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Intel Corp INTC

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Intel IDM 2.0 Strategy Inspires Confidence, But Execution Risks Remain; No Change to $65 FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

On March 23, wide-moat Intel announced its long-awaited manufacturing plans, with new CEO Pat Gelsinger updating the firm’s 7-nanometer progress and use of third-party foundries. Additionally, Intel will more meaningfully offer foundry services to fabless chip designers, with the firm announcing a $20 billion investment to build two new fabs in Arizona. We note Intel had previously attempted to offer foundry services (notably to Altera before Intel acquired the FPGA firm in 2015), with little success. Addressing this concern, Gelsinger highlighted Intel will be creating a dedicated foundry business unit with segregated capacity that won’t compete with Intel’s own products and will be located in the U.S. and Europe. We still believe there are risks to this strategy (as Intel will have to develop the third-party IP libraries and customer support capabilities at which TSMC excels) but this is certainly a step in the right direction. At this juncture, we are maintaining our $65 fair value estimate, and we see shares as fully valued.

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Company Profile

Business Description

Intel is one of the world's largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It was the prime proponent of Moore's law for advances in semiconductor manufacturing, though the firm has recently faced manufacturing delays. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, acquiring Altera, Mobileye, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas.

2200 Mission College Boulevard
Santa Clara, CA, 95054-1549
T +1 408 765-8080
Sector Technology
Industry Semiconductors
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 26, 2021
Stock Type Cyclical
Employees 110,600