2020 Annual Report Letter from Your CEO
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2020 Annual Report Letter From Your CEO To our stockholders, customers, partners, and employees: When I joined Intel at the age of 18, I could not have imagined that I would one day have the honor of becoming CEO of this iconic company. After a 30-year journey inspired by the leadership of Gordon Moore, Robert Noyce, and Andy Grove, and then a decade away, I have returned to Intel with great excitement and passion to take on my dream job. For the last eight years, I was CEO of VMware, where I had the privilege of re-imagining an enterprise software pioneer and leading it to new heights. I gained valuable insights along the way, but my experience at Intel has always been foundational to my thinking and close to my heart. I take on this job humbled by the challenges and excited by the limitless opportunities. Digital technology is transforming the world at an accelerated pace, driven by what I call the four key “superpowers”: cloud, mobility fueled by 5G, artificial intelligence (AI) and machine learning, and the intelligent edge. They are superpowers because each expands the impact of the others and together, they are reshaping every aspect of our lives and work. This goes straight to Intel’s purpose and my own passion: creating technology that Pat Gelsinger, Chief Executive Officer touches and enriches the lives of every person on earth. While we are operating from a position of progress and These superpowers are also reshaping the business of silicon financial strength, we have a great deal of work ahead of us. innovation. In this evolving landscape, Intel is the only Since I returned to Intel, our customers, partners, and company that has the depth and breadth of intelligent silicon, employees have given me direct and honest feedback about platform, software, architecture, design, manufacturing, and what Intel does well and where we must do better. They scale that our customers need to capitalize on these continue to see Intel as essential to solving problems at scale, opportunities and fuel their next-generation innovations. safeguarding the technology infrastructure, and securing the global semiconductor supply chain. They also know that we This was underscored in 2020 as Intel delivered another year must once again lead in execution and innovation, with a of record financial results, while navigating the impacts of a predictable roadmap of leadership silicon. global pandemic. This is a testament to my predecessor Bob Swan’s leadership. He laid the foundation for the company’s I am confident that Intel can be the world’s leading transformation in three key areas, including our expansion semiconductor company and set a course for a new era of beyond silicon to platforms as well as an evolution of the innovation and technological leadership in this landscape of integrated device manufacturer (IDM) model, setting the stage tremendous change. We may look different from our past in for our new IDM 2.0 vision. He broadened our focus from many respects, but we will always remain dedicated to central processing units (CPUs) to a full portfolio of xPUs, excellence in engineering innovation and execution. I have where CPUs remain the center of our business, but we also four priorities that will fortify our leadership position: now deliver graphics processing units (GPUs) and other special-purpose accelerators for AI, machine learning, and 5G. Be the leader in every category in which we compete. We have a strong product roadmap that highlights the power “Intel is the only company that has the of integrated design and manufacturing to create truly differentiated products. We are well-positioned to lead the depth and breadth of intelligent silicon, industry, building on our CPU leadership with a diverse xPU platform, software, architecture, design, portfolio and deep customer collaboration. But we must move faster to outpace the competition where we are the manufacturing, and scale that our established leader, take share in adjacent segments where customers need to capitalize on these they are strong, and learn and capitalize on new opportunities opportunities and fuel their next- more quickly with data and analysis driving decision making. generation innovations.” Execute flawlessly to our commitments. We must demonstrate that customers can rely on Intel for their products and their strategies for the future. We will continue to ramp our portfolio on the Intel 10nm high-volume manufacturing process in 2021 in Oregon, Arizona, and Israel. We will deliver with quality and scale our Intel 7nm process and invest in future manufacturing leadership. We will also leverage our foundry and supplier ecosystem as part of our agile IDM 2.0 model that customers can rely on for the greatest innovations in the industry, delivered with agility and at scale. Passionately innovate with boldness and speed. We will be a source of continuous innovation through world-leading engineering, leading process technology, and research into next-generation computing architectures. We will lead in new chip designs and technologies that accelerate our customers’ high-value workloads in the cloud, at the edge, and on the client. We will continue to pursue radical areas to innovate as every aspect of the world and humanity comes online and creates more opportunities for us to transform digital technology. We must outpace anything our competitors—or I am thrilled to lead Intel during a critical time of change and customers—can build. vast opportunity to shape the future of our industry and the world. I look forward to working with our extraordinarily Reignite our culture to attract and motivate the best talented Intel team and our industry partners around the engineers and technologists on the planet. Intel must be world to create and deliver leadership products, powerful where the best talent in the world can fulfill their dreams, platforms, and breakthrough technologies to our customers contributing and inventing at a scale that touches the lives of around the world. every person on earth. We need to untether our enormous energy and potential for our business with a vibrant, inclusive, I believe deeply in this company and the powerful future we and open culture. We need to bring back key aspects of the will create together. Our best days are in front of us. “Grove-ian” discipline for direct, transparent, and data-driven decisions and accountability. This will unlock enormous energy and potential for our business. “We will help solve the world’s greatest challenges through deep technical collaboration with our customers, helping them transform their industries with radical innovation Pat Gelsinger, CEO and leadership products.” Intel Corporation March 2, 2021 In addition to positioning Intel for success in a new era, these priorities serve a higher purpose. We will help solve the world’s greatest challenges through deep technical collaboration with our customers, helping them transform their industries with radical innovation and leadership products. Along with customers, partners, governments, and NGOs we will support smart policies that accelerate the creation of safe and secure digital infrastructure, advanced manufacturing, and a workforce of the future. We will work with government partners to ensure the integrity and resilience of our global supply chain, and ensure Intel is the source and the enabler of U.S. technology leadership that fuels a global ecosystem. And we will remain steadfast in our commitment to achieve Intel’s 2030 global challenges focused on positive impact in responsibility, inclusivity, and sustainability. This Annual Report contains forward-looking statements, and actual results could differ materially. Risk factors that could cause actual results to differ are set forth in the “Risk Factors” section and throughout our 2020 Form 10-K, which is included in this Annual Report. These risk factors are subject to update by our future filings and submissions with the U.S. SEC. Forward-looking statements included in our 2020 Form 10-K are based on management’s expectations as of January 21, 2021, and forward-looking statements in the CEO and Chairman letters are based on expectations as of March 2, 2021. Intel disclaims any obligation to update these statements, except as required by law. Letter From Your Chairman 2020 was a time of crisis and renewal for Intel, marked by the global pandemic, economic disruption, calls for action on social equity, devastating wildfires, and intense competition. Intel employees met the challenges with extraordinary energy, demonstrating again the resilience of the culture. Thanks to their focus and diligence, Intel entered 2021 with a renewed sense of purpose as well as a position of financial and strategic strength. Intel revenue for 2020, $77.9 billion, was the highest in the company’s history. The company generated $35.4 billion in cash from operations for the year and $21.1 billion in free cash flow1. This brings cash from operations over the five years ending in 2020 to a total of $141.9 billion and free cash flow for this period to a total of $74.8 billion. Return on average equity for the year was 26.4%, bringing the five-year average to 22.8%. These results reflect the economic value of Intel’s technology, strategy, and execution. Omar Ishrak, Chairman of the Board In technology companies, value creation begins with technical innovation and the people who achieve it. When I joined the “Intel has visionary leadership who we Board of Directors, I was impressed by the scope and depth of are confident will take the company to the technical talent at Intel. When I was an engineering student, I had read about the groundbreaking work of Intel’s new heights and set future directions founders and was inspired by how the technology they were of technology for Intel and the developing was changing the world.