Intel Stock Analysis (FY 2020)

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Semiconductor and microchip suppliers such as Intel are currently under vigilant observation by global market players. Unprecedented peaks in demand along with supply chains in disarray is a recipe for trouble in global markets. The global pandemic serves as a catalyst towards a digitalised economy. These days, microchips are an essential element in almost every industry. Particularly, the automotive industry has become one of the major consumers of microchips. Additionally, the new “WFH” (work-from-home) culture pushed demand even further. Those are only some of the factors that contribute to a serious imbalance of supply and demand in the industry. Is Intel well positioned to meet the uprising demand? Can it continue to deliver next-generation microchips to its customers? And even more important, can Intel prove its resilience once again and fight-off stiff competition? Find all the answers below!
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Intel, Corp. | North America | Semiconductors | Fiscal Year 2020 | ISIN: US4581401001

Table of Contents

Qualitative Analysis

Intel Company History

intel inside
Illustration 1: Intel Inside

The Intel story in a nutshell

Intel (abbreviation for “integrated electronics”) was founded in 1968 by Gordon Moore and Robert Noyce in Santa Clara, California. Today, Intel is most famous for its CPUs, which it supplies to computer manufacturers such as Lenovo, Dell or Apple (until recently). Yet, prior to the success of the personal computer, Intels major business was to develop SRAM and DRAM memory chips. Although Intel had already developed its first CPU in 1971, the CPU development did only become Intels main business after demand for personal computers increased. One of its first breakthrough products was the 1103 DRAM memory chips, which was the first commercially available chip of its kind at the time. By 1972, this was the best selling microchip in the world.
As Intel built up its production capacities in Asia, profitability for DRAM microchips has substantially decreased. The main reason for that was related to rising competition from Japanese companies. During that period, sales numbers for personal computers increased by a lot, which led Intel to make a strategic shift towards microprocessors (CPUs). This decision (made by Moore) was one of the foundations of Intels success today. Another contributing factor was certainly Intels famous “Intel Inside” campaign, which was a tremendous marketing success and boosted sales significantly. Today, Intel is the largest semiconductor company in the world by revenue (USD 77.87 Billion in 2020). It produces three quarters of its products in the US, although about 75% of revenue come from overseas.

Growing competition over time

Especially since the 2000’s, Intel is facing continuous competition from other companies such as AMD, Nvidia or recently also Apple. Due to the increasing competition, Intel lost significant market share but still remains one of the top companies in the industry. However, lately AMD proved that it can also compete with Intels high-end CPUs, which is a serious threat to Intel (see also SWOT-Analysis below). Also, Apple has recently developed its own CPU and is going to build it in most of its products. Previously, Apple computers were mainly relying on Intel chipsets. Additional competition comes from overseas. Taiwan Semiconductor Manufacturing Company (TSMC) does already have an edge over Intel when it comes to production of state-of-the-art microchips. As Intel is still relying on outdated production processes, TSMC takes advantage of the latest production technologies. Intel has already indicated to move to newer and better production standards – but this transition will take a while. In fact, the company recently acknowledged to rely on TSMC to produce some of its 7nm chips which Intel fell short to produce on time for its customers.
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Intel Business Model and Outlook

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Intel SWOT Analysis

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Intel CEO: Patrick Paul Gelsinger

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Quantitative Analysis

Intel roovestor company score

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Disclaimer
We assume no liability for the accuracy of the financial data. Sources of the financial data are foremost IR websites of the company subject to the analysis. Additionally we rely on further data and information from Thomson Reuters EIKON. Moreover, unless better data is available, we do our own calculations of available data for KPI determination. Our stock analyses are by no means to be understood as a buy or sell recommendation and do not provide any conclusions regarding the future development of the company (and thus the future price development of the share).