Intel Corporation (INTC), conventionally known as a world-renowned PC company, is fast expanding into the realm of advanced technologies, such as artificial intelligence (AI), cloud computing, the Internet of Things (IoT) and 5G to stimulate growth while enabling efficiency and profitability across the organization. Here’s how Intel is changing its core, thereby making itself a sound bet for long-term investors.
Research & Development
Intel’s spending on Research and Development (R&D) has steadily risen over the years; its investment in R&D was $12.74 billion in 2016, up 20% from its spending in 2013. The company’s R&D investment shift shows an increasing focus on IoT (up ~80%), non-volatile memory (up ~40%) and data center (up ~25%) while suggesting a slump in mobile (down ~55%) as well as PC CPU (down ~5%). During 2016, Intel topped all other chip companies in terms of R&D spending, exceeding the combined R&D spending by the next three in the list.
Intel was granted 2,784 patents in 2016, an increase of 35.94% over 2015, which helped it secure the sixth spot on the list of the U.S. patent assignees. The percentage increase in the number of patents granted to Intel was the maximum among the top ten players.
As the world around us becomes increasingly digitally transformed, 5G (fifth generation) is geared to become the basis on which these technologies rest. While most see 5G as a sequential evolution in the connectivity journey, it’s far beyond that; Intel’s Venkata Murthy Renduchintala believes that it’s as transformational as the move “from analog to digital.”
In February, Cisco, Ericsson and Intel entered into a collaboration to develop the industry’s first 5G mobile network router. The three are members of the Verizon 5G Technology Forum, and will be working with Verizon to accelerate the pace of critical 5G innovations. Earlier in January, Intel announced world’s first global 5G modem, which would enable businesses globally to develop and launch early 5G solutions.
“With large-scale commercial deployments expected to begin in 2020, it is estimated that 5G networks will generate nearly $250 billion in annual service revenue by 2025,” according to a report.
Intel is working to reposition itself as a major end-to-end provider of products and services for IoT devices. Through its IoT Platform, Intel says that it “works with third-party solutions to provide a foundation for seamlessly and securely connecting devices, delivering trusted data to the cloud, and delivering value through analytics.”
As more and more organizations invest in hardware, software, services, and connectivity that enable IoT, the global IoT spending is projected to reach $1.29 trillion in 2020. During 2016, Intel’s IoT group revenue was reported at $2.6 billion, up 15% from 2015.
Data Centers & Cloud
Intel operates more than 60 data centers housing approximately 145,000 servers. Its vision encompasses the next-generation data center built on software-defined infrastructure (SDI), which is highly flexible and responsive and is thus adopting the most advanced technologies such as AI to deliver the best products and services possible.
Today, Intel powers more than 97% of data center servers running AI/machine learning workloads. Intel’s offerings include Xeon, Phi processors, field-programmable gate arrays (FPGAs) and the technology innovations acquired from Nervana.
In addition, Intel is working with leading cloud computing providers such as Google, Microsoft, Alibaba and AWS to fuel cloud innovations and adoption.
Currently, less than 10% of servers worldwide are deployed in support of machine learning. However, the insights and capabilities offered by it pitch for its phenomenal growth in the coming times.
The ecosystem of processors, computing capabilities, artificial intelligence, cloud and 5G are revolutionizing Intel from the inside, equipping it for the connected world and the technological disruptions that are underway in industries (such as car automation, healthcare) while generating growth stimulus and revenue streams.
The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.