To our stockholders, customers, partners,
and employees:
Legendary intel CEO Andy Grove talked about “strategic
inflection points," periods of fundamental change in a
business, an industry, or even the world. At such times, he
said, clarity about what you uniquely do and why you do itis
‘essential to defining your path forwara
‘The emergence of data as a transformational force is such a
moment—for the world and for Intel. We already create
technology that enriches lives, serving every industry, every
sector of society, and nearly every person on earth, every day.
But now nearly everything looks more lke a computer and,
therefore what it means to have “Intel Inside” is changing.
‘A.computer is no longer simply a PC or a server in ad
center, or even a phone. Computing is permeating all of our
interactions: the global communications network, every retail
experience, vehicle, hospital, arm, and factory floor. This is
helping unleash the potential of data in every part of our lives
and create societal and economic value on a global scale.
Intel Inside now goes well beyond the familiar CPU in your PC
to include processors that orchestrate a network, visual
processing units that help give a car awareness ofits
environment, and ASICs specially tuned to machine learning
algorithms, Also, new, highly fexible packaging technologies
‘enable platform solutions that solve our customers’ biggest
challenges.
‘This profound evolution in computing opens a much larger
‘opportunity with implications for every aspect of our
business. As Intel's leadership team, we must reimagine the
world through this change, and move forward boldly, not
constrained by history. This includes the iconic Intel culture
that helped define not just our company, but Silicon Valley
itself. In some regards, that culture is more differentiating
than ever, particularly the value we place on brillant
‘engineering, integrity, tcuth, and transparency. But we also
know that we must continue to evolve our culture. We must
approach every day with a growth mindset.
We took important steps in that direction in 2019, Our focus
‘on data drove record financial performance, informed.
strategic investments, and gave us the conviction to make
tough decisions about what not to do. The result isan Intel
that is more relevantin a world where Al is pervasive,
networks are transforming for unprecedented amounts of
data, and more intelligence is moving to the network edge.
‘These emerging opportunities all benefit from Intel's unique
ability to reimagine the boundaries of innovation, achieve
‘economies of scale, and build global ecosystems.
“Our ambition is to play a much larger
role in our customers’ success.”
Oe
Bob Swen, Chet Executive Officer
‘Our progress on this journey and our record results are
gratifying, but they're not a reason for complacency. Our
ambition is to play a much larger role in our customers’
success. Therefore, we need to ensure that we exceed their
‘expectations and deliver what they need when they need it.
‘Sometimes we failed to do that last year, and that was
unacceptable, Customers look to Intel for a predictable
cadence of high-performance products and technologies that
are integral to their success. They also look for products that
are designed for privacy and security, and manufactured ina
sustainable, ethically sourced way. Accountability comes with
the territory. We will improve our execution,
We are positioned for another strong year in 2020. We will
continue to make significant investments in R&D and capital
‘expenditures to deliver an unmatched portfolio of leadership
products, increase capacity for our customers, and accelerate
‘our Moore's Law transitions. We expect to return in excess of
100% of free cash flow in 2020 through our dividend and
share repurchases. And finally, we will leverage our leadership
position in the global tech ecosystem to help Intel and the
industry make more progress in corporate responsibilty,
environmental sustainability, diversity, and inclusion. No one
company, no matter haw significant, can solve these
problems alone. We will soon outline long-term goals to
‘extend our positive global impact through 2030 and beyond.
‘To explain why |am so confident in our future, let me briefly
Address three key elements of our journey going forward
investing in strategic technology inflections to accelerate
‘growth; executing and innovating inspired by Moore's Law,
and, critically, taking our culture forward.
Embracing strategic inflections
Intel at its best creates technologies that have true global
impact. The PC, the Internet, and the cloud were fully realized
in part because of the power of our technology and the
richness of our ecosystem. The technology inflections now
driving the data revolution—A, 5G, and the intelligent edge—
will similarly rise on a foundation of great technology, shared,
standards, and scale economics that unlock the creativity of
innovators around the world,‘Intel at its best creates technologies
that have true global impact. The PC,
the Internet, and the cloud were fully
realized in part because of the power
of our technology and the richness of
our ecosystem.”
‘As a result, our opportunity and our ambitions have never,
been greater. Our strategy to help customers unleash the
potential of data has increased our addressable market by
about five times, to nearly $300 billion’. And we made
significant progress in 2019, repositioning Intel for these new
inflections.
According to IDC, 75% of enterprise applications will use Al
by 20212, That's why we're infusing Al into everything we
build, One reason Cascade Lake is our fastest ramping Intel”
Xeon’ processor ever is its unrivaled Al performance,
including built-in Intel” Deep Learning Boost technology. Our
Intel’ Movidius” Vision Processing Unit is a performance
leader for Alat the edge, and we recently acquired Habana
Labs, further strengthening our broad A\l portfolio.
With products spanning from the cloud to the intelligent
‘edge, we generated billions in Al-driven revenue in 2019,
growing in strong double digits.
We also have a very significant networking business helping
‘our customers transform their networks with a cloud-style
infrastructure that's more flexible and efficient, virtualizing
workloads on Intel’ architecture-based servers.
‘The 5G era will significantly increase demand for computing
throughout the network. Many services delivered from a
distant cloud today will be processed nearby to improve the
‘experience—at what we call the intelligent edge—ivhether the
‘context is Al-assisted retail or a super-efficient factory.
Perhaps the most transformational segment atthe intelligent
‘edge will be transportation or “mobility,” where Intel is a
leader thanks to our acquisition of Mobileye two years ago. We
couldn't be more excited about our progress toward winning,
the $70 billion-plus? opportunity for advanced diver-
assistance systems, autonomous vehicles, and crowd-sourced
maps generating valuable data. We aim to play an even larger
role in the $160 billion? opportunity for mobility-as-a-service.
We recently demonstrated our capability in a very public way
when analysts and media from around the world test drove
‘our technology on the demanding roads of Jerusalem, where
the industry's leading autonomous vehicle solution navigated
‘awide variety of driving complexities and delivered
unmatched agility and safety.
's Law
Executing, inspired by Moor
Our co-founder Gordon Moore articulated a law of
‘exponential improvement for semiconductors in 1965 that
led us from tens, to tens of billions of transistors per chip. His
simple thought experiment stil inspires our team every day to
continue reinventing not only transistors, but everything we
do,
‘To keep his vision alive, we are innovating and investing across
sic pillars of technology that will uel our product leadership:
process and packaging, architectures, memory, interconnects,
secutity technologies, and software. At the same time, Intel
Labs is researching completely new approaches to
computing—such as neuromorphic, probabilistic, and
‘quantum—that could untock completely new opportunities
‘Our process technology and design engineering teams are
working closely to simplify design and balance schedule,
performance, power, and cost, leveraging each of our six
pillars. In 2020, we will continue to make progress with
important new products, platform initiatives, and software
‘optimizations.
+ Data center performance will advance when our 3rd
generation Intel’ Xeon” Scalable processor debuts in the
second quarter of 2020 with “Cooper Lake," followed by
initial production shipments of 10-nanometer "Ice Lake
the latter part of the year. We will also continue to deliver
platform solutions in the data center, combining
Advancements in CPU with technologies like Intel’ Optane™
DC persistent memory,
+ Client performance in mobile has excellent momentum to
diate on the strength of 10-nanometer Ice Lake system.
designs, and will advance with our newest Intel’ Core™
mobile processors, code-named "Tiger Lake,” later this
year. Our Project Athena program also helps the industry
Create laptops with truly exciting innovations that
consumers and businesses really care about, including.
longer battery life and instant wake features. Together with
our partners we expect to have verified more than 70
Project Athena designs across Windows and Chrome by the
end of this year.
10th Gen Intel Core Processor, code-named “Ice Lake
+ Software optimization is critical for any workload on an
individual silicon architecture, but it isn’t enough to
approach each in isolation when customers’ problems
increasingly demand diverse computing architectures.
That's why we launched the oneAPI industry initiative to
deliver a unified and simplified programming model for
application development across a giobal ecosystem on
diverse architectures,
» Source: Intel calculated 2024 total addressable market derive from industry analyst reports
2 Source: International Data Corp. IDC), “Ari! Intelligence Requires Tolloree Solstions trom Technology Providers"(2019),
4 Source Intel calculated 2030 foto! addressable market derived from industry analyst reportsur pipeline of innovative 10-nanometer products is strong, “Our cultural evolution will be a significant
We are accelerating the pace of process node introductions,
moving back to a two- to two-and-a-half-year cadence with focus for me and the Intel leadership team in
‘7-nanometer-based products, and we are well down the 2020."
‘engineering path on 5-nanometer.
‘Our cultural evolution will bea significant focus for me and
Evolving our culture the Intel leadership team in 2020. Our success evolving our
culture will determine how we perform over the next decade
and how we fulfil our purpose to create world-changing
technology that enriches lives.
Intel has a wonderful culture, and we want to keep all the
‘elements that have made our company special. But we also,
know that healthy and successful organizations evolve and
adapt as circurnstances change. ‘The opportunities and profound strategic inflections that this
data revolution represent are evident, Intel is both positioned
and driven to seize them, I could nat be more proud to lead
this group of people. | want to thank our many stakeholders
for their belief and partnership with Intel.
When you ae the clear lear in any feld—as Intl has been
in semiconductors for PCs and servers—shere iva danger that
your listening skis and your curiosity about the wor wilt
trode, This 3 big part of what Andy Grove meant wien he
{Sid “Only the paranoid survives And that comes nto sharp
focus when you aggressively reposition your company to
address a major new market opportunity, as we are today. In -
an estimated $300 billion market opportunity, wehaveunder C2 XY S$
25 percent share, with a more dverse universe of customers go, ewan CEO
andincressed competion. ee gua EO
‘This has several important cultural implications:
We must be customer obsessed, When you want to play
a bigger role in your customers’ success, and when the
sources of that success are shifting, you must understand
their ambitions and their challenges so you can anticipate
their needs,
2. We must show up as “One Intel." When you expand your
horizons, you have a lot of new competitors, You must
bring everything you have—your collective talents—in
order to win.
3. We must be fearless. When you become a challenger,
you're highly motivated to reinvent yourself and your
portfolio, and not simply protect what you built.
Fortunately, we have the best team of problem-solving
‘engineers on the planet. It's the job of our leadership
team to foster the risk taking and learning mindset of a
challenger.
4. We need truth and transparency, Success over decades
and fear of failure can inhibit the free flow of information
between teams. It can make the constructive
‘confrontation for which Intel is famous too
uncomfortable. Or you may fail to truly confront what
data is telling you. You can't do that in a fast-emerging
‘opportunity
5. We must create a diverse and inclusive workplace. it's
‘essential toa growth strategy, We've made good
progress and have set an example as a company that is
‘open about our diversity and inclusion journey, but we
have much to learn and to do.
‘This Annual Report contains forward-looking statements, and actual results could lifer materially isk factors that could cause actual results to
diffe are set forth in the Risk Factors" section and throughout our 2018 Ferm 10-K, which s included inthis Annual Report. These risk factors are
subject to update by our future filings and submissions with the US. SEC. Forward-looking statements included in our 2019 Form 10-K are based
‘on management's expectations as of January 23, 2020, and forward-looking statements inthe CEO and Chalrmen letters are based on
‘expectations as of March 2, 2020. Intl cisc’aims any obligation to update these statements, except as required by law.