Intel Unveils Innovative Financial Reporting Approach, Revolutionizing Industry Standards

Intel Corporation has launched a new financial reporting structure to enhance cost discipline and increase returns, with a focus on transparency, accountability, and incentives across the company. This new structure aims to optimize Intel's operations and capitalize on the growing demand for AI solutions, enabling the company to deliver innovative products, drive financial performance improvement, and create value for its shareholders.

Enhanced cost discipline and increased returns through transparency, accountability, and incentives
Establishment of the industry's first systems foundry with leading-edge manufacturing capacity
Improved operating margins and profitability for both Intel Foundry and Intel Products

Intel Corporation has launched a new financial reporting structure that aligns with its upcoming Foundry operating model. The goal of this new structure is to enhance cost discipline and increase returns by promoting transparency, accountability, and incentives across the company. As part of this announcement, Intel has provided recast operating segment financial results for the years 2023, 2022, and 2021. The company has also outlined a clear path towards long-term growth and profitability for Intel Foundry, while setting goals for improving financial performance and creating shareholder value.

Intel CEO Pat Gelsinger highlighted the company’s unique position as a leading semiconductor manufacturer and fabless technology leader. He emphasized that the new model represents a significant milestone in Intel’s IDM 2.0 transformation, enabling the establishment of the industry’s first systems foundry with geographically diverse leading-edge manufacturing capacity. Gelsinger also emphasized Intel’s mission to bring AI Everywhere.

The new operating model establishes a foundry relationship between Intel Foundry, the company’s manufacturing organization, and Intel Products, which encompasses its product business units. Intel Foundry, introduced at the Direct Connect event in February, is positioned as the world’s first systems foundry for the AI era, offering end-to-end optimization from the factory network to software.

By combining Intel’s foundry and product capabilities, the company aims to create a more resilient, sustainable, and secure supply chain while delivering solutions to customers through continuous technological advancements, reference designs, and new standards.

Under the new reporting structure, starting from Q1 2024, Intel will present segment results aligned with seven operating segments: Client Computing Group (CCG), Data Center and AI (DCAI), Network and Edge (NEX), Intel Foundry, Altera (formerly Intel’s Programmable Solutions Group), Mobileye, and Other. CCG, DCAI, and NEX will collectively be referred to as Intel Products, while Altera, Mobileye, and Other will be referred to as All Other. 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 operating model is expected to unlock significant cost savings, operational efficiencies, and asset value for Intel Foundry and Intel Products. The transition will enable Intel Foundry to achieve profitable growth and tap into the unrealized value of Intel’s capital assets, which amount to approximately $100 billion. The model will also drive efficiency and cost savings across both Intel Foundry and Intel Products.

Intel Foundry aims to improve its operating margins by shifting volume mix to leading-edge extreme ultraviolet (EUV) nodes and expanding its high-margin advanced packaging business. The company expects its operating losses to peak in 2024 as it completes its ambitious five-nodes-in-four-years journey. By mid-2030, Intel Foundry targets break-even operating margins, with a long-term goal of achieving 40% non-GAAP gross margins and 30% non-GAAP operating margins. The company currently has a lifetime deal value with external customers exceeding $15 billion and aims to become the world’s second-largest foundry by 2030.

Intel Products already demonstrates healthy operating margins, which are expected to improve further under the new operating model. The product segments will have increased visibility and accountability for their financial drivers, with manufacturing costs now being charged at a market-based price by Intel Foundry. Intel Products targets 60% non-GAAP gross margin and 40% non-GAAP operating margin by the end of 2030.

In addition to the financial reporting structure announcement, Intel has appointed Lorenzo Flores as the chief financial officer of Intel Foundry, effective April 8, 2024. Flores brings nearly 30 years of financial experience in semiconductors and technology to the role. He previously served as the CFO of Xilinx. Flores will join Mark Henninger, who was appointed as the chief financial officer of Intel Products.

Intel will be hosting an investor webinar to present the vision and financial framework for the Intel Foundry business, including recast financials and the new segment reporting structure. The webinar will provide further insights into Intel’s strategy for driving growth, profitability, and shareholder value creation.

Overall, Intel’s new financial reporting structure and operating model aim to position the company for long-term sustainable growth, leveraging its expertise in semiconductor manufacturing and fabless technology leadership. By optimizing its operations and capitalizing on the growing demand for AI solutions, Intel aims to deliver innovative products, drive financial performance improvement, and create value for its shareholders.

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Background Information

About Intel: Intel Corporation, a global technology leader, is for its semiconductor innovations that power computing and communication devices worldwide. As a pioneer in microprocessor technology, Intel has left an indelible mark on the evolution of computing with its processors that drive everything from PCs to data centers and beyond. With a history of advancements, Intel's relentless pursuit of innovation continues to shape the digital landscape, offering solutions that empower businesses and individuals to achieve new levels of productivity and connectivity.

Technology Explained

EUV: Extreme Ultraviolet Lithography (EUV or EUVL) is an advanced semiconductor manufacturing technique that employs extremely short wavelengths of light in the extreme ultraviolet spectrum to create intricate patterns on silicon wafers. Utilizing a wavelength around 13.5 nanometers, significantly shorter than traditional lithography methods, EUVL enables the production of smaller and more densely packed integrated circuits, enhancing the performance and efficiency of modern microprocessors and memory chips.

Foundry: A foundry is a dedicated manufacturing facility focused on producing semiconductor components like integrated circuits (ICs) for external clients. These foundries are pivotal in the semiconductor industry, providing diverse manufacturing processes and technologies to create chips based on designs from fabless semiconductor firms or other customers. This setup empowers companies to concentrate on innovative design without needing substantial investments in manufacturing infrastructure. Some well-known foundries include TSMC (Taiwan Semiconductor Manufacturing Company), Samsung Foundry, GlobalFoundries, and UMC (United Microelectronics Corporation).

IDM 2.0: Intel IDM 2.0 is Intel's integrated device manufacturing (IDM) strategy introduced at 2021. It is a major evolution of the company's traditional IDM model, which has been in place since its founding in 1968. Under the IDM 2.0 strategy, Intel will continue to design and manufacture its own chips, but it will also become a major provider of foundry services to other companies. This will allow Intel to tap into the growing demand for semiconductor manufacturing capacity, while also generating new revenue streams.