Porter’s Five Forces Analysis of Intel
|Name||Intel (integrated and electronics)|
|Industry||Semiconductors, Electronics, Electrical Engineering, Technology Hardware & Equipment.|
|Founded||18 July, 1968|
|Headquarters||Santa Clara, California, United States|
|Revenues||US $79.024billion,2021 and US $ 63.054 billion|
|Profit||US $ 19.868 billion, 2021and US $ 8.014 billion|
|Competitors||AMD, Samsung, IBM, Nvidia, Qualcomm, ASUS|
Intel Corporation is a multinational company whose main business is in the manufacturing of semiconductor chips. Headquartered in Santa Clara, California, the company was founded in 1968 by the scientists Robert Noyce and Gordon Moore. It is one of the world’s largest and most valuable semiconductor chip makers, generating over 79 billion U.S. dollars in global annual revenue in 2021. Intel has steadily increased its annual research and development expenditure, surpassing 15 billion U.S. dollars in 2021.Forbes ranked Intel No. 12 on its list of the “World’s Most Valuable Brands” of 2020. It appears among 100 global companies spanning all industries, up from number 13 in 2019. According to Forbes’ methodology, Intel’s brand value grew to $39.5 billion.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School.
Intel Rivalry among Existing Competitor
- Intel Business Segments: The Company’s segments include Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solutions Group (NSG) and Programmable Solutions Group (PSG). In 2021, CCG revenue amounted to more than 40 billion U.S. dollars, while Data Center Group (DCG) revenue equated to around 26 billion U.S. dollars. Most of Intel’s revenue stems from China, Singapore, the United States, and Taiwan, while approximately 20 percent comes from the rest of the world. In 2021, Intel generated 21.14 billion U.S. dollars of its revenue in China and Hong Kong, whilst 14.25 billion U.S. dollars was generated in Singapore. Of the regions Intel operates in, China and Taiwan experienced revenue increases between 2020 and 2021.
- Intel Global Operations Year 2022: In 2022, Intel’s semiconductor revenue was 58.4 billion U.S. dollars, featuring as part of the top semiconductor companies worldwide for 2022 amounted to some 601.7 billion U.S. dollars worldwide.In the second quarter of 2022, Intel’s “Client Computing Group (CCG)” revenue amounted to 7.7 billion U.S. dollars and Intel’s “Mobileye” segment revenue amounted to 460 million U.S. dollars, an increase of 41 percent from the revenue that the company posted in the second quarter of 2021.
In 2021, the workforce at Intel increased to over 121 thousand employees compared to 110.6 thousand in 2020. In 2022, Intel announced the 5.4 billion U.S. dollar acquisition of Tower Semiconductor as it looks to gain additional foundry experience and build-upon customer relationships to accelerate the growth of its foundry services offering.
- Samsung is also proved to be one of key players by giving a record sale of US $ 244.388 billion and net profit of US $ 244.388 billion in 2021.Samsung Electronics also acquired a 50 percent stake in Korea Semiconductor; further solidifying Samsung Electronics’ position as a leader in semiconductor manufacturing.Samsung has a brand value of US $74.64 billion as per Statista. The company has net assets worth US $266.49 billion in 2021. With 32 factories in 14 countries around the globe, in 2021, the Korean conglomerate Samsung had 266,673 employees worldwide. At its headquarter in South Korea alone, Samsung employed more than a hundred thousand workers as of September 2021. Global smartphone sales reached 1.43 billion units during 2021.
As of 2021, Samsung held 30.8 percent of the global TV market share. As of 2021, global mobile phone shipments totaled over 1.67 billion units; in that same period Samsung’s smartphone shipments amounted to almost 70 million units.
- Advanced Micro Devices(AMD) gave tough competition to Intel by generating a sales of US$ 16.434 billion, with a net income of US$ 3.162 billion for 2021 and revenue of US $ 18 billion with a net profit of US $ 1.299 billion for third quarter ended September 2022.In 2021 revenue of $4.8 billion was up 49 percent year-over-year and 12 percent quarter-over-quarter driven by higher revenue in the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments. Gross margin was 50 percent, an increase of more than 5 percentage points year-over-year and approximately 2 percentage points quarter-over-quarter.
AMD’s “Computing and Graphics” segment generated 6.43 billion U.S. dollars in revenue during 2020, while the company’s “Enterprise, Embedded, and Semi-Custom” segment contributed 3.33 billion U.S. dollars in revenue through the year.Embedded, and Semi-Custom” segment generated revenues of 2.24 billion U.S. dollars in the fourth quarter of 2021, an increase from the 1.9 billion U.S. dollars in revenue recorded for this segment in the previous quarter.
- Investment in Research & Development-Marketing Cost and Brand Image: The existing battles among the competitors with a challenge of changing trend towards technological advancement, high quality but low prices and being environmental friendly requires high investments in research and development to better design the product for an accelerated customer satisfaction. Samsung also needs to focus the marketing cost to increase the brand image and better customer loyalty.
Intel Threat of New Entrants
- Global Semiconductor Industry: Revenue in the Semiconductors market is projected to reach US$599.80bn in 2023.The market’s largest segment is Integrated Circuits with a projected market volume of US$488.80bn in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 8.09%, resulting in a market volume of US$818.60bn by 2027. In global comparison, most revenue will be generated in China (US$217.10bn in 2023).
- High Capital Investment- Trained Human Resources: The new entrant will be requiring high capital investment, with extensive and sophisticated manufacturing-assembling structure so it is discouraging barrier for any new entrant. As due to the specialized nature of the product only limited human resource can handle such high-end products.
- High Research & Development Cost: High research and development cost is required for launching any new product in the current engineering and technological industry.
- Technological Advancement: Due to the changing trend in consumer electronic, semiconductor and engineering industry towards technological advancement, only high technological advance companies or groups can enter such a market.
Intel BargainingPower of Suppliers
- Supplies Industry Influence: Intel has easy access to raw material required for manufacturing/fabrication of its chips. Hence, bargaining power of supplier is moderate. Moderate size of supplier result in less pressure on a firm which gives advantage to Intel which is huge in size. Hence bargaining power of supplier is low in this respect.
- Suppliers Collaboration: About 9,000 tier 1st suppliers in 89 countries providedirect materials to Intel for their production processes. The company has close ties and collaboration with the suppliers.To prevent forced and bonded labor, Intel set expectations with their suppliers that workers should not have to pay for their employment. As a result, they have facilitated the return of over $23 million in fees to suppliers’ workers since 2014.
Intel Bargaining Power of Buyers
- High Product Differentiation: Due to highly sophisticated and technological advanced product the buyers have less knowledge and influence over the company’s decisions.
- Customer Satisfaction – After Sales Services: The requirements of the after sales services include prompt reply to complaints, timely return and exchange etc. Customer feedback, customer satisfaction and continuous innovation is important to retain the market share.Intel Corporation’s Net Promoter Score (NPS) is a 31 with 56% Promoters, 19% Passives, and 25% Detractors.
- High Switching Cost: In computer chips, many hardware and software around it depend on that chip. Hence switching to another product will require a lot of changes and hence a lot of time and money. Hence, customers cannot easily switch and have low bargaining power.
Intel Threat of Substitute Products or Services
- Low availability of substitutes: The low availability of substitutes weakens the threat of substitution against Intel. For example, even if customers are interested in using substitutes, these substitutes are not readily available. On the other hand, the relatively low performance-to-price ratio of substitutes exerts a weak force in the industry environment.
- Brand Loyalty: Intel is the market leader and has the highest market share. The threat of substitutes is moderate as Intel has invested heavily in research and development. As a result, it provides better performing and higher quality products to their customer, so any substitution can only be replaced at the cost of brand loyalty.Forbes ranked Intel No. 12 on its list of the “World’s Most Valuable Brands” of 2020. It appears among 100 global companies spanning all industries, up from number 13 in 2019. According to Forbes’ methodology, Intel’s brand value grew to $39.5 billion.
- Intel – statistics & facts(Feb 23, 2022)| Available at Statista
- Semiconductors – Worldwide|Available at Statista
- Intel’s net revenue by country from 2011 to 2021(Jul 27, 2022 )| Available at Statista
- Number of employees at Intel from 2004 to 2021(Jul 27, 2022)| Available at Statista
- Basic information on Intel by Forbes| Available at Forbes
- Intel 2020-21 Corporate Responsibility Report: Supply Chain Summary| Available at Intel
- Intel Named One of Forbes’ ‘World’s Most Valuable Brands’ of 2020(July 29, 2020)| Available at newsroom. Intel
- Intel Mobileye business unit revenue worldwide from 2019 to 2022, by quarter| Available at Statista
- Intel Client Computing Group (CCG) revenue from 2018 to 2022, by quarter(Aug 31, 2022)| Available at Statista
- AMD revenue worldwide from 2015 to 2020, by segment(Sep 12, 2022)| Available at Statista
- AMD “Enterprise, Embedded, and Semi-Custom” segment revenue worldwide from 2018 to 2021, by quarter(Feb 7, 2022)| Available at Statista
- Samsung annual financial report 2021| Available at Samsung
- Number of Samsung Electronics employees worldwide from 2009 to 2021(Aug 12, 2022)| Available at Statista
- Samsung Electronics’ global revenue from 2005 to 2021(Jul 27, 2022)| Available at Statista
- Intel Reports Fourth-Quarter and Full-Year 2022 Financial Results| Available at Intel
- AMD Reports Third Quarter 2022 Financial Results| Available at AMD
- AMD Reports Fourth Quarter and Full Year 2021 Financial Results| Available at AMD
- Intel Reports Fourth-Quarter and Full-Year 2021 Financial Results| Available at Intel