New financial reporting structure reflects
Intel’s transition to a foundry operating model to drive greater
transparency, cost savings and growth.
Intel Corporation today outlined a new financial reporting
structure that is aligned with the company’s previously announced
foundry operating model for 2024 and beyond. This new structure is
designed to drive increased cost discipline and higher returns by
providing greater transparency, accountability and incentives
across the business.
To support the new structure, Intel provided recast operating
segment financial results for the years 2023, 2022 and 2021. The
company also shared a targeted path toward long-term growth and
profitability of Intel Foundry, as well as clear goals for driving
financial performance improvement and shareholder value
creation.
“Intel’s differentiated position as both a world-class
semiconductor manufacturer and a fabless technology leader creates
significant opportunities to drive long-term sustainable growth
across these two complementary businesses,” said Pat Gelsinger,
Intel CEO. “Implementing this new model marks a key achievement in
our IDM 2.0 transformation as we hone our execution engine, stand
up the industry’s first and only systems foundry with
geographically diverse leading-edge manufacturing capacity, and
advance our mission to bring AI Everywhere.”
The new operating model establishes a foundry relationship
between Intel Foundry, the company’s manufacturing organization,
and Intel Products, comprised of the company’s product business
units. Launched at its inaugural Direct Connect event in February,
Intel Foundry is the world’s first systems foundry for the AI era,
offering full-stack optimization from the factory network to
software.
The combination of Intel’s world-class foundry and product
capabilities will leverage a more resilient, sustainable and secure
source of supply while delivering cutting-edge solutions to
customers through continuous technology improvements, reference
designs and new standards.
New Reporting Structure
Beginning with the first quarter 2024, the company will present
segment results aligned to the following operating segments: Client
Computing Group (CCG); Data Center and AI (DCAI); Network and Edge
(NEX); Intel Foundry; Altera, an Intel Company (formerly Intel’s
Programmable Solutions Group); Mobileye; and Other. CCG, DCAI and
NEX will collectively be referred to as Intel Products; Altera,
Mobileye and Other will collectively be referred to as All
Other.
Intel Foundry is a newly established operating segment that
includes foundry technology development, foundry manufacturing and
supply chain, and foundry services (formerly IFS). Under this new
structure, Intel Foundry will recognize revenues generated from
both external foundry customers and Intel Products, as well as
technology development and product manufacturing costs historically
allocated to Intel Products. The new Altera operating segment,
which was previously reported under DCAI, follows its announced
separation into a standalone business.
The Form 8-K containing recast operating segment results for the
years 2023, 2022 and 2021 aligned with the foundry operating model
was furnished with the Securities and Exchange Commission (SEC) and
posted on the company’s Investor Relations website.
Dave Zinsner, Intel chief financial officer, said, “This model
is designed to unlock significant cost savings, operational
efficiencies and asset value. As it begins to take hold, we expect
to accelerate on our path toward achieving our ambition of 60%
non-GAAP gross margins and 40% non-GAAP operating margins in 2030.
Ultimately, improved cost competitiveness will help us deliver
process technology, product and foundry leadership while driving
significant financial upside for Intel and our owners.”
Clear Path to Value Unlock and Margin Expansion
The transition to the new operating model is expected to enable
Intel Foundry to achieve profitable growth and unlock unrealized
value across Intel’s approximately $100 billion in capital assets.
It will also create significant efficiency and cost savings
opportunities across both Intel Foundry and Intel Products.
- Intel Foundry: Operating margin improvement is expected
through shifting volume mix to leading-edge extreme ultraviolet
(EUV) nodes as the company achieves process parity and leadership.
Intel Foundry expects to drive further operating margin expansion
by manufacturing a larger percentage of Intel’s products, growing
its high-margin advanced packaging business, continuing to expand
its external foundry business, and further focusing on capital
utilization, cost efficiency and growing scale. Intel Foundry’s
operating losses are expected to peak in 2024 as Intel completes
its five-nodes-in-four-years journey, and the company is driving
for Intel Foundry to achieve break-even operating margins midway
between now and the end of 2030, when it targets 40% non-GAAP gross
margins and 30% non-GAAP operating margins. Intel Foundry currently
has an expected lifetime deal value with external customers of more
than $15 billion and remains focused on its goal of becoming the
world’s second-largest foundry by 2030.
- Intel Products: Intel Products already exhibits healthy
operating margins today, which are expected to improve as the
product operating segments benefit from the new operating model. In
this model, product operating segments will have increased
visibility into and be accountable for the financial drivers for
their businesses. Instead of recognizing manufacturing costs that
were previously allocated to the product operating segments, they
will be charged a market-based price by Intel Foundry. Continued
operating margin improvement is expected as the product segments
build on their execution momentum with leadership products and
improved pricing, drive cost optimizations in design and roadmap
decisions, and realize improved costs in package, assembly and
test. Intel Products targets 60% non-GAAP gross margin and 40%
non-GAAP operating margin by the end of 2030.
Appointment of Intel Foundry CFO
As part of today’s news, Intel also announced the appointment of
Lorenzo Flores as chief financial officer of Intel Foundry,
effective April 8, 2024. Flores possesses nearly 30 years of
financial experience in semiconductors and technology, including
most recently as the chief financial officer of Xilinx. This
complements the earlier appointment of Mark Henninger as the chief
financial officer of Intel Products. Both will report to
Zinsner.
Investor Webinar
- Intel will host an investor webinar at 1:30 p.m. PDT today to
present the vision and financial framework for the Intel Foundry
business, including the recast financials and new segment reporting
structure aligned with the foundry operating model. The webcast and
corresponding presentation slides can be accessed on Intel's
Investor Relations website at intc.com.
- An infographic that outlines the new financial reporting
structure can be found on the Intel Newsroom.
Non-GAAP Financial Measures
This press release contains forward-looking references to the
achievement of certain non-GAAP financial results, including
non-GAAP gross margins and non-GAAP operating margins. These
non-GAAP financial measures should not be considered a substitute
for, or superior to, financial measures prepared in accordance with
GAAP. A full reconciliation of these targets cannot be provided
without unreasonable efforts as we are unable to provide the
reconciling adjustments over the forward-looking period. For a full
explanation of these non-GAAP financial measures, see Intel’s
earnings release for the fourth-quarter and full-year 2023,
released on January 25, 2024, available on intc.com.
Forward-Looking Statements
This release contains forward-looking statements, including with
respect to:
- our business plans and strategy and anticipated benefits
therefrom, including with respect to our IDM 2.0 strategy, the
transition to an internal foundry model, updates to our reporting
structure, and our AI strategy;
- projections of our future financial performance, including
future profitability, gross margin improvements, operating margin
improvements, cost savings, and operational efficiencies;
- future products, services, and technologies and expectations
regarding product and process leadership;
- plans and goals related to Intel's foundry business, including
with respect to anticipated customers and future business with
customers, future manufacturing capacity, service technology and IP
offerings, and ecosystem support;
- expected completion and impacts of restructuring activities and
cost-saving or efficiency initiatives;
- our anticipated growth, future market share, and trends in our
businesses and operations;
- projected market and technology trends, such as AI; and
- other characterizations of future events or circumstances.
Such statements involve many risks and uncertainties that could
cause our actual results to differ materially from those expressed
or implied, including those associated with:
- the high level of competition and rapid technological change in
our industry;
- the significant long-term and inherently risky investments we
are making in R&D and manufacturing facilities that may not
realize a favorable return;
- the complexities and uncertainties in developing and
implementing new semiconductor products and manufacturing process
technologies;
- our ability to time and scale our capital investments
appropriately and successfully secure favorable alternative
financing arrangements and government grants;
- implementing new business strategies and investing in new
businesses and technologies;
- changes in demand for our products;
- macroeconomic conditions and geopolitical tensions and
conflicts, including geopolitical and trade tensions between the US
and China, the impacts of Russia's war on Ukraine, tensions and
conflict affecting Israel, and rising tensions between mainland
China and Taiwan;
- the evolving market for products with AI capabilities;
- our complex global supply chain, including from disruptions,
delays, trade tensions and conflicts, or shortages;
- product defects, errata and other product issues, particularly
as we develop next-generation products and implement
next-generation manufacturing process technologies;
- potential security vulnerabilities in our products;
- increasing and evolving cybersecurity threats and privacy
risks;
- IP risks including related litigation and regulatory
proceedings;
- the need to attract, retain, and motivate key talent;
- strategic transactions and investments;
- sales-related risks, including customer concentration and the
use of distributors and other third parties;
- our significantly reduced return of capital in recent
years;
- our debt obligations and our ability to access sources of
capital;
- complex and evolving laws and regulations across many
jurisdictions;
- fluctuations in currency exchange rates;
- changes in our effective tax rate;
- catastrophic events;
- environmental, health, safety, and product regulations;
- our initiatives and new legal requirements with respect to
corporate responsibility matters; and
- other risks and uncertainties described in this release, our
most recent Annual Report on Form 10-K and our other filings with
the U.S. Securities and Exchange Commission (SEC).
All information in this release reflects management's
expectations as of the date of this release, unless an earlier date
is specified. We do not undertake, and expressly disclaim 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.
About Intel
Intel (Nasdaq: INTC) is an industry leader, creating
world-changing technology that enables global progress and enriches
lives. Inspired by Moore’s Law, we continuously work to advance the
design and manufacturing of semiconductors to help address our
customers’ greatest challenges. By embedding intelligence in the
cloud, network, edge and every kind of computing device, we unleash
the potential of data to transform business and society for the
better. To learn more about Intel’s innovations, go to
newsroom.intel.com and intel.com.
© Intel Corporation. Intel, the Intel logo and other Intel marks
are trademarks of Intel Corporation or its subsidiaries. Other
names and brands may be claimed as the property of others.
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version on businesswire.com: https://www.businesswire.com/news/home/20240402570432/en/
Kylie Altman Investor Relations 1-916-356-0320
kylie.altman@intel.com
Sophie Won Media Relations 1-408-653-0475
sophie.won@intel.com
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