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Intel & ARM: Strategic Comparison

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A strategy comparison between Intel and ARM done for the HULT MBA

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Intel & ARM: Strategic Comparison

  1. 1. VS Group 1|Bayswater Toby Allen | Moritz Ilg | Simone Rossi | Antoine Abinader Maureen Mahr Von Staszewski |Walter Felix | Harsh Chaitany
  2. 2. Overview of industry • Industry: Semiconductors • Governed by Moore’s Law • Semiconductors are electronic components used in a diversity range of products such as PCs, mobile phones and TV sets. • The demand for consumer electronics, computers and industrial machinery was slow due to global economy in 2008 and 2009. • In 2014, the Global Semiconductor and Electronic Parts Manufacturing industry is expected to generate $755.2 billion in revenue, up 3.2% from the previous year.
  3. 3. Value Chain Overview IP Development Processors Intel, ARM Chip Design Manufacturing Software and Applications Operating Systems Apple, Google, (iOS, Android), Apps Microsoft End Product Segments Smartphones, Tablets, PCs, IT infrastructure Apple, Samsung, Dell, Google Chips, fabrication tools Intel, Samsung, Texas Instruments, Qualcomm Generic & Custom Intel, AMD, Samsung, NVIDIA Chips are central to computers
  4. 4. Intel & Arm Product INTEL • High End Powerful MicroProccessors • Broad Product Range Commonly Found in… ARM • Mobile Chips • Small and Light • Low Energy Consumption Commonly Found in…
  5. 5. Semiconductors Five Forces Threat of new Entrants - R&D investments - High capital expenditures to create a high entry barriers. Power of Suppliers - Few manufacturers with almost all the industry manufacturing capacity. - Chinese Rare earth mineral Control Rivalry among existing competitors The industry is fast growing with a permanently pressure on market Threat of substitutes participants - Copycat producers creating a certain threat of substitution - Mitigated by the very small innovation cycles in the industry making hard for new entrants. Power of Buyers - Limited number of large buyers. - Significant bargain power over the suppliers.
  6. 6. Intel Key Metrics KPI Number Number of employees 105,000 Worldwide Revenues in 2012 (in milion $) $53,341 Operating Margin $14,638 Market Share in processor chips 90% Market Share in mobile handsets <10%
  7. 7. Business Overview
  8. 8. Key Metrics KPI Number Number of employees 2,392 Revenues in 2012 (in milion $) 913 Operating Margin 36% Market Share in processor chips 32% (8.7b) Market Share in mobile handsets 95% Number of processor licenses 954 Number of new design 2-3 devlopments per year Source: ARM Annual Report 2012
  9. 9. Business Model Fabrication partners Chip design partners ARM • Supply device manufacturers • Manufacture chips • Contract fabrication • Pay license and royalty fees • Licenses designs to partners • Develops processor designs
  10. 10. Revenues and Profitability Year Revenues (in million $) Operating Income (in million $) Operating Margin 2008 546 109 20% 2009 490 74 15% 2010 631 164 26% 2011 785 236 30% 2012 913 329 36% 1000 900 800 700 600 500 400 300 200 100 0 2008 2009 2010 2011 2012 million $ Year Revenues Operating Profit
  11. 11. COMPARING STRATEGIES USING PORTER’S 5 FORCES
  12. 12. Strategy Intel Strategy • Manufacturing Leader • Dominate PC Market • Vertical Integration (Semi) • Always adapting Flexibility • High End Market • Acquisition (6 in 2013 alone) • Broader Portfolio of Products ARM Strategy • Specialisation • Organic growth • Ecosystem • Open source
  13. 13. Structure Intel Structure •Global Network •Spanning Multiple Industries •Multidimensional Business Model ARM Structure •Lean organisation •Global presence •Extensive partner network
  14. 14. Systems Intel Systems •Vertical Solution from Chip Design to In-House Manufacturing Solution •Allows optimisation performance, shorter time to market, & scale new products more rapidly •R&D: •Collaborative and Business Partners in R&D •Cross-Business group R&D, including joint ventures and acquisitions ARM Systems • Frequent interal workshops •Regular partner conferences •Feedback loop from partners and licensors
  15. 15. Staff Intel Staff •Huge Manpower •105,000 Worldwide •Broader skillset which allows them to adapt better •Requires more diverse staff and skills ARM Staff •Mostly engineers •Graduates and experienced professionals •Retirement of founding CEO and chairman
  16. 16. Skills Intel Skills • +20 years of experience •Wide Core Competencies • Provide IT, Cloud, Security and other services ARM Skill • Strong communication skills •Management of sophisticated project teams
  17. 17. Style Intel Style • Leadership Style: • Estimated 2-year process technology lead • About a 3.5-year lead in introducing revolutionary transistor technologies into high-volume manufacturing • Strained silicon, High-K Metal Gate, and Tri-Gate • Marketing & Brand Power ARM Style • Open internal communication • Open external two-way collaboration • Focus information sharing
  18. 18. Shared Values Intel Style • Create and extend computing technology to connect and enrich the life of every person on Earth. • Being the industry leading force • Corporate Social Responsibility regarding conflict minerals ARM Style • Open communication internally and externally • Strong focus on collaboration internally and externally • Focus on mutual benefits to strengthen partnerships
  19. 19. Intel Sustainable Strategic Advantage Vertical Integration • Building Entire Chip from Design to Manufacturing and Vendor • Ability to fix and optimise Chips • Flexibility in Economies of Scale • Backend Support Business Intel • Chip Design Intel • System on Chip (SoC) Intel • Manufacturing
  20. 20. ARM Sustainable Strategic Advantage The EcoSystem • Only Licenses Chip Design • Multiple Licensors & Partners • Upfront Licensing fees • Continuous Royalties from partners Manufacturing SemiCo Partners CPU ARM Nvidia TSMC QualComm UMC Apple GloFo Samsung Samsung Broadcom SMIC Text Instruments Intel
  21. 21. Strategy School of Thought Intel • Configuration school – Strategy and Organisation development are closely intergrated – Development is provided by new business units – Periods of stability are interupted by transformation in processes – Struggles and Revolutions occur regularly (2~3years) ARM • Learning school – Formulating strategy is the result of cross-functional collaborating internally in the search of new technologies – High investments into internal communication and collaboration indicates bottom-up approach to strategy – External partner conferences and meetings lead to new directions for product development
  22. 22. LOOKING FORWARD
  23. 23. Current Market Domination Short Term Changes • Still moving from high performance & high power consumption to high performance, low powered • PC market is under threat from ARM & AMD Intel • Dominate the Manufacturing Sector • Dominate the integrated Solution factor • Strongest brand power ARM • Dominate the Mobile segment • Entry into PC Market & Server segment Forecast
  24. 24. Trends & Changes from 2014+ • Internet of things (IoT) • Mobile & Low power Tech chips • Cloud Computing & Data Centers
  25. 25. Industry trends and impact Trend Intel ARM Internet of Things Will utilise it‘s broad portfolio of integrated products and services to gain market share Will leverage its partner network to supply a broad set of products Mobile Will gain market share due to new supply contracts with major buyers Will continue to dominate due to its core competence in low performance chips Cloud computing and data centers Will continue to dominate due to its core competence in high performance chips Will gain foothold due to its new high performance chips
  26. 26. CONCLUSION
  27. 27. Conclusion • Strategic rivalry between Intel and ARM will intensify • The rivalry will expand to almost all market segments • Each of the two competitors will maintain a dominant role in their respective core segments but will increasingly challenge each other Intel • Defend PC Market • Focus on IoT • Focus on Cloud • Focus on Data Solutions • Continue R&D Spend ARM • Lead the way on mobile & device Market • Maintain Ecosystem • Increase spending on R&D
  28. 28. QUESTIONS

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