Qualcomm CFO to quit Intel, can Intel return to the "semi-semiconductor" throne?

Release on : Apr 15, 2019

On the recent Innovation Day, Intel announced a series of new products that emphasize the company's move toward a data-centric strategy.

Next-generation products such as Xeon Scalable, Agilex 10nm FPGAs and Optane Persistent Memory are impressively enhanced and expose Intel's leading design, architecture and software capabilities.

The event reinforces Intel's technology and product depth, as well as leadership in artificial intelligence and autonomous driving. .

The new Chief Financial Officer, George Davis, left Qualcomm and joined Intel, bringing a wealth of experience in the semiconductor field.
Compared to historical P/E and Intel's growth potential, the current 11x valuation is attractive.

Intel is a world leader in artificial intelligence and autonomous driving processors, and dominates these markets with a microprocessor chip market share of approximately 80%.
In the next decade, microprocessors are expected to grow faster than the entire semiconductor industry and become a data-centric $300 billion total addressable market. This will drive Intel's revenue growth in the next few years.

Intel also has long focused on high-growth markets for AI products, autonomous driving and 5G wireless technology. In addition, Intel has recently become the exclusive modem provider for the iPhone.

Intel's valuation is attractive, its share price is lower than its peers, its historical average expected price-earnings ratio is currently 11 times, and the historical average of 5 years is 13 times.

Business overview

Intel is one of the largest semiconductor manufacturers in the world of computing, networking, data storage and communications solutions. Based on sales of $72 billion in 2018, it has the largest market share in the industry. The company's fundamentals are accelerating, and its revenue and earnings per share generated in the most recent quarter is a testament to this. Intel achieved 13% revenue growth last year and exceeded the $70 billion mark for the first time.
Most lines of business have records, including customer computing, data centers, Internet of Things (IoT), memory, programmable solutions, and Autoye. The double-digit growth of the data center (20% in 2018) is particularly impressive due to the strong demand from cloud service providers and the growing market share of communication service providers.

Data Center Innovation Day brings next-generation products to the next level

Intel's April 2 Innovation Day showcases its data-centric next-generation product. The company launched seven new products, although many participants considered the impressive list of customer reviews to be the highlight of the event. Companies such as Amazon, Google, Microsoft, and SAP have voted for confidence in Intel's latest innovations in discussing performance and ownership cost benefits. Intel's strategic direction is evolving from a computer-centric (PC)-centric company to a data-centric business model. The company discussed trends in data growth, as well as opportunities for cloud computing applications and 5G networks.

Xeon Scalable Processor Showcases Intel's Leadership in AI

Intel introduced the second generation of Xeon scalable CPUs, including integrated learning acceleration through Deep Learning Boost. New high-performance AI processor The Cascade Lake suite began shipping in the fourth quarter, and the company plans to release 50 new products at the lowest single-core cost. It is estimated that the customer's volume performance will increase by 30% compared to the first generation. The performance benefits of the next-generation Xeon Scalable will help generate strong revenues in the second half of the year and give Intel a competitive edge when it launched the Advanced Micro Devices EPYC this summer.

Agilex 10nm FPGA products confront Xilinx

Intel also announced a new 10nm FPGA product (Agilex) that will compete directly with Xilinx's 7nm products. The new FPGAs use Intel's EMIB 3 d packaging technology to solve the 5G network and data center acceleration problems. The long-awaited 10nm CPU production continues to grow. It is estimated that Agilex products have improved performance by 40% while reducing power consumption by 40%. Intel predicts that its Ice Lake 10nm CPU will be available in time for the 2019 holiday season. The new Ice Lake product may be firmly positioned in the CPU market. Intel's FPGA accelerators are in a strong position to see the market actively adopting and mean that the competition around the company's core CPU business is absolutely dominant.

Introducing new data-centric memory products

Announced the introduction of new memory products, including Optane SSD and Optane DC persistent storage. Two new Optane SSDs and Optance Persistent Memory have been introduced, which can become interferers in memory structures. Persistent memory products require new controllers, new firmware, optimized software and ecosystem support, all of which are new sources of revenue that Intel brings to the market. The company implemented its first implementation of the data center application as an Optane persistent storage product for Ethernet to Optane solutions. This is part of a joint venture between Intel and Micron Technology. Google is the first company to receive persistent memory technology and use this product to handle some workloads. Complementary storage and networking platforms will greatly expand the company's market opportunities and drive data-centric growth.

Source: Intel Investor Relations
Industry veteran appointed as chief financial officer
After former CFO Bob Swan was appointed CEO last year, Intel announced the appointment of George Davis as the company's new chief financial officer and executive vice president. Davis left Qualcomm, where he held the same position and was also the chief financial officer of Applied Materials. On the one hand, given Swan's success in managing Intel's finances and leadership as a CEO, hiring Davis will have a big impact. On the other hand, Davis brings experience in the semiconductor industry to Intel, so this will certainly be considered positive. Intel hired a chief financial officer who may have more direct industry experience than other candidates. During Swan's role as CFO, he emphasized cost management and free cash flow improvements.