Intel: Small Fish in the Broader Data-Centric Market



Intel catches up on manufacturing technology

Intel (INTC) expects its revenues to grow by low-single digits to reach $76 billion–$78 billion by 2021. Reaching the revenue target in a weak macroeconomic environment with competition from Advanced Micro Devices (AMD) and TSMC (TSM) is a difficult task. Advanced Micro Devices and TSMC overtook Intel in the manufacturing technology node by transitioning to 7nm technology. Intel has been struggling with 10nm technology.

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Intel has undertaken the costly task of catching up in the manufacturing technology race to regain its pricing power and market share from Advanced Micro Devices and TSMC. Intel plans to launch 10nm PC chips later this year, 10nm server chips early in 2020, and 7nm chips by 2021. Funding these overlapping technology generations will likely require huge capital and put pressure on Intel’s gross margin. Intel expects its gross margin to fall to as low as 57% by 2021—the lowest level in a decade. Intel probably won’t be able to get back its technology lead before 2021.

Growth beyond 2021

Beyond 2021, Intel expects the growth to increase as the company gets back on track with technology leadership. In the past, Intel dominated the PC and server CPU (central processing unit) markets with more than 90% market share. The company was a big fish in a small pond with a TAM (total addressable market) of $52 billion. The company has expanded its TAM to over $300 billion by tapping markets like AI, network, Internet-of-Things, 5G, and graphics in its PC and data-centric businesses.

At the 2019 Investor Meeting, Intel’s CEO, Bob Swan, stated that the company has less than a 25% share of the expanded TAM, which opens the opportunity to grow more. He expects Intel’s revenues to reach $85 billion by 2023. All of the growth is expected to come from the data-centric business. The figure shows average annual revenue growth of 4% between 2019 and 2023.

Intel’s $85 billion revenue target on $300 billion TAM reflects a market share of 28% by 2023.


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