745  $ 51,895 
     Intersegment eliminations
 (4,297) (4,419) (12,904) (13,073)
Total net revenue $ 13,284  $ 14,158  $ 38,841  $ 38,822 
Segment operating income (loss):
Intel Products:
   Client Computing Group
 $ 2,722  $ 2,780  $ 7,864  $ 5,946 
   Data Center and AI
 347  391  1,105  882 
   Network and Edge
 268  100  591  95 
  Total Intel Products operating income (loss)
 $ 3,337  $ 3,271  $ 9,560  $ 6,923 
Intel Foundry $ (5,844) $ (1,407) $ (11,148) $ (5,636)
All Other
     Altera
 9  263  (55) 899 
     Mobileye
 78  170  82  422 
     Other
 (42) (198) (229) (384)
  Total all other operating income (loss)
 $ 45  $ 235  $ (202) $ 937 
 Total segment operating income (loss) $ (2,462) $ 2,099  $ (1,790) $ 2,224 
     Intersegment eliminations
 (79) 5  124  48 
     Corporate unallocated expenses
 (6,516) (2,112) (10,424) (4,764)
Total operating income (loss) $ (9,057) $ (8) $ (12,090) $ (2,492)
Corporate Unallocated Expenses
Corporate unallocated expenses include certain operating and non-operating costs not allocated to specific operating segments. The nature of these expenses may vary, but primarily consist of restructuring and other charges, share-based compensation, certain impairment charges, and certain acquisition-related costs.
Three Months Ended Nine Months Ended
(In Millions)
 Sep 28, 2024 Sep 30, 2023 Sep 28, 2024 Sep 30, 2023
Acquisition-related costs $ (266) $ (344) $ (796) $ (1,065)
Share-based compensation (800) (772) (2,759) (2,433)
Restructuring and other charges1
(5,622) (816) (6,913) (1,080)
Other 172  (180) 44  (186)
Total corporate unallocated expenses
 $ (6,516) $ (2,112) $ (10,424) $ (4,764)
1 See "Note 6: Restructuring and Other Charges" within Notes to Consolidated Condensed Financial Statements for further information.