Intel Corporation: 1968–2013
Charles W.L. Hill
School of Business, University of Washington Seattle, WA 981095, June 2013
In 2012 Intel was the leading manufacturer of micropro- cessors for personal computers in the world, a position that it had held onto for more than two decades. Over 80% of all personal computers sold in 2012 used Intel microprocessors. The company reported revenues of $53 billion and net pro ts of $11 billion. Meanwhile, Intel’s only viable competitor, AMD, which in the early 2000s had been gaining share from Intel, lost $1.2 billion on sales of $5.4 billion.
Despite its historic dominance, the future looked uncertain for Intel. The rise of mobile devices had led to a strong substitution effect, with sales of PCs fall- ing as consumers switched to smart phones and tablets for many of their computing needs. In the rst quarter of 2013, global PC sales fell 14% on a year over year basis according to the research rm IDC. This was the worst yearly decline since IDC started tracking PC sales in 1994, and the fth quarter in a row that PC sales had fallen. At the same time, sales of smart phones and tab- lets were booming. IDC predicted that sales of tablets would grow almost 60% in 2013, and that tablet ship- ments would exceed those of portable PCs.1
The crux of the problem for Intel is that most tablets and smart phones used microprocessors that are based on technology licensed from ARM Holdings PLC, a British company whose chip designs are valued for their low power consumption, which extends battery life. While Intel has a line of chips aimed at mobile devices—the Atom chips—microprocessors incorporating ARM’s technology were found on 95% of smart phones in 2012 and over 30% of all mobile computing devices, a cate- gory that includes tablets and PC notebooks.2 Moreover, in 2012 Microsoft issued a version of its Windows 8
operating system that ran on ARM chips, rather than Intel chips, creating a potential threat to Intel’s core PC business.
The FoundaTion oF inTel
Two executives from Fairchild Semiconductor, Robert Noyce and Gordon Moore, founded Intel in 1968. Fairchild Semiconductor was one of the leading semi- conductor companies in the world and a key enterprise in an area south of San Francisco that would come to be known as Silicon Valley. Noyce and Moore were no ordinary executives. They had been among the eight founders of Fairchild Semiconductor. Noyce was gen- eral manager at the company, while Moore was head of R&D. Three years previously, Moore had articu- lated what came to be known as Moore’s Law. He had observed that since 1958, due to process improvements the industry had doubled the number of transistors that could be put on a chip every year (in 1975 he altered this to doubling every two years).
Fairchild Semiconductor had been established in 1957 with funding from Sherman Fairchild, who had backed the founders on the understanding that Fairchild Semiconductor would be a subsidiary of his Fairchild Camera and Instrument Corporation on New York. By 1968 Noyce and Moore were chaf ng at the bit under management practices imposed from New York, and both decided it was time to strike out on their own. Such were the reputations of Noyce and Moore that they were able to raise $2.3 million to fund the new venture “in an afternoon on the basis of a couple of sheets of paper