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. 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%
- 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
Editor's Notes
- SWOT Strengths Market Leader Major foothold in major markets such as Germany, UK, US & US Cadbury Schweppes (agreement in place) – positives for further international expansion Superior product Engagement with consumers Created the industry – 1st and original Product on trend – preferential choice of consumers Weaknesses Lack of diversification of product range (2004) – missing out on additional revenue streams Vulnerable to the buoyancy of energy drinks market – staying on trend Over-reliance on club/bar scene - 76% revenue / 64% volume sales High price – undercutting Opportunities Entering of new markets Production of new products Consolidation of existing markets – pushing sales Re-engage with lost generation Emergence of social media and Web 2.0 (video and interactivity) Threats Direct threat from competitors e.g. Monster (backed by drink giants) Regulatory risk – Perceived health issues Saturated market – differentiation is harder
- http://www.intc.com/intel-annual-report/2012/business/selected-financial-data/
- http://www.intc.com/intel-annual-report/2012/business/business-organization/
- ARM specialises in the development of processor designs It licenses its designs to customers and receives a license fee for each sold license It also receive royalty fees for each single chip sold by its customers ARM has created an ecosystem with over 1,000 partners that it works with to develop and sell its processors
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally
- Strategy Organic growth strategy through licensing and development of new technologies It created an ecosystem of partners Co-development of new technologies Origins in energy-efficient, low-power processors Structure Extremely lean through the specialisation in processor design Global presence with own offices that are empowered to work independently Maintains extensive external network of 1,000 partners Systems Frequent internal conferences and workshops are used to enable smooth collaboration on new technologies Regular conferences and workshops with partners are held to align product roadmaps and co-develop new technologies Staff Strong focus on R&D and development of new technologies 2/3 of employees are engineers A mix of graduates and experienced professionals is hired Founding CEO and the chairman of the board retired and could create leadership problem Skills Strong emphasis on good communication skills Focus on management of sophisticated internal and external teams Style Open culture with focus on good cross-functional collaboration Open two-way communication with partners to create mutual benefits Sharing of information internally and externally