US Semiconductor Industry Vincent Gee - Andy Kong - Mark Wong
Agenda • Technology overview • Industry Overview • Industry information • Industry trends and outlook • Company Analysis • Intel (INTC) • Advanced Micro Devices (AMD) • Applied materials (AMAT)
What is a Semiconductor? • A semiconductor is a substance, usually a solid chemical element or compound, that can conduct electricity under some conditions but not others, making it a good medium for the control of electrical current. • The most common semiconductor materials are silicon and germanium.
What are Semiconductors Used For? • Integrated Circuits • 89.7% of market • CPU and PC memory (DRAM, SRAM, Flash Memory) • Discrete Devices • Transistors, diodes, resistors • Optoelectrics • LED, Optical coupler, laser diode
What are Semiconductors Used For? • Worldwide semiconductor product breakdown
Industry Characteristics • Short life cycles • Continuous innovation • Moore’s law: The number of transistors in an integrated circuit doubles every 18 months
Industry Characteristics • High Research and Development Costs • R&D is vital to maintaining competitive advantage • R&D enables firms to release competitive products
Industry Characteristics • The sector is highly cyclical with peaks (2000) closely followed by troughs (2001). • While there are numerous strong competitors in this sector, over 64% of the sector remains relatively fragmented. • Intel leads the semiconductor sector, generating $28 billion in revenues, giving the company a 17% sector share.
Industry Characteristics • Where are Semiconductors Used?
2004 Recap • Market Value • The global semiconductors industry sector grew by 28% in 2004 to reach a value of $213 billion. • Market Value Forecast • In 2008 the global semiconductors industry sector is forecast to have a value of $314 billion, an increase of 87.1% since 2003.
2004 Recap • Market Segmentation I • By far the leading source of revenue for the semiconductors industry sector is the IC segment, which generates 89.7% of the sector's value. • Market Segmentation II • The largest market globally for the semiconductors industry sector is the Asia-Pacific region, which generates 56.8% of the sector's value. • Market Share • The leading company in the semiconductors industry sector is Intel, which generates 16.7% of the sector's value.
Industry Stock Performance • Chart: Weekly semiconductors vs SP500
Industry Outlook • Opportunities • Expansion into Asia • Multi-core processors • Network products (wired and wireless) • Mobile products • Laptops • Personal Digital Assistants (PDAs) • Cellphones
Industry Outlook • Increasing Foreign Consumption (sales)
Estimated Future Growth • PC industry • Projected 14% growth • Technological advancement • Telecommunication • Projected 14 % growth • Increase use of wireless telecom products • Consumer products • Projected 30% growth • Increase use of digital technology
Intel Corporation Presented by: Mark Wong
History • Incorporated in California in 1968 • Initially supplied DRAM and EPROMS • Success of memory chip sales funded the microprocessor development • Processor Timeline
Company Overview • Mission statement: “ Do a great job for our customers, employees and stockholders by being the preeminent building block supplier to the worldwide digital economy. ”
Recent Developments • March 2005: Intel Corporation Raises Low End of Q1 2005 Revenue Guidance Above Analysts' Estimates • February 2005: Intel Corporation Desktop Processors Get 64-Bit Support
Recent Developments • January 2005: Intel Corporation Announces New Centrino Mobile Technology • January 2005: Intel Corporation Restructures Into Five Units
Recent Developments • November 2004: Intel Corporation Board Elects Paul Otellini Intel Chief Executive Officer; Craig Barrett to Become Intel Chairman • November 2004: Intel Corporation Doubles Cash Dividend and Authorizes Repurchase of 500 Million Shares of Intel Common Stock
Recent Developments • September 2004: Intel Corporation Invests in Five Companies Developing Technologies for the Digital Home • March 2004: Intel Corporation May Cut China Sales Due To Rule
Management Andrew Grove (Chairman) • Founder (1968) Craig Barret (CEO) • Joined Intel in 1974. Voted into BOD in 1992. Paul Otellini (President and COO) • Joined Intel in 1974, became president in 2002. Andy Bryant (Executive VP, CFO) • Joined Intel in 1981. Became CFO in 1994.
Business Segments and Products • Primary lines of busines: • Intel Architecture Business • Intel Communications Group
Business Segments and Products • Intel Architecture Business • Microprocessors • Desktop Platform Pentium 4 • Mobile Platform Pentium M • Enterprise Platform Xeon • Chipsets • Intel chipsets are compatible with variety of industry-accepted specifications • Motherboard products
Business Segments and Products • Intel Communications Group • Flash memory • Wired and wireless connectivity products • Processors for handheld computing devices • Cellular baseband chipsets
Major Customers • Distributors • Original Equipment Manufacturers of computer systems • Retail
Competitors • Intel Architecture Business • Advanced Micro Devices (Desktop, mobile platform) • IBM (Desktop, mobile platform) • ATI, Broadcom, SIS, Via (Chipsets) • Nvidia, ATI (Chipsets/Motherboards) • Transmeta (Mobile platform) • Sun Microsystems (Enterprise platform)
Competitors • Intel Communications Group • Samsung, TI (Application processors) • Spanshion (falsh memory) • Qualacom (Cellular baseband chips)
Strategy • Strategy • Utilize core competencies to develop advanced products • Exercise control over value chain • Utilize “Intel inside” marketing campaign • Expand into faster growing complementary businesses • Invest in companies globally to further strategic objectives (Intel Capital program) • Objectives: • Extend silicon leadership and manufacturing capability • Deliver architectural innovation for all platforms • Pursue worldwide opportunities