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

1. VS
Group 1|Bayswater
Toby Allen | Moritz Ilg | Simone Rossi | Antoine Abinader
Maureen Mahr Von Staszewski |Walter Felix | Harsh Chaitany

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. 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. 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. 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.

7. 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%

8. Business Overview

10. 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

11. 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

12. 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

13. COMPARING STRATEGIES
USING PORTER’S 5 FORCES

14. 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

15. Structure
Intel Structure
•Global Network
•Spanning
Multiple
Industries
•Multidimensional
Business Model
ARM Structure
•Lean
organisation
•Global presence
•Extensive partner
network

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. LOOKING FORWARD

25. 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

26. Trends & Changes from 2014+
• Internet of things (IoT)
• Mobile & Low power Tech chips
• Cloud Computing & Data Centers

27. 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

28. CONCLUSION

29. 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

30. QUESTIONS