(copy from Yao)

Intel

Competitive Intelligence and Benchmarking

Jeffrey Zhang

Supply Chain Management

Rutgers Business School

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Intel

One of the world’s largest semiconductor manufacturers, known for designing and producing microprocessors and integrated circuits used in most personal computers.
Operates globally with manufacturing, research, and development facilities in the United States, Ireland, Israel, and other countries.
Named one of the World’s Most Admired Companies by Fortune in 2023.

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Stock Market Performance 2018-2025

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Industry Analysis

Concentration and Competition Intensity

How concentrated is the industry?

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Concentration and Competition Intensity - Total Revenue

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US airlines industry is dominated by a few large firms

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Concentration and Competition Intensity - Four-firm Concentration Ratio

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Operating income split

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You can clearly see that Intel's operating income has drastically decreased throughout the years.

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Concentration & Competition Intensity Summary

The semiconductor industry is highly concentrated, with a few major firms dominating global market share.
Intel held a large portion of the market in 2016 but has since declined due to rising competition from NVIDIA, Broadcom, Qualcomm, and AMD.
Until 2021, Intel accounted for the majority of the industry’s total operating income, but its share has dropped sharply in recent years.
As of the most recent data, NVIDIA, Broadcom, and Qualcomm collectively generate over 50% of the industry’s operating income.
The semiconductor industry has high barriers to entry, as most competitors are well-established companies with significant resources and experience.

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Industry Analysis

Trend Analysis

The potential and risk of the industry?

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Industrial Trend - Size and profitability

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Semiconductors has consistently been more profitable the semiconductor equipment
Semiconductors continued growing, semiconductor equipment remained the same
Workforce kept growing for semiconductors but remained around the same for semiconductor equipment.
Semiconductor valuation is at an all-time high, with a large spike in 2024. Semiconductor Equipment valuation has remained around the same throughout the years

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Industrial Trend - Health and efficiency

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Semiconductors had a slightly higher current ratio and so lower short-term risk than semiconductor equipment.
Semiconductor equipment had lower liability asset ratio and so lower overall risk than Semiconductors.
Air-freight had higher asset turnover than airlines constantly.
Airlines had higher ROA than air-freight before COVID but lower after.

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Industry Potential: Summary

Although Semiconductors and Semiconductor Equipment are closely related industries, they have distinct trend, potential and risk.
- The Semiconductor industry saw growth throughout the years while Semiconductor Equipment revenue stayed around the same level.
- The Semiconductor Equipment industry had consistently had higher return on assets then the Semiconductors.
- Semiconductors have the potential because technology keeps advancing year over year, but the future remains to be seen.
- Meanwhile Semiconductor Equipment has better financial health than Semiconductors .

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Industrial Trend - Industry Total Size

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KPI Distribution by Industry

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Value Driver Analysis

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Industry Risk: Summary

50% of semiconductor companies are losing money up to 2024, although losses are rarely significant, e.g., net margin -50%.
Most semiconductor companies are more or less the same risk wise

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Industry Analysis

Value Chain & Industry Comparison

Expand or stay focused?

More valuable and better potential Industries - how to measure?

Gross margin: value added

Size, profitability, productivity and growth

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Expand up or downstream?

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Industrial Comparison - Size.

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Semiconductors vs. Semiconductor Equipment: very different total revenue and operating income for the US. The average size of Semiconductors is bigger than Semiconductors, but air freight has higher chance to break even.

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Industrial Comparison - labor productivity, gross margin, growth rates.

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Semiconductors and Semiconductor equipment are very similar. Thus expanding to semiconductor equipment cannot make a company very rich.

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Value Chain & Industry Comparison: Summary

None of the upstream industries of semiconductor equipment has sufficiently high value added that is worthy of the entrance barrier.
Semiconductor Equipment is an industry that a Semiconductor company depends on, it’s not similar at all in value added, profitability, and productivity.
Expanding into Semiconductor Equipment will not make a Semiconductor company richer.

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Competition Positioning

Profit Comparison

Where do I stand in the competition landscape?

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Revenue vs. Cost

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This picture shows two results: (1) Semiconductors and Semiconductor equipment are not equally scalable, Semiconductor equipment generates more total revenue per total cost then Semiconductors. (2) INTC, AVGO and NVDA are industry leaders and are vastly different form each other

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Operating Income vs. Total Assets

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Two results: (1) NVDA and AVGO are much better than INTC in utilizing assets to generate profit. (2) US semiconductors are more scalable than Chinese semiconductors.

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Return on Asset vs. Liability Asset Ratio

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(1) NVDA & AVGO outperformed INTC on liability and ROA (2) AVGO is barely profitable and has a liability over assets > 0.5. (3) There are more airlines clearly in worse trouble than AAL.

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Profit Comparison: Summary

The big three, NVDA, AVGO and INTC, are comparable in revenue.
Among them, INTC is least profitable, had the lowest return on assets and also the highest risk.
Semiconductors is a tough industry: Many smaller semiconductor companies are in trouble from the perspective of profitability or financial health or both.

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Competition Positioning:

Multiple Rankings

Where is the company ranked relative to its competitors?

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Enterprise Ranking - Revenue

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AAL is the 3rd largest airline in the US.

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Enterprise Ranking - Revenue

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INTC: 29th in Operating Margin, behind NVDA and AVGO.

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Competition Positioning

KPI Examination

Anomalies and potential issues undetected?

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KPI Examination - INTL

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The KPI examination of INTC relative to the US semiconductor industry. For profitability, despite its gross margin being lower than the industry, INTC’s operating margin, net margin, and ROAs are normal in the industry, showing that they are relatively profitable. For financial health, INTC has a normal liability asset ratio which is below one, indicating its ability to pay long-term debts, and thus good health. Regarding growth, while revenue growth in a normal range, its profit growth is on the lower side, implying slow growth among its peers. For operational efficiency, INTC has a normal operating cost over revenue ratio and inventory days, but its cash cycle is low, indicating a mixed operating efficiency. Although Intel is the worst among the big three, but still better than many other smaller semiconductor companies.

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Ranking and KPI Examination: Summary

INTC: strong revenue but weak profitability, confirming prior analysis.
In addition, INTC had slower profit growth but good operating efficiency.
Although INTC performed the worst among the big three, it’s still better than many smaller semiconductor companies.

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Enterprise Diagnosis:

My strengths and weaknesses?

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Major Competitors to Intel

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Enterprise Comparison

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Clearly, INTC is not comparable to NVDA at all on revenue, but has sligltly larger total revenue then AVGO, In all other aspects, INTC has lower Net Income, Gross Profit, Operating Income or Loss, and Profit before Tax

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Enterprise Comparison

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The margins confirm the observations and show a clearer picture.

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Enterprise Diagnosis

Company trend

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Enterprise Trend - revenue, profit, liability, labor productivity

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INTC is comparable on revenue but weak on profits for all years. AAL had the highest liabilities constantly. AAL improved its asset turnover lately and outperformed its peers.

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Enterprise Trend - Labor productivity

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AAL had the lowest labor productivity among the top three for all these years.

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Strengths and Weaknesses: Summary

Comparing the top 3 semiconductor companies, INTC is comparable on revenue but inferior on profits in recent years.
AVGO had the highest liabilities in all years
INTC had the lowest labor productivity constantly.
NVDA improved its asset turnover in recent years

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Value Driver Analysis

Performance drivers

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Value Driver Analysis

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A higher liability asset ratio may lead to a lower ROA for the US semiconductors and semiconductor industry.

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Breakdown Analysis

Root Causes

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Revenue Breakdown

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INTC has a negative net margin. Its cost of goods sold (COGS) is higher than the industry average, assuming competitive and comparable pricing. NVDA and Broadcom outperform due to lower COGS and higher net income.

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COGS Breakdown

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Given of INTC's has 100% COGS, INTC's profitability is much lower then the rest of its peers, leaving little room for operating income and contributing to its negative net margin.

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Summary

Semiconductors is a tough industry, and the same can be said for semiconductor equipment, it is hard for small companies to survive.
INTC has high revenue, but its asset turnover is lower than peers, which contributes to weaker profitability.
Cause 1: Certain parts of INTC’s COGS are abnormally higher than the industry average and peers, putting pressure on margins.
Cause 2: While INTC has normal levels of liabilities compared to AVGO and NVDA, its overall cost structure still results in higher COGS.
Potential issue: Lower labor productivity combined with similar staff costs may indicate less efficient use of human resources

Looks like a lion but is a little cat

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(copy from Yao)

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