A few days ago, I met with many friends at the new book launch meeting. The most I care about is the current situation of Intel (ticker: INTC) and the future prospects of the company. I plan to write two articles to express my views on Intel. This is the first one. The other post is “Intel’s current difficult dilemma“.
Intel’s main business and performance
The following are the main divisions of Intel and their performance in 2020:
| Business unit | Annual revenue (in US$ billion) | Annual revenue growth | Annual operating income | Annual operating income growth rate | Rivals (in US ticker:) |
| Client computing group (CCG) | 40.1 | +8.09% | 15.1 | -0.66% | AMD, APPL, QCOM, MTK |
| Data center group (DCG) | 26.1 | +11.06% | 10.6 | +3.92% | NVDA, AMD, AMZN, QCOM, Ampere, BABA |
| Self-driving (Mobileye, ticker: MBLY) | 1.0 | +11% | 0.2 | +0% | TSLA, NVDA, GOOGL, GOOG |
| Internet of Things (IoT) | 3.0 | -21.05% | 0.5 | -54.55% | QCOM, MTK, Huawei, ZTE |
| Non-Volatile Solutions Group (NSG) | 5.4 | +22.73% | 0.4 | +133% | SSNLF, Kioxia, WDC, SD Hynix, MU |
| Programmable Solutions Group (PSG) | 1.9 | -5% | 0.3 | +0% | AMD’s Xilinx |
Financial performance
In 2020, the company’s revenue totaled 77.867 billion US dollars, an annual growth of 8.2%. The annual operating profit is 23.678 billion U.S. dollars, annual growth rate is 7.26%. The annual net profit is 20.899 billion US dollars, a decrease of 0.707%.
2021 full year performance
| 2021 | TSMC | Intel |
| Annual revenue and growth ($ million) | 57,231 +20.15% | 79,024 +1.49% |
| Annual gross income and growth ($ million) | 29,546.7 +16.82% | 43,815 +0.465% |
| Annual operating income and growth ($ million) | 23,443.6 +16.3% | 22,082 -7.51% |
| Annual net income and growth ($ million) | 21,507 +16.77% | 19,868 -4.94% |
| Gross margin | 51.63% | 55.45% |
| Operating margin | 40.96% | 27.94% |
| Net margin | 37.58% | 12.49% |
What is the current valuation?
| Stock price | P/S | P/E | Year to date stock performance | Market cap (in US$ billion) | Dividend yield | |
| INTC | 48.3 | 2.58 | 9.38 | -2.8% | 195.81 | 2.88% |
| NVDA | 245.43 | 26.24 | 87.7 | +88.48% | 615.62 | 0.065% |
| AMD | 123.76 | 10.87 | 44.17 | +34% | 151.03 | 0 |
After a sharp drop of nearly 11% on 10/22/2021, Intel’s market value of US$195.87 billion has been chased by Broadcom (see “Significant changes in Broadcom’s business approach“), which is really unimaginable. Moreover, the market value of Advanced Micro Devices (ticker: AMD) has reached 149.11 billion U.S. dollars; the performance of Intel in the past 10 years is really dumb.
The benefits of investing in Intel
For retirees, investors who start with dividends are more suitable; because Intel’s dividend yield is a not bad group in US stocks. It has an advantage. Even if the above-mentioned dilemma persists, Intel’s status in personal computers will not change significantly within a few years. This is certain. As long as personal computers exist, Intel is a cash cow. This means that there is a high probability that the principal you invested will not be reduced. This is the first priority that all investors who start with dividends must consider.
Investors must not forget one of the most fundamental things ─ ─ Intel is a representative of the few domestic semiconductor industries that are rooted in the United States. The only comparable weight peer may be Texas Instruments (ticker: TXN). The importance of it is self-evident. The US government cannot allow it to be at a disadvantage side or downtrend for a long time, let alone let it go bankrupt (investors who think so are really worried).
In the late 1980s, the same history appeared once. The US semiconductor industry, including Intel, was all beaten down to the earth by Japanese peers. The United States forced Japan to sign an unfair agreement and forced Japan to withdraw from the semiconductor industry. This is the real reason why TSMC founded in the next year. Isn’t the United States also starting to use the previous tricks now?
Intel’s worst situation is probably the situation now, and it won’t go down further. But don’t expect its stock price to rise too much in the visible 4-5 years. But the premise is that within 5 years, the gap between the two process generations that lagging behind TSMC must be filled, otherwise the company will ask whether it will continue to exist.
Concluding remarks
Remember, Intel is no longer the largest company in the semiconductor industry that you knew five years ago. From all perspectives (market share, technology, market value, revenue growth, industry leadership and voice, manufacturing ability, morale), not at all anymore.
Note: With no surprise! On Dec 10, 2021. Intel CEO Gelsinger sees company turnaround taking at least five years.
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