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www.intel.com
News and information about Intel® products and technologies, customer
support, careers, worldwide locations, corporate responsibility and
sustainability, and more.
www.intc.com
Stock information, earnings and conference webcasts, annual reports, and
corporate governance and historical financial information.
LETTER FROM YOUR CEO
When I stepped into the role of Intel CEO almost five years ago, this
company had a decision to make: protect the past or chart the future.
At the time, Intel’s core PC market was declining, but the explosion of
data brought on by the rise of smartphones and social media was
driving growth in cloud computing and paved our way forward.
Since that time, Intel has been undergoing one of the most significant
transformations in corporate history. We are evolving from a PC-
centric to a data-centric company, delivering products that play critical
roles in processing, storing, analyzing, and sharing data to enable
amazing new experiences and competitive advantages. Put simply,
Intel is building the foundation for technology’s data-driven future.
2017 was a year of outstanding progress in our transformation. We
delivered record revenue of $62.8 billion and strong growth in
operating income with solid execution and spending discipline. Few
companies can grow in the face of a declining core market. Between
2012 and 2017, PC unit volumes declined 25%, yet Intel revenue grew
more than $10 billion. It’s clear our strategy is working.
We are successfully keeping our PC business healthy and strong while
accelerating growth in the data center, Internet of Things, memory, and
programmable solutions. Collectively, Intel’s data-centric businesses
are growing in the mid-teens and approaching 50% of Intel’s total
revenue. The investments we’ve made in promising, data-driven
market opportunities like 5G communications, artificial intelligence,
and autonomous driving are starting to pay off.
In 2017, we acquired Mobileye to combine its leading computer vision and mapping technology with Intel’s high-performance
computing and connectivity to deliver automated driving solutions from the cloud to the car. This is already a winning
combination. Now an Intel company, Mobileye earned more customer designs in 2017 than in the prior year.
While 2017 was a financial high note for the company, I’m even more excited about Intel’s future. We are now competing for a
$260 billion total addressable market—the largest in Intel’s history. In some markets, Intel is the challenger, and winning will
require bold moves, smart trade-offs, and a growth mindset. In all markets, Intel will continue to operate responsibly and with the
integrity and transparency that has defined our culture.
This year Intel is celebrating a half century of innovation that has profoundly changed the world. Personal computing, the Internet,
and cloud computing would not be possible or pervasive without the invention of Intel® architecture and our relentless pursuit of
Moore’s Law. In 2018, we will continue making the world’s best silicon as we focus on executing to our strategy and meeting our
commitments to stockholders and customers.
In our 50th year, a new Intel is emerging. We are well-positioned to be the end-to-end platform provider for the new data world,
and a leader in artificial intelligence and the autonomous revolution. I could not be more proud to lead this company or more
optimistic about Intel’s future.
Brian M. Krzanich, Chief Executive Officer
Past performance does not guarantee future results. 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 2017 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. Securities and Exchange Commission and earnings releases.
[THIS PAGE INTENTIONALLY LEFT BLANK]
LETTER FROM YOUR CHAIRMAN
Several years ago I told you in this letter that Intel was changing
to create more value for our owners. In 2017, Intel reported
significant progress toward this goal.
The Board of Directors is also evolving. We have worked to make
sure that collectively we have the appropriate skills and
backgrounds to be strong stewards in a dynamic industry. In the
past two years, as a part of Board refreshment, Intel has added
five new exceptional directors. They bring fresh perspectives and
a rich mix of depth in areas such as business strategy, technology,
innovation, global markets, compliance, and oversight. We
continue to look for people with diverse backgrounds to address
the challenges of today and tomorrow.
After reviewing the structure and independence of the Board, we
rotated almost all committee leaders, changed committee
assignments, and appointed a new independent Lead Director. At
the end of 2017, the Board had nine independent directors, who meet regularly as a group. Four of the Board’s five standing
committees are chaired by independent directors.
The Board continues to work closely with the CEO on business strategy and capital allocation, building on the company’s core
strengths and increasing investments in growing businesses and emerging technologies. Of Intel’s 2017 capital investment of
$11.8 billion, the largest amount was deployed for equipment and facilities to produce advanced silicon. The investment in logic
was roughly flat compared to 2016, while the investment in new memory technology grew significantly. With the purchase of
Mobileye for approximately $14.5 billion, Intel acquired some of the world’s most advanced technology in machine learning and
computer vision.
Intel’s investments in technology are long term. To assess their business value, my rule is to follow the cash. By this measure, the
returns on investments of prior years are evident in the 2017 financial results. Intel’s business generated record cash from
operations of $22.1 billion in 2017, and return on stockholders’ equity was 14%. For the past five years, cash from operations has
averaged $20.8 billion, while return on stockholders’ equity has averaged 18%.
Intel returned $8.7 billion in cash to stockholders in 2017. We paid $5.1 billion in dividends, with a dividend per share increase of
4% over 2016, and we announced a 10% increase in Intel’s dividend per share in 2018. We also repurchased $3.6 billion in
shares. Since 1990, the company has returned a cumulative $164 billion to stockholders through dividends and repurchases.
In 2018, Intel will mark its 50th anniversary, a milestone few companies celebrate. People often ask me how Intel has been able to
survive and grow. I think the answer is that the company has a history of adapting to change while staying true to core values. Intel
has always had a resilient culture that values innovation, optimism, and integrity. Thousands of employees, current and former,
have worked to keep that culture alive, and we are committed to continue doing this while creating value for our owners.
Andy D. Bryant, Chairman of the Board
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2017.
or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
.
Commission File Number 000-06217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of
incorporation or organization
2200 Mission College Boulevard, Santa Clara, California
(Address of principal executive offices)
94-1672743
(I.R.S. Employer
Identification No.)
95054-1549
(Zip Code)
Registrant’s telephone number, including area code (408) 765-8080
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, $0.001 par value
Name of each exchange on which registered
The Nasdaq Global Select Market*
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È Accelerated filer ‘
Smaller reporting company ‘ Emerging growth company ‘
Non-accelerated filer ‘
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2017, based upon the
closing price of the common stock as reported by the Nasdaq Global Select Market on such date, was $158.3 billion. 4,668 million shares of
common stock were outstanding as of February 7, 2018.
Portions of the registrant’s proxy statement related to its 2018 Annual Stockholders’ Meeting to be filed subsequently are incorporated by
reference into Part III of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s proxy statement shall not
be deemed to be part of this report.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
CHANGES TO OUR ANNUAL REPORT ON FORM 10-K
To improve readability and better present how we organize and manage our business, we have changed the order and
presentation of content in our Annual Report on Form 10-K (Form 10-K). See “Form 10-K Cross-Reference Index” within the
Consolidated Financial Statements and Supplemental Details for a cross-reference index to the traditional U.S. Securities and
Exchange Commission (SEC) Form 10-K format.
We have included key metrics that we use to measure our business, some of which are non-GAAP measures. See these
“Non-GAAP Financial Measures” within Other Key Information.
FUNDAMENTALS OF OUR BUSINESS
OTHER KEY INFORMATION
3 Business Introduction
4 A Year in Review
6 How We Organize Our Business
7 Capital Allocation
8 Our Strategy
41 Stock Performance Graph
42 Selected Financial Data
43 Sales and Marketing
44 Competition
45 Intellectual Property Rights and Licensing
10 Research and Development (R&D) and Manufacturing
46 Critical Accounting Estimates
12 Who Manages Our Business
13 Human Capital
46 Risk Factors
54 Non-GAAP Financial Measures
14 Corporate Responsibility and Sustainability
55 Properties
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) -
RESULTS OF OPERATIONS
15 Overview
16 Revenue, Gross Margin, and Operating Expenses
Business Unit Trends and Results
Client Computing Group (CCG)
Data Center Group (DCG)
Internet of Things Group (IOTG)
19
22
25
28
31
56 Market for Registrant’s Common Equity
56 Availability of Company Information
CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTAL DETAILS
57 Index to Financial Statements and Supplemental Details
58 Auditor’s Report
60 Consolidated Financial Statements
65 Notes to the Consolidated Financial Statements
Non-Volatile Memory Solutions Group (NSG)
108 Financial Information by Quarter
Programmable Solutions Group (PSG)
109 Controls and Procedures
34 Other Consolidated Results of Operations
110 Exhibits and Financial Statement Schedules
35 Liquidity and Capital Resources
38 Contractual Obligations
39 Quantitative and Qualitative Disclosures about Market Risk
116 Form 10-K Cross-Reference Index
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve a number of risks and uncertainties. Words
such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,”
“should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements.
In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our
businesses, projected growth of markets relevant to our businesses, uncertain events or assumptions, and other characterizations
of future events or circumstances are forward-looking statements. Such statements are based on management’s expectations as
of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those
expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this
report and particularly in “Risk Factors” within Other Key Information. Given these risks and uncertainties, readers are cautioned
not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various
disclosures made in this Form 10-K and in other documents we file from time to time with the SEC that disclose risks and
uncertainties that may affect our business. The forward-looking statements in this Form 10-K do not reflect the potential impact
of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of February 16, 2018.
In addition, the forward-looking statements in this Form 10-K are made as of the date of this filing, including expectations based
on third-party information and projections that management believes to be reputable, and Intel does not undertake, and
expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise,
except to the extent that disclosure may be required by law.
NOTE REGARDING THIRD-PARTY INFORMATION
This Annual Report on Form 10-K includes market data and certain other statistical information and estimates that are based on
reports and other publications from industry analysts, market research firms, and other independent sources, as well as
management’s own good faith estimates and analyses. Intel believes these third-party reports to be reputable, but has not
independently verified the underlying data sources, methodologies or assumptions. The reports and other publications
referenced are generally available to the public and were not commissioned by Intel. Information that is based on estimates,
forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or
circumstances may differ materially from events and circumstances reflected in this information.
INTEL UNIQUE TERMS
We use specific terms throughout this document to describe our business and results. Below are key terms and how we define
them:
PLATFORM PRODUCTS
ADJACENT PRODUCTS
A microprocessor (processor or central processing unit (CPU)) and chipset, a stand-alone
System-on-Chip (SoC), or a multichip package. Platform products, or platforms, are
primarily used in solutions sold through CCG, DCG, and IOTG segments.
All of our non-platform products, for CCG, DCG, and IOTG like modem, ethernet and
silicon photonics, as well as NSG, PSG, and Mobileye products. Combined with our
platform products, adjacent products form comprehensive platform solutions to meet
customer needs.
PC-CENTRIC BUSINESS
Is made up of our CCG business, both platform and adjacent products.
DATA-CENTRIC BUSINESSES
Includes our DCG, IOTG, NSG, PSG, and all other businesses.
* Other names and brands may be claimed as the property of others. Radeon and the Radeon RX Vega logo are trademarks of Advanced Micro
Devices, Inc.
Intel, the Intel logo, 3D XPoint, AnyWAN, Arria, Celeron, Cyclone, Enpirion, Intel Atom, Intel Core, Intel Inside, the Intel Inside logo,
Intel Optane, Intel Xeon Phi, Itanium, MAX, Movidius, Myriad, Pentium, Puma, Quark, Stratix, Thunderbolt, Xeon, and XMM are
trademarks of Intel Corporation or its subsidiaries in the U.S. and/or other countries.
1
in the design and manufacturing of
essential products and technologies
that power the cloud and an increasingly
smart, connected world.
is if it is smart and connected,
it is best with Intel.
to corporate responsibility and
sustainability leadership is deeply
integrated throughout our business.
WE ARE A WORLD LEADERour commitmentour vision introduction to our business
We are a world leader in the design and manufacturing of essential
technologies that power the cloud and an increasingly smart,
connected world. We offer computing, networking, data storage,
and communications solutions to a broad set of customers
spanning multiple industries. In 1968, Intel was incorporated in
California (reincorporated in Delaware in 1989), in what became
known as Silicon Valley, and our technology has been at the heart
of computing breakthroughs ever since.
We’re now in the midst of a corporate transformation as we grow
beyond our traditional PC and server businesses into data-rich
markets addressing the explosive demands to process, analyze,
store, and transform data. The transformation is well underway,
with our data-centric businesses representing an increasing share
of our overall revenue.
Our vision is to build a smart and connected world that runs on
Intel® solutions. This vision is supported by our commitment to
corporate responsibility and our relentless pursuit of Moore’s Law.
As we enter Intel’s 50th year in business, we continue to follow the
advice of Intel co-founder Bob Noyce: “Don’t be encumbered by
history, go off and do something wonderful.”
3
A YEAR IN REVIEW
2017 was another record year for Intel and shows we have made progress on our
shift from being primarily a PC-centric company to a data-centric company. We
achieved record revenue in 2017 and strong operating income growth and bottom
line results. Our growth was primarily driven by our data-centric businesses, while
our PC-centric business exceeded our expectation and continues to be a source of
profit, cash flow, scale, and intellectual property. The strategic Investments we
have made in data-rich markets like memory, programmable solutions, and
autonomous driving are starting to pay off and are becoming an increasingly larger
portion of our business.
“We had an outstanding year—our
revenue was stronger, our operating
margins were higher, and our
spending was lower. This shows
Intel’s transformation is on track.”
—Bob Swan, Intel Chief Financial
Officer
REVENUE
$62.8B
up $3.4B or 6% from 2016; up 9%
excluding the Intel Security Group
(ISecG)
Stabilizing PC market, solid
growth in data center and
adjacent businesses
OPERATING INCOME
$17.9B
$19.6B
GAAP
up $5.1B or
39% from 2016
non-GAAP1
up $3.0B or
18% from 2016
Higher revenue and gross margin
along with better spending
leverage and lower restructuring
charges, excluded from non-
GAAP operating income
EPS
$1.99
$3.46
GAAP
down $0.13 or
6% from 2016
non-GAAP1
up $0.74 or
27% from 2016
Higher revenue, sales of equity
investments, and the one-time
charge from Tax Reform2,
excluded from non-GAAP EPS
GOAL
PC-centric business decline in
low single digits and low double
digit growth of data-centric
businesses.
RESULT
PC-centric business growth
exceeded expectation at 3%.
Excluding ISecG, data-centric
businesses grew 16%.
ACHIEVED
GOAL
Grow non-GAAP operating
income faster than revenue.
RESULT
On a non-GAAP basis, operating
income grew at 18%, faster than
revenue growth of 6%.
ACHIEVED
GOAL
Grow non-GAAP earnings per
share (EPS) faster than non-
GAAP operating income.
RESULT
On a non-GAAP basis, EPS grew
at 27%, compared to 18%
growth in non-GAAP operating
income.
DATA-CENTRIC $B
PC-CENTRIC $B
$55.4
$59.4
$62.8
$23.1
$26.5
$28.8
$32.2
$32.9
$34.0
2015
2016
2017
GAAP $B
NON-GAAP $B
$19.6
$17.9
$16.5
$15.0
$14.0
$12.9
2015
2016
2017
GAAP
NON-GAAP
$3.46
$2.49
$2.33
$2.12
$1.99
$2.72
ACHIEVED
2015
2016
2017
1 See “Non-GAAP Financial Measures” within Other Key Information.
2 Tax Reform refers to the U.S. Tax Cuts and Jobs Act enacted In December 2017.
FUNDAMENTALS OF OUR BUSINESS
A Year in Review
4
We strive to be the driving force of the data revolution across technologies and
industries. Our data-centric businesses are the company’s growth engine and
provide great value to our customers. During the year, we’ve taken strategic actions
and made significant progress in strengthening the businesses, including
introducing new products, pursuing emerging opportunities, and making strategic
acquisitions. At the same time, our PC business remains focused on an annual rate
of innovation and thoughtful segmentation.
“I’m excited about our progress and
our future. Intel’s product lineup is the
strongest it has ever been, with
further innovation on the way for
artificial intelligence, autonomous
driving, and more.”
—Brian Krzanich, Intel Chief Executive
Officer
KEY MILESTONES
Introduced the 8th generation
Intel® Core™ processor family
(formerly code-named Coffee
Lake), maintaining our annual
rate of innovation.
Acquired Mobileye, an industry
leader in computer vision and
machine learning. Announced
that Waymo’s newest self-
driving vehicle* featured lntel®-
based technologies for sensor
processing, general computing,
and connectivity.
Completed the divestiture of
ISecG to focus on long-term
growth areas of the company.
We maintain an investment in
the newly formed company,
called McAfee.
Shipped the Intel® Stratix®
10 FPGA, the industry’s first
14-nanometer (nm) FPGA, built
on Intel’s process technology.
Introduced the Intel® XMM™ 8000
series modem, our first family of 5G
new radio (5G NR) multi-mode
commercial modems, representing
substantial advances in the wireless
product roadmap to accelerate the
adoption of 5G.
Shipped the revolutionary Intel®
Optane™ memory, which is designed
for the data center and client
computing to drive the evolution of
computer architecture.
Achieved advancements in
Artificial Intelligence with the
launch of the Intel® Movidius™
Myriad™ X vision processing unit
(VPU), the world’s first VPU.
Introduced and shipped the Intel®
Xeon® Scalable processor, offering
data center customers performance
gains needed for artificial
intelligence and other data-intensive
workloads.
FUNDAMENTALS OF OUR BUSINESS
A Year in Review
5
HOW WE ORGANIZE OUR BUSINESS
CCG
CLIENT COMPUTING GROUP
DCG
Data CENTER Group
IOTG
INTERNET OF THINGS GROUP
NSG
NON-VOLATILE MEMORY
SOLUTIONS GROUP
PSG
PROGRAMMABLE
sOLUTIONS GROUP
KEY PRODUCTS AND
MARKETS
Includes platforms designed
for notebooks and desktops
(including 2-in-1,
thin-and-light, high-end
desktop, and all-in-one PCs)
and wireless and wired
connectivity products.
54% OF INTEL’S
TOTAL REVENUE
HIGHLIGHTS
We introduced several products in 2017, such as the Intel® Core™
X-series and the 8th Gen Intel® Core™ processor families, delivering
premium performance to consumers. Profitability continued to improve
significantly for the year.
CHALLENGES
Annual PC shipments declined at a single-digit rate, even though the
decline slowed in 2017.
OPPORTUNITIES
We continue a disciplined focus to deliver operating margin. In our
expanded market opportunity, we are less than 40% of TAM1 and see
opportunities in connectivity, memory, and graphics.
KEY PRODUCTS AND
MARKETS
Includes workload-optimized
platforms and related
products designed for
enterprise, cloud, and
communication infrastructure
market segments.
30% OF INTEL’S
TOTAL REVENUE
HIGHLIGHTS
In 2017 we introduced our biggest data center platform advancement in
a decade with the Intel ®Xeon® Scalable processors and exceeded our
commitment of delivering high single-digit revenue growth.
CHALLENGES
Our enterprise and government market segment continues to decline as
workloads move to the public cloud.
OPPORTUNITIES
We have a significant data center TAM1 opportunity where we have less
than a 40% market share. We see opportunities in cloud, networking,
and analytics/AI driving higher growth.
KEY PRODUCTS AND
MARKETS
Includes high-performance
Internet of Things platforms for
retail, automotive, industrial,
and a broad range of other
embedded applications.
5%
OF INTEL’S
TOTAL REVENUE
HIGHLIGHTS
This business has been one of our fastest growing businesses, with an
annual growth rate of 15% over the last five years
CHALLENGES
The Internet of Things market continues to expand and evolve. Agility to
meet customer requirements and compete globally within this complex
marketplace is essential for our continued growth.
OPPORTUNITIES
We see opportunities for high growth across multiple market segments
as devices become connected and businesses deploy analytics and
automation solutions to improve operations.
KEY PRODUCTS AND
MARKETS
Includes Intel® Optane™
technology and 3D NAND
flash memory, primarily used
in solid-state drives (SSDs).
6% OF INTEL’S
TOTAL REVENUE
HIGHLIGHTS
2017 was a record year for NSG. We launched Intel® Optane™
technology, were first-to-market with 64-layer 3DNAND, accelerated our
Fab 68 expansion, and improved operating costs.
CHALLENGES
While profitable with our 3D NAND technology, we experienced
challenges associated with fab expansion costs and accelerating the
adoption of our new Intel® Optane™ Technology.
OPPORTUNITIES
We expect costs for lntel® Optane™ technology to improve, NSG to
become profitable in 2018, and Fab 68 to reach higher capacity
providing more supply at a lower cost per gigabyte.
KEY PRODUCTS AND
MARKETS
Includes programmable
semiconductors, primarily
FPGAs, and related products
for a broad range of markets,
such as communications, data
center, industrial, military, and
automotive.
3%
OF INTEL’S
TOTAL REVENUE
HIGHLIGHTS
Strong customer interest drove the largest design win pipeline ever. We
launched our first hardware programmable platform, enabling rapid
deployment of acceleration solutions.
CHALLENGES
As new software developer tool introductions have increased FPGA
adoption, we must continue to address the demands of all developers
for greater productivity and ease of use.
OPPORTUNITIES
The tight coupling of FPGA and lA technology allows customization for
changing workloads, enables new users, and provides market-ready
solutions making us the multi-function accelerator of choice.
1 Source: Intel calculated TAM derived from industry analyst reports. NOTE: Mobileye results are reported within the “All Other” category.
FUNDAMENTALS OF OUR BUSINESS
How We Organize Our Business
6
CAPITAL ALLOCATION
Our capital allocation strategy focuses on building value. We do this by first investing in ourselves and growing our capabilities.
We then look to supplement and strengthen our capabilities through acquisition and strategic investments. And finally, we
provide the return realized by these investments to our shareholders.
OUR CAPITAL ALLOCATION DECISIONS ARE DRIVEN BY THREE PRIORITIES
INVEST IN THE BUSINESS
We invest in R&D and capital spending to strengthen our competitive
position. We have shifted our R&D focus as we transform to become
a more data-centric company, while efficiently maintaining our
investment at approximately 20% of revenue. Our capital investment
in logic {silicon wafer manufacturing of our platform products)
remained roughly flat, but our capital investment in memory
increased significantly year over year as we ramped our Dalian, China
manufacturing facility {Fab 68). We obtained customer prepayments
of over $1.0 billion in 2017, which helped to offset our initial
investment in memory.
R&D AND CAPITAL INVESTMENTS $B
$21.3
$21.6
$19.4
$22.3
$24.9
2013
2014
2015
2016
2017
R&D
Logic
Memory
(cid:2)
ACQUISITIONS
ACQUIRE AND INTEGRATE
Our second capital allocation priority is to invest in companies around
the world that will complement our strategic objectives and stimulate
growth of data-centric opportunities. We look for acquisitions that
further leverage our capital and R&D investments. In 2017, we
completed three acquisitions, most notably, the acquisition of Mobileye,
which strengthens our leadership in autonomous vehicles. Intel Capital
equity investments also support our strategic objectives.
$15.5
$14.5
7
5
7
1
7
1
12
3
2013
2014
2015
2016
2017
Total spent $B
Number of acquisitions for:
Data-centric
PC-centric
(cid:2)
RETURN CASH TO STOCKHOLDERS
Our third capital priority is to return cash to stockholders. We achieve
this through our dividend and share buyback programs. During 2017, we
paid $5.1 billion in dividends, increased dividends per share by 4% from
2016, and announced a 10% increase for 2018. We also repurchased
$3.6 billion in shares, up from 2016, and have maintained a consistent
level of diluted shares outstanding over time.
Dividends per share
2017
2016
2015
$1.0775
$1.04
$0.96
6% CAGR
Diluted shares outstanding
(in Millions)
2017
2016
2015
4,835
4,875
4,894
CASH TO STOCKHOLDERS $B
$4.4
$4.5
$2.1
2013
$10.8
$4.6
$3.0
$4.9
$2.6
$5.1
$3.6
2014
2015
2016
2017
Buyback
Dividends
FUNDAMENTALS OF OUR BUSINESS
Capital Allocation
7
OUR STRATEGY
Data is a significant force in society and will be essential in shaping the future of
every person on the planet. From large complex applications in the cloud to
small low-power mobile devices at the edge, our customers are looking for
solutions that can process, analyze, store, and transfer data—turning it into
actionable insights, amazing experiences, and competitive advantages.
“Intel’s strategy is to provide the
technological foundation of the new
data world.”
We strive to unlock the power of data so people can ride in self-driving cars,
experience virtual worlds, connect with each other over fast mobile networks,
and be touched by computer-assisted intelligence in ways yet unimagined.
—Brian Krzanich, Intel Chief Executive
Officer
We are well-positioned to be the driving force of this data revolution. Intel technology powers the devices and infrastructure that
power the data-centric world, from PCs and the cloud to telecommunications equipment and data centers. Our computing
solutions from the cloud to the edge enable a Virtuous Cycle of Growth. Our strategy is to provide the technological foundation of
the new data world—a world that is always learning, smarter and faster.
COMPUTE PERFORMANCE FROM CLIENT TO CLOUD
The most important trend shaping the future of the data-
centric world is the cloud and its connection to billions of
smart devices, including PCs, autonomous cars, and virtual
reality systems. When smart devices are connected to the
cloud, the data can be analyzed real-time, making these
devices more useful. Our continuous innovation of client
and Internet of Things products, designed to connect even
more seamlessly, is shaping this trend.
Our data center products are optimized to deliver industry-
leading performance and best-in-class total cost of
ownership for cloud workloads. We add new products and
features to our portfolio to address emerging, high-growth
workloads such as artificial intelligence, virtual reality
systems, and the 5G network.
ACCELERANT TECHNOLOGIES
Advancements in memory technology and programmable
solutions, such as FPGAs, drive performance in smart
devices as well as data centers. Intel’s 3D XPoint™
technology significantly improves access to large amounts
of data. FPGAs can efficiently manage the changing
demands of next-generation data centers and accelerate the
performance in other applications. The combination of
memory and FPGAs with client and cloud products enables
new solutions such as deep learning acceleration engines.
CONNECTIVITY
With our wireless, computing, and cloud capabilities, we are
driving the development of technologies and collaborating
on the rapid definition of open standards that will help
define the 5G market. Our collaborations shape the
connectivity ecosystem and enable new opportunities to
meet the diverse connectivity needs of data. From smart
devices to network infrastructure to the cloud and back, we
aim to offer scale, innovation, and expertise to our
customers.
FUNDAMENTALS OF OUR BUSINESS
Our Strategy
8
STRATEGIC ENABLERS
We meet our customer needs with discrete platforms and platforms that are integrated with software and other technologies to
provide end-to-end solutions. Our solutions are enabled by:
• Shared architecture and intellectual property. We have developed a common architecture and intellectual property across our
platforms. We continue to invest in improving our architecture and product platforms that deliver increasing value to our
customers. Our proprietary technologies make it possible to integrate products and platforms that address evolving customer
needs and expand the markets we serve. Sharing a common architecture and intellectual property enables us to spread our
costs over a large manufacturing base of products, which reduces our costs and increases our return on capital.
• Silicon manufacturing technologies. We make significant investments and innovations in our silicon manufacturing
technologies. Unlike many semiconductor companies, we primarily develop and manufacture our products in our own facilities
using our proprietary process technologies. This competitive advantage enables us to optimize performance, shorten
time-to-market for new product introduction, and more quickly scale products in high volume.
• Moore’s Law. Intel’s advancement of Moore’s Law has driven significant computing power growth and better economics.
Through Moore’s Law we enable new devices and capabilities that meet our customers’ needs for balancing performance,
power efficiency, and cost.
NFV
SDN
CORPORATE TRANSFORMATION
We are in the midst of a corporate transformation. Over the last four years, we’ve grown outside our traditional PC and server
businesses, where we had roughly 90% market share. By making key investments and decisions to enter data-rich markets, we
have redefined our target market well beyond our traditional businesses and estimated a total addressable market (TAM) of $260
billion1, where we have greater opportunity to grow. The expanded TAM leverages our manufacturing technologies and
intellectual properties and provides growth opportunities in our revenue and profit. We have evolved from a PC company with a
server business to a data-centric company, and have begun the next phase of our journey—to build a world that runs on Intel.
1 Source: Intel calculated 2021 TAM derived from industry analyst reports and internal estimates.
FUNDAMENTALS OF OUR BUSINESS
Our Strategy
9
RESEARCH AND DEVELOPMENT (R&D) AND MANUFACTURING
We are committed to investing in R&D. Realizing the benefits from Moore’s Law provides flexibility in balancing production costs
and the increased functionality of our products. In addition, intellectual property that we have developed for our platforms
reduces our costs, creates synergies across our businesses, and provides a higher return as we expand into new markets.
We design and manufacture silicon technology products. Unlike many other semiconductor companies, we primarily manufacture
our products in our own manufacturing facilities. We see our in-house manufacturing as one of our most critical assets and
advantages. This advantage is now expanding to our adjacent businesses, for example, FPGA, modem, and memory, which are
enabling our transformation to a data-centric company.
MOORE’S LAW — A LAW OF ECONOMICS
LOWER COST
MOORE COST SAVINGS
Same circuitry in half the space
(feature neutral)
OR
MORE FUNCTIONALITY
MOORE PERFORMANCE
Twice the number of transistors
in the same space
45NM
32NM
22NM
14NM
10NM
Die shrinking resulting in lower cost
Higher density and number of transistors resulting
in more functionality within the same die area.
Moore’s Law is not a law of physics, but instead a law of economics predicted by Intel’s co-founder Gordon Moore 50 years ago. It
is the keystone of our manufacturing advancement. We measure Moore’s Law primarily using a quantitative transistor density
metric (transistors per square millimeter). In addition, we are optimizing process technology within each node to enable an annual
cadence of product improvements.
Realizing Moore’s Law results in economic benefits as we are able to either reduce a chip’s cost as we shrink its size, or increase
functionality and performance of a chip while maintaining the same cost. At Intel, we continue to develop new generations of
manufacturing process technology and realize the benefits from Moore’s Law. This makes possible the innovation of new
products with higher functionality while balancing power efficiency, cost, and size to meet customers’ needs. As of the end of
2017, our platform products were manufactured on 300mm wafers, with the majority manufactured using our 14nm process
node.
RESEARCH AND DEVELOPMENT
We focus our R&D activities on developing new microarchitectures, advancing our manufacturing process technology, delivering
the next generation of products, ensuring our products and technologies are secure, and developing new solutions in emerging
technologies, for example, artificial intelligence, 5G wireless connectivity, and autonomous vehicles.
FUNDAMENTALS OF OUR BUSINESS
Research and Development (R&D) and Manufacturing
10
In conjunction with our R&D efforts, we plan to introduce new microarchitectures for our various products on a regular cadence. We
have lengthened the amount of time we are using our 14nm process node, further optimizing our technology and meeting the
yearly market cadence for product introductions with multiple waves of product offerings. While we have lengthened our utilization
of 14nm, we are accelerating transistor density improvement with hyper-scaling technology, resulting in the same density and cost
improvements over time as predicted by Moore’s Law. We expect the same trends to continue as we introduce our next-generation
10nm process node.
We centrally manage key cross-business group product initiatives to align and prioritize our R&D activities. In addition, we may
augment our R&D initiatives by investing in companies or entering into agreements with companies that have similar R&D focus
areas, as well as directly purchasing or licensing applicable technology. To drive innovation and gain efficiencies, we intend to
utilize our investments in intellectual property and R&D across our platforms and businesses.
MANUFACTURING FOOTPRINT
In 2017, the majority of our wafer manufacturing was conducted within the U.S. We incur factory start-up costs as we ramp our
facilities for new process technologies. In 2017 we continued to ramp the 10nm process node in our Oregon and Israel locations,
began 10nm production in Oregon, and restarted construction on one of our Arizona wafer fabs, which is targeted for leading-
edge process technologies. We ramped our first memory fab, Fab 68, with investments representing approximately 20% of total
capital spending in 2017.
The map below marks our manufacturing facilities and their primary manufacturing functions as of the end of 2017, as well as the
countries where we have a significant R&D or sales and marketing presence.
SUPPLY CHAIN AND FACTORY NETWORK
Our manufacturing facilities are primarily used for silicon wafer manufacturing of our platform and memory products. These
facilities are built following a “copy exactly” methodology, whereby new process technologies are transferred identically from a
central development fab to each manufacturing facility. This enables fast ramp of the operation as well as better quality control.
These wafer fabs operate in a network of manufacturing facilities integrated as one factory to provide the most flexible supply
capacity, allowing us to better analyze our production costs and manage capacity.
We use third-party foundries to manufacture wafers for certain components, including communications, connectivity, networking,
FPGA, and memory products. We also leverage subcontractors to augment capacity to perform assembly and test in addition to
our in-house manufacturing, primarily for chipsets and adjacent products.
We use a multi-source strategy for our memory business to enable a robust and flexible supply chain. The ramping of Fab 68 in
2017 enabled us to maintain a cost-effective strategy to better serve our customers. We expect this expansion to continue to
provide significant manufacturing capacity. As of the end of 2017, over half of the 3D NAND we supplied was manufactured in Fab
68. In addition to the memory we manufacture internally, we have a supplemental supply agreement with Micron Technology, Inc.
(Micron), as well as capacity from our joint venture, IM Flash Technologies, LLC (IMFT) factory in Lehi, Utah.
FUNDAMENTALS OF OUR BUSINESS
Research and Development (R&D) and Manufacturing
11
WHO MANAGES OUR BUSINESS
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME
AGE
OFFICE(S)
Andy D. Bryant
Brian M. Krzanich
Dr. Venkata S.M. Renduchintala
Navin Shenoy
Robert H. Swan
67
57
52
44
57
Chairman of the Board
Chief Executive Officer
Executive Vice President; Group President, Client and Internet of Things Businesses
and System Architecture Group, and Chief Engineering Officer
Executive Vice President; General Manager, Data Center Group
Executive Vice President, Chief Financial Officer
Andy D. Bryant has been Chairman of our Board of Directors since May 2012. Mr. Bryant served as Vice Chairman of the Board of
Directors of Intel from July 2011 to May 2012. From 2007 to 2012, Mr. Bryant served as Chief Administrative Officer. Mr. Bryant
joined Intel in 1981 and served in a number of executive roles at the company. He was Executive Vice President, Technology,
Manufacturing, and Enterprise Services from 2009 to 2012. Mr. Bryant previously served as Executive Vice President, Finance and
Enterprise Services from 2007 to 2009; Executive Vice President, Chief Financial and Enterprise Services Officer from 2001 to
2007; Senior Vice President, Chief Financial and Enterprise Services Officer from 1999 to 2001; Senior Vice President, Chief
Financial Officer from January 1999 to December 1999; and Vice President, Chief Financial Officer from 1994 to 1999. Mr. Bryant
also serves on the board of directors of Columbia Sportswear and McKesson Corporation.
Brian M. Krzanich has been Chief Executive Officer and a member of our Board of Directors since May 2013. Mr. Krzanich served
as Executive Vice President, Chief Operating Officer from 2012 to 2013. As CEO, his focus has been transforming Intel from a
PC-centric company to a data-centric company, delivering the technology foundations for the new data economy. Mr. Krzanich
joined Intel in 1982 and served in a number of executive roles prior to his appointment as CEO. From 2010 to 2012, he was Senior
Vice President, General Manager of Manufacturing and Supply Chain. From 2006 to 2010, he was Vice President, General Manager
of Assembly and Test. Prior to 2006, Mr. Krzanich held various senior leadership positions within Intel’s manufacturing
organization. Mr. Krzanich is also a member of Deere & Company’s board of directors, and chairman of the board of directors of
the Semiconductor Industry Association.
Dr. Venkata S.M. (“Murthy”) Renduchintala joined Intel in November 2015. Since then, he has served as our Executive Vice
President, Group President, Client and Internet of Things Businesses and System Architecture Group, and Chief Engineering
Officer. In this role, Dr. Renduchintala oversees Intel’s Platform Engineering, Client Computing, Internet of Things, Software and
Services, and Design and Technology Solutions divisions. From 2004 to 2015, Dr. Renduchintala held various senior positions at
Qualcomm Incorporated, most recently as Co-President of Qualcomm CDMA Technologies from June 2012 to November 2015
and Executive Vice President of Qualcomm Technologies Inc. from October 2012 to November 2015. Before joining Qualcomm,
Dr. Renduchintala served as Vice President and General Manager of the Cellular Systems Division of Skyworks Solutions Inc./
Conexant Systems Inc. and he spent a decade with Philips Electronics, where he held various positions, including Vice President of
Engineering for its consumer communications business.
Navin Shenoy has been Executive Vice President and General Manager of the Data Center Group since May 2017. In this role, he
oversees the strategy and product development of our data center platforms, a business that spans servers, networks, and
storage across all customer segments. From May 2016 to May 2017, Mr. Shenoy was Senior Vice President and General Manager
of the Client Computing Group. From April 2012 to April 2016, he served as General Manager of the Mobility Client Platform
Division, as Vice President from April 2012 until December 2014 and Corporate Vice President from January 2015 to May 2016.
From October 2007 to April 2012, Mr. Shenoy served as Vice President and General Manager of our Asia-Pacific business.
Mr. Shenoy joined Intel in 1995.
Robert (“Bob”) H. Swan has been our Executive Vice President, Chief Financial Officer since joining Intel in October 2016. He
oversees Intel’s global finance organization—including finance, accounting and reporting, tax, treasury, internal audit, and investor
relations—IT, and the Corporate Strategy Office. From September 2015 to September 2016, Mr. Swan served as an Operating
Partner at General Atlantic LLC, a private equity firm. He served as Senior Vice President, Finance and Chief Financial Officer of
eBay Inc. from March 2006 to July 2015. Previously, Mr. Swan served as Executive Vice President, Chief Financial Officer of
Electronic Data Systems Corporation, Executive Vice President, Chief Financial Officer of TRW Inc., as well as Chief Financial
Officer, Chief Operating Officer, and Chief Executive Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General
Electric, serving for 15 years in numerous senior finance roles. Mr. Swan also serves on the board of directors of eBay.
FUNDAMENTALS OF OUR BUSINESS
Who Manages Our Business
12
HUMAN CAPITAL
Given the highly technical nature of our business, our success depends on
our ability to attract and retain talented and skilled employees. Our global
workforce of 102,700 is highly educated, with approximately 87% of our
people working in technical roles.
We invest in creating a diverse and inclusive environment where our
employees can deliver their workplace best every day, and empower them
to give back to the communities where we operate.
“Through a focused effort across Intel, we
are building diverse and inclusive teams and
embedding this capability in all that we do.
We believe a more diverse and inclusive
Intel provides a better work environment for
our employees and enables better business
results.”
—Leslie Culbertson, Senior Vice President
and Director of Human Resources (2017)
4%
2017
Employees
by region
50%
20%
26%
United States
Asia Pacific
Europe, Middle East, Africa
Latin America and Canada
GROWTH AND DEVELOPMENT
We invest significant resources to develop the talent needed to keep the company at the forefront of innovation, delivering
millions of hours of web-based and face-to-face training annually and providing rotational or temporary assignment development
opportunities. Through our new “Managing at Intel” course, we are training every manager in the company in inclusive
management practices and providing resources and tools to support them.
COMMUNICATION AND ENGAGEMENT
We believe that our success depends on employees understanding how their work contributes to the company’s overall strategy.
We use a variety of communications channels to facilitate open and direct communication, including open forums with our
executives, quarterly Organizational Health Polls, and engagement through 30 different employee resource groups, including the
Women at Intel Network.
COMPENSATION AND BENEFITS
We strive to provide benefits and services that help meet the varying needs of our employees—from working parents and those
with eldercare responsibilities, to those in the military reserves. Our total rewards package provides highly competitive
compensation, with the inclusion of stock grants, retirement benefits, generous paid time off, bonding leave, flexible work
schedules, sabbaticals, on-site services, and more.
HEALTH, SAFETY, AND WELLNESS
Our ultimate goal is to achieve zero injuries through continued investment in and focus on our core safety programs and injury-
reduction initiatives. We provide access to a variety of innovative, flexible, and convenient employee health and wellness
programs, including on-site health centers and fitness classes and facilities.
FUNDAMENTALS OF OUR BUSINESS
Human Capital
13
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
Our commitment to corporate responsibility and sustainability—built on a strong foundation of transparency, governance, and
ethics—creates value for Intel and our stockholders by helping us mitigate risks, reduce costs, build brand value, and identify new
market opportunities. We set ambitious goals for our company and make strategic investments to advance progress in the areas
of environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact that benefit the environment
and society. Through our technology we enable more people to harness the power of data to help address society’s most complex
issues—from climate change and energy efficiency, to economic empowerment and human rights.
We have established formal board-level oversight responsibility for corporate responsibility and, since 2008, have linked a
portion of employee and executive pay to corporate responsibility factors. A foundational element of our approach to corporate
responsibility is our commitment to transparency. For more information, read our most recent Corporate Responsibility Report
and Diversity and Inclusion Report.
ENVIRONMENTAL SUSTAINABILITY
Driving to the lowest environmental footprint possible helps us achieve efficiency, lower costs,
and respond to the needs of our customers and community stakeholders. We invest in
conservation projects and set company-wide environmental targets, seeking to drive reductions
in greenhouse gas emissions, energy use, water use, and waste generation. Since 2012, we have
invested more than $185 million in approximately 2,000 energy conservation projects, resulting
in annual cost savings of approximately $120 million and cumulative energy savings of more
than 3 billion kilowatt hours. We are also working with others to apply Internet of Things
technologies to environmental challenges such as climate change and water conservation.
SUPPLY CHAIN RESPONSIBILITY
Actively managing our supply chain creates business value for Intel and our customers by
helping us reduce risks, improve product quality, achieve environmental and social goals, and
raise the overall performance of our suppliers. Over the past five years, we have completed
more than 450 supplier audits using the Responsible Business Alliance Code of Conduct
standard and have expanded training and capacity building programs with our suppliers. We
actively collaborate with others and lead industry initiatives on key issues such as advancing
responsible minerals sourcing, addressing risks of forced and bonded labor, and improving
transparency around climate and water impacts in the global electronics supply chain.
DIVERSITY AND INCLUSION
Building an inclusive workforce, industry, and ecosystem is critical to helping us attract and
retain the talent needed to advance innovation and drive our business forward. We have
committed $300 million to advance diversity and inclusion in our workforce and in the
technology industry, and are making progress toward our goal to achieve full representation of
women and underrepresented minorities in our U.S. workforce by the end of 2018. We are
increasing spending with diverse-owned suppliers with a goal of reaching $1.0 billion by 2020,
and are investing in programs to create new career pathways into the technology industry.
SOCIAL IMPACT
Empowering people through technology and advancing social impact initiatives helps build
trust with key external stakeholders and engages and supports the interests of our employees.
Our employees actively share their expertise and skills through technology-related volunteer
initiatives, and over the past 10 years have contributed approximately 10 million hours of
service in the communities where we operate.
FUNDAMENTALS OF OUR BUSINESS
Corporate Responsibility and Sustainability
14
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) - RESULTS OF OPERATIONS
2017 was another record year for Intel and shows we have made progress on our shift from being primarily a PC-centric company
to a data-centric company. We achieved record revenue in 2017 and strong operating income growth and bottom line results. Our
growth was primarily driven by our data-centric businesses, while our PC-centric business exceeded our expectation and
continues to be a source of profit, cash flow, scale, and intellectual property. The strategic investments we have made in data-rich
markets like memory, programmable solutions, and autonomous driving are starting to pay off and are becoming an increasingly
larger portion of our business. For a more comprehensive overview of the results of our operations, see “A Year in Review” within
Fundamentals of Our Business.
Years Ended
(In Millions, Except Per Share Amounts)
Dollars
% of Net
Revenue
Dollars
% of Net
Revenue
Dollars
% of Net
Revenue
December 30, 2017
December 31, 2016
December 26, 2015
Net revenue
Cost of sales
Gross margin
$
62,761
100.0% $
59,387
100.0% $
55,355
100.0%
23,692
37.7%
23,196
39.1%
20,676
37.4%
39,069
62.3%
36,191
60.9%
34,679
62.6%
Research and development
Marketing, general and administrative
Restructuring and other charges
Amortization of acquisition-related intangibles
13,098
7,474
384
177
20.9%
11.9%
0.6%
0.3%
12,740
8,397
1,886
294
21.5%
14.1%
3.2%
0.5%
12,128
7,930
354
265
21.9%
14.3%
0.6%
0.5%
Operating income
17,936
28.6%
12,874
21.7%
14,002
25.3%
Gains (losses) on equity investments, net
Interest and other, net
Income before taxes
Provision for taxes
Net income
Earnings per share—Diluted
2,651
(235)
20,352
10,751
4.2%
(0.4)%
32.4%
17.1%
506
(444)
12,936
2,620
0.9%
(0.8)%
21.8%
4.4%
315
(105)
14,212
2,792
0.6%
(0.2)%
25.7%
5.1%
9,601
15.3% $
10,316
17.4% $
11,420
20.6%
1.99
$
2.12
$
2.33
$
$
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
15
REVENUE
(Dollars in charts are shown in billions)
REVENUE
$59.4
$26.5
$62.8
$28.8
$55.4
$23.1
$32.2
$32.9
$34.0
2015
2016
2017
PC-centric $B
Data-centric $B
SEGMENT REVENUE
SEGMENT REVENUE WALK
1.7
0.1
$59.4
1.1
1.8
0.5
0.9
0.2
$62.8
(1.3)
1.3
0.3
$55.4
0.7
2015
CCG
DCG
IOTG
NSG
PSG Other
2016
CCG
DCG
IOTG
NSG
PSG Other
2017
2017 vs. 2016
We have achieved record revenue two years in a row, with 2017 revenue of $62.8 billion, up $3.4 billion, or 6%, from 2016. After
adjusting for the Q2 2017 divestiture of ISecG, revenue grew 9% from 2016. The increase in revenue was primarily driven by
strong performance across our data-centric businesses, which collectively grew 16% year over year after adjusting for ISecG. We
saw revenue growth across our DCG, IOTG, NSG, and PSG businesses, and 2017 revenue includes $210 million from our Mobileye
business. The increase in revenue was partially offset by $1.6 billion from the divestiture of ISecG and by a change to the Intel
Inside® program in 2017.
We implemented a change to the Intel Inside program to make the program more efficient and effective, and to provide more
flexibility to our customers. This change affects the way we classify our cooperative advertising costs and resulted in a reduction
to 2017 revenue of approximately $500 million compared to 2016, which would have been classified as marketing expenses prior
to program changes.
2016 vs. 2015
In 2016, we achieved revenue of $59.4 billion, up $4.0 billion, or 7%, from 2015. Our 2016 results reflected the inclusion of PSG
and an extra workweek when compared to 2015. In addition, our revenue growth in 2016 was driven by higher unit sales from our
DCG platform and higher average selling prices (ASPs) for our notebook and desktop platforms.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
16
GROSS MARGIN
(Dollars in chart are shown in billions; percentages indicate gross margin as a percentage of total revenue)
GROSS MARGIN
2015 2016 2017
We derived most of our overall gross margin dollars from the sale of platform products in the CCG and DCG operating segments.
Our overall gross margin dollars in 2017 increased by $2.9 billion, or 8%, compared to 2016, and in 2016 increased by
$1.5 billion, or 4%, compared to 2015.
(In Millions) GROSS MARGIN WALK
$ 39,069 2017 Gross Margin
2,380 Higher gross margin from platform revenue
1,010 Lower platform unit cost, primarily on 14nm cost improvement
420 Lower Altera and other acquisition-related charges
315 Lower period charges associated with product warranty and intellectual property agreements incurred in 2016
(535) Higher factory start-up costs, primarily driven by the ramp of our 10nm process technology
(390)
(275) Period charges primarily associated with engineering samples and higher initial production costs from our
Impact of the ISecG divestiture, offset by higher gross margin from adjacent businesses
10nm products
(47) Other
$ 36,191 2016 Gross Margin
1,830 Higher gross margin from platform revenue
1,150 PSG gross margin from acquisition of Altera
935 Lower platform unit cost
(1,045) Altera and other acquisition-related charges
(690) Lower NSG gross margin
(645) Higher factory start-up costs, primarily driven by the ramp of our 10nm process technology
(315) Period charges associated with product warranty and intellectual property agreements
292 Other
$ 34,679 2015 Gross Margin
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
17
OPERATING EXPENSES
(Dollars in charts are shown in billions; percentages indicate expenses as a percentage of total revenue)
RESEARCH AND DEVELOPMENT
MARKETING, GENERAL AND ADMINISTRATIVE
$12.1
21.9%
$12.7
$13.1
21.5%
20.9%
$7.9
14.3%
$8.4
14.1%
$7.5
11.9%
2015
2016
2017
2015
2016
2017
Total R&D and marketing, general and administrative (MG&A) for 2017 were $20.6 billion, down 3% from 2016. These expenses
represent 32.8% of revenue for 2017 and 35.6% of revenue for 2016. We are making progress toward our goal to have annual
R&D and MG&A be 30% of revenue by 2020, and are now expecting to meet this goal by 2019. See additional operating expense
details within Restructuring and Other, below.
RESEARCH AND DEVELOPMENT
2017-2016
R&D spending increased by $358 million, or 3%, driven by the following:
+ Investments in data-centric businesses, including the addition of Mobileye
+ Process development costs for our 7nm process technology
+ Profit-dependent compensation due to an increase in net income, excluding Tax Reform impacts
- Lower expenses due to the ISecG divestiture
- Cost savings from gained efficiencies
2016-2015
R&D spending increased by $612 million, or 5%, driven by the following:
+ Addition of PSG expenses from the acquisition of Altera Corporation (Altera)
+ Higher investment, net of 2016 restructuring program savings, in strategically important areas such as servers, Internet of
Things, new devices, and memory
+ Higher process development costs for our 7nm process technology
- Lower depreciation expense due to a change at the beginning of fiscal year 2016 to the estimated useful life of the machinery
and equipment in our wafer fabrication facilities
MARKETING, GENERAL AND ADMINISTRATIVE
2017-2016
MG&A expenses decreased by $923 million, or 11%, driven by the following:
- Lower expenses due to the ISecG divestiture
- Change to the Intel Inside program
+ Profit-dependent compensation due to an increase in net income, excluding Tax Reform impacts
2016-2015
MG&A expenses increased by $467 million, or 6%, primarily driven by PSG expenses due to the acquisition of Altera.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
18
CLIENT COMPUTING GROUP
OVERVIEW
CCG is our largest business unit, delivering 54% of our revenue. CCG is responsible for all
aspects of the client computing continuum, which includes platforms and connectivity
technologies that are incorporated in a wide range of consumer and commercial products. In
2017, we released the 8th generation Intel® Core™ processor family for use in notebooks and
desktops, as well as our first Intel® Core™ i9 processors. These processors use 14nm
transistors and new-generation Tri-Gate transistor technology.
HIGHLIGHTS AND SEGMENT IMPERATIVES
•
CCG is foundational to the Virtuous Cycle of Growth. CCG’s scale enables
investment in critical intellectual property and Moore’s Law for Intel.
Continued innovation in client computing drives growth in the cloud and
data center.
•
•
•
Strategic imperatives include delivering predictable annual cadence of
leadership products, focusing on high growth segments of 2-in-1,
thin-and-light, commercial and gaming, and growing close adjacencies
and modem.
Since 2013 the PC total TAM has decreased approximately 18%1, while
CCG profitability has improved over 45% as we have focused on high-
growth segments and innovative form factors.
CCG operating income was $12.9 billion, up 21% year over year on
continued strength of Intel® Core™ processors and improved 14nm costs.
The 2017 Intel® Core™ processor brand mix reached an all-time high.
KEY PRODUCTS
PLATFORM INNOVATION
Intel® Optane™ technology
Intel® Wi-Fi solutions
Thunderbolt™ technology
Intel® Core™ i7 processor with
Radeon™ RX Vega M Graphics
Intel® mobile modem solutions
5-YEAR TREND
$34.6
$34.9
$32.2
$32.9
$34.0
$12.9
$10.3
$10.6
$8.7
$8.2
2013
2014
2015
2016
2017
Revenue $B
Op Income $B
CUSTOMER EXPERIENCES
End-user form factors
1 Source: Intel calculated TAM derived from industry analyst reports.
MD&A - RESULTS OF OPERATIONS
Client Computing Group
19
MARKET AND BUSINESS OVERVIEW
Market trends and strategy
Worldwide PC shipments have decreased over the last few years1. However, our CCG profitability has increased over 45% since
2013. The CCG business provides scale, funds intellectual property, and continues to generate a significant portion of our
consolidated profit and cash flow.
The landscape of the client computing market is shifting, with new markets and devices, new consumer expectations, and new
ways to connect to the cloud. We have focused our strategy on these growth opportunities by enhancing platforms and adjacent
technologies to reinvigorate PC demand and provide new user experiences. Today, CCG spans a broader set of devices and a
wider array of uses, such as smart homes, virtual reality, and video streaming.
As these new uses become mainstream in our daily lives, an increasing amount of data will flow between PCs or PC-like devices
and the data center. While we are transforming from a PC-centric to a data-centric company, CCG continues to be a critical part of
the Virtuous Cycle of Growth, generating significant amounts of data and driving the growth of new uses, as well as the need for
continued expansion of the cloud and data center.
Products and competitiveness
To focus our business and better serve our customers, we have established an annual cadence of leadership product
introductions. This year we launched the latest flagship product, the Intel® Core™ i9 processor family, and the 8th generation Intel
Core processors. These platform products address a wide range of needs for rapidly growing markets, from notebook products
such as 2 in 1 systems, thin-and-lights, and Chromebook* systems, to desktop products such as gaming systems and mini
desktops.
Our platform products are enhanced by new adjacent technologies. During the year, we introduced our 5th generation LTE*
modem, the Intel® XMM™ 7560 modem, built on Intel’s 14nm process technology, and our first family of 5G NR multi-mode
commercial modems, the Intel XMM 8000 series modems. In addition, we offer Intel Optane memory, an adaptive caching
technology for accelerating system performance, and advanced connectivity like Thunderbolt™ technology.
To enable the smart and connected home, Intel delivers SoCs and Wi-Fi chipsets for home gateways, routers, modems, and
personal assistants. Intel® Puma™ and Intel® AnyWAN™ SoCs enable high-performance connectivity that can keep up with
increasing demands for bandwidth. Intel® Home Wi-Fi Chipsets enable home networks to scale for more connected devices and
experiences and Intel Atom® SoCs enable a new class of premium personal assistant experiences for the smart home.
1 Source: Intel calculated PC shipment estimate derived from industry analyst reports.
MD&A - RESULTS OF OPERATIONS
Client Computing Group
20
FINANCIAL PERFORMANCE
(Dollars in charts are shown in billions)
CCG REVENUE WALK
0.6
$32.9
0.3
0.9
0.6
$34.0
$32.2
0.3
0.4
0.2
(0.7)
(0.1)
(0.7)
2015
DT
Volume
DT
ASP
NB
Volume
NB
ASP
Other
Platform
Adjacent
Revenue
2016
DT
Volume
DT
ASP
NB
Volume
NB
ASP
Other
Platform
Adjacent
Revenue
2017
Revenue Summary
2017 vs. 2016
Key Revenue Metrics
2017 vs. 2016 2016 vs. 2015
+ Growth in notebook (NB) from the strength in commercial and gaming
Desktop Platform
and improving market conditions
+ Higher adjacent revenue, primarily from modem product ramp
- Continued desktop (DT) market decline and the impact from the change
of Intel Inside program, partially offset by higher demand for high-
performance processors
2016 vs. 2015
+ Ramp of our adjacent products, primarily modem
- PC market decline, offset by mix of high-performance processors
Volume
ASP
down (5)%
down (6)%
flat —%
up 2%
Notebook Platform
Volume
ASP
up 5%
up 2%
down (1)%
up 2%
Adjacent Products
Revenue
up 29%
up 40%
(In Millions) CCG Operating Income Walk
$
12,919 2017 Operating Income
CCG OPERATING INCOME
$12.9
$10.6
1,135 Lower CCG platform unit cost, primarily on 14nm cost improvement
630 Lower CCG spending and share of technology development and MG&A
costs
635 Higher gross margin from CCG platform revenue
(430) Period charges primarily associated with engineering samples and higher
initial production costs from our 10nm products
$8.2
303 Other
$
10,646 2016 Operating Income
1,250 Lower CCG platform unit cost
905 Lower CCG operating expense
625 Higher gross margin from CCG platform revenue
(645) Higher factory start-up costs, primarily driven by the ramp of our 10nm
2015
2016
2017
process technology
345 Other
$
8,166 2015 Operating Income
MD&A - RESULTS OF OPERATIONS
Client Computing Group
21
DATA CENTER GROUP
OVERVIEW
DCG develops workload-optimized platforms for compute, storage, and network functions.
Customers include enterprise and government, as well as cloud and communications service
providers. In 2017, DCG continued to grow faster than Intel as a whole, generated roughly
30% of our total revenue, and contributed over 40% of our total operating income.
HIGHLIGHTS AND SEGMENT IMPERATIVES
5-YEAR TREND
• We exceeded our commitment of high single-digit revenue growth and
>40% operating margin for 2017.
• We continue to see strong growth in our cloud and communications market
segments.
•
The data center TAM1 is expected to be >$70 billion by 2022, of which we
currently have less than a 40% market share.
• We see significant opportunities in cloud, networking, and analytics/
artificial intelligence, with the chance to drive higher growth as we expand
our product offerings in the data center with our adjacent products.
•
During 2017, we launched the Intel® Xeon® Scalable processors, delivering
the largest advancements in platform capabilities in a decade and
achieving over 110 world performance records.
$12.2
$14.4
$16.0
$17.2
$7.4
$7.8
$7.5
$5.5
$19.1
$8.4
2013
2014
2015
2016
2017
Revenue $B
Op Income $B
KEY PRODUCTS
PLATFORM INNOVATION
CUSTOMER EXPERIENCES
End-user form factors
Intel® Optane™ technology
Intel® Omni-Path Fabric
Intel® Silicon Photonics
Intel® FPGAs
Intel® Ethernet
1 Source: Intel calculated TAM derived from industry analyst reports.
MD&A - RESULTS OF OPERATIONS
Data Center Group
22
MARKET AND BUSINESS OVERVIEW
Market trends and strategy
The infographic below illustrates multiple ways that we analyze the DCG business. The “What’s in the box?” line shows all DCG
products —for example, CPUs, and silicon photonics—that are integrated in the form of server, storage, and network (“What is the
box?”) and sold to DCG’s end users (“Who bought the box?”).
Data is a significant force in society today and data is generated by intelligent and connected machines. Data is the lifeblood for
the future of technology innovation and actionable insights. Data is transmitted through network infrastructure, processed, and
analyzed to become real-time information.
The data center TAM is expected to surpass $70 billion by 20221. Currently, we have less than a 40% market share. We see
significant opportunities in cloud, networking, and analytics/artificial intelligence and the chance to drive higher growth as we
expand our product offerings with our adjacent products. The cloud and communications service provider market segments
continue to grow significantly, while the enterprise and government market segment continues to decline as workloads move to
the public cloud.
Products and competitiveness
We offer a broad portfolio of platforms and technologies
designed to provide workload-optimized performance across
compute, storage, and network. These offerings span the full
spectrum from the data center core to the network edge. In
addition, DCG focuses on lowering the total cost of ownership and
on other specific workload optimizations for the enterprise, cloud
service provider, and communications service provider market
segments with hardware-enhanced performance, security, and
reliability. DCG’s platform value can be extended through Intel
adjacent products such as FPGAs and SSDs.
In early Q3 2017, we launched the Intel Xeon Scalable processors, formerly code-named Skylake-SP. The new product delivers
performance improvement over the prior generation on popular workloads, and was broadly available in more than 200 original
equipment manufacturer (OEM) systems as of the end of 2017.
1 Source: Intel calculated Data Center TAM derived from industry analyst reports.
MD&A - RESULTS OF OPERATIONS
Data Center Group
23
FINANCIAL PERFORMANCE
(Dollars in charts are shown in billions)
DCG REVENUE WALK
1.1
0.2
$17.2
0.8
$16.0
(0.1)
0.7
0.3
$19.1
Market Segment Revenue Growth1
2016 vs.
2015
2017 vs.
2016
Cloud Service
Provider
Enterprise and
Government
up 28% up 24%
down (3)% down (3)%
Communication
Service
Provider
up 15% up 19%
1 DCG platform products are sold
across all three market segments.
2015 Platform
Volume
Platform
ASP
Adjacent
Revenue
2016 Platform
Volume
Platform
ASP
Adjacent
Revenue
2017
Revenue Summary
2017 vs. 2016
Key Revenue Metrics
2017 vs. 2016
2016 vs. 2015
+ Growth in server box type, primarily with cloud service providers
DCG Platform
and increased market share in network box type, and higher mix of
our 14nm processors that have higher ASPs
+ Higher revenue across our adjacent products
2016 vs. 2015
+ Growth in cloud and network, offset by mix of processors
+ Higher revenue across our adjacent products
Volume
ASP
up
up
5%
4%
up
8%
down
(1)%
Adjacent Products
Revenue
up
21%
up
19%
(In Millions) DCG Operating Income Walk
$
8,395 2017 Operating Income
DCG OPERATING INCOME
1,450 Higher gross margin from DCG platform revenue
215 Lower period charges associated with product warranty and intellectual
property agreements incurred in 2016
(585) Higher factory start-up costs, primarily driven by the ramp of our 10nm
$7.8
$7.5
$8.4
process technology
(315) Higher DCG spending and share of technology development and MG&A
costs
110 Other
$
7,520 2016 Operating Income
930 Higher gross margin from DCG platform revenue
(655) Higher DCG operating expense
(335) Higher DCG platform unit costs
(215) Period charges associated with product warranty and intellectual property
agreements
(52) Other
$
7,847 2015 Operating Income
2015
2016
2017
MD&A - RESULTS OF OPERATIONS
Data Center Group
24
INTERNET OF THINGS GROUP
OVERVIEW
IOTG develops and sells high-performance Internet of Things compute solutions for retail,
automotive, industrial, and video surveillance, along with a broad range of other embedded
applications. These market-driven solutions utilize silicon and software assets from our data
center and client businesses to expand our compute footprint into Internet of Things
markets. Smart and connected things accelerate the Virtuous Cycle of Growth by creating
large amounts of data that flow through enhanced networks to the cloud.
HIGHLIGHTS AND SEGMENT IMPERATIVES
5-YEAR TREND
•
•
IOTG is a rapidly growing business within Intel, with a 15% annual
growth rate from 2013-2017.
2017 was a record year for the IOTG business segment, with record
revenue, unit sales, and operating income.
• We continue to execute on our strategy, with new design wins and
product launches such as Huawei Internet of Things gateway*
based on Intel® Xeon® processor and Siemens human machine
interface technology* for industrial Internet of Things based on
Intel Atom® processor.
$3.2
20.1%
$2.6
14.8%
$2.3
$2.1
$1.8
18.9%
7.3%
2013
2014
2015
2016
2017
Revenue $B
YoY Growth
KEY PRODUCTS
PLATFORM INNOVATION
CUSTOMER EXPERIENCES
End-user form factors
Simplified developer tools across all
products
Accelerators to enable computer
vision and deep learning
Connectivity and machine learning
.
MD&A - RESULTS OF OPERATIONS
Internet of Things Group
25
MARKET AND BUSINESS OVERVIEW
Market trends and strategy
The world is becoming smarter, more connected, and more data driven, and the Internet of Things sits at the center of this global
digital transformation. Through a robust network of devices, software, networks, and sensors the Internet of Things is
transforming the way we live, connect, work, create, and conduct business—from smart cities, to smart and efficient
manufacturing. Creating, transferring, and harnessing the power of data, Internet of Things-based solutions represent one of the
fastest growing segments within the semiconductor industry, with 9% compound annual growth rate (CAGR) forecast from 2017
to 20221. However, the Internet of Things is a highly fragmented market with a diverse collection of competitors, products, and
vertical segments. As such, we are specifically focused on market sectors that align well with Intel’s ability to provide high-
performance computing solutions.
RETAIl
AUTOMOTIVE
INDUSTRIAL
SMART CITIES
For retailers, the IoT offers
unlimited opportunities to
increase supply chain
efficiencies, develop new
services, and reshape the
customer experience.
Ultimately our goal is to
unify and connect every
single shopping experience
from brick-and-mortar to
digital.
The car of the future will
share data with the cloud,
infrastructure, and other
vehicles. Intel is working
with leading automakers
and suppliers to create
experiences inside the
vehicle, while forging a
roadmap to autonomous
driving with technologies
that span the car,
connectivity, and the cloud.
IoT technology enables
today’s factories to
enhance collaboration
between machines,
humans, and enterprise
systems – from the supply
chain to the shop floor.
Intel IoT solutions can help
unlock operational
efficiency, optimize
production and increase
worker safely.
Increasing demand for
everything from reliable
energy to improved air
quality and traffic flows will
require innovation in our
urban centers. Intel
provides building blocks
for IoT solutions that
address these changing
needs.
Intel’s vision for this market revolves around powering the evolution of the smart and connected world by providing distributed
compute from the edge through the network to the cloud. We focus our efforts partnering with industry leaders to lead the
transition from connected to smart and eventually autonomous devices capable of creating learning systems.
CONNECTED
SMART
AUTONOMOUS
Creates the Architecture for Internet of Things and Artificial Intelligence
Products and competitiveness
We are uniquely equipped to offer technologies that enable solutions that work across the entire Internet of Things—at the edge,
in the network, or in the cloud—enabling businesses to extract the right insights, in the right place, at the right time. We offer
end-to-end solutions with our wide spectrum of products, including Intel Atom to Intel Xeon processor-based computing, wireless
connectivity, FPGAs, and Wind River* software. IOTG leverages adjacent product investments across Intel while making the
investments needed to adapt products to the specific requirements for IOTG vertical segments. For example, applications in the
industrial sector require technologies such as extended temperature ranges, functional safety, time-coordinated computing, and
long-life support.
With IOTG, we enable a global ecosystem of industry partners, developers, and innovators to create solutions based on our
products that accelerate return on investment and time-to-value for end customers. These Intel® IoT Ready Solutions are vetted
and tested in the market, commercially available, and fully supported through our ecosystem partners. One example is the Intel
architecture-based Cisco* Connected Factory Network*, which improves factory operation efficiency and reduces costs by
connecting factory automation and control systems to IT systems.
1 Source: Intel calculated Internet of Things CAGR derived from industry analyst reports.
MD&A - RESULTS OF OPERATIONS
Internet of Things Group
26
FINANCIAL PERFORMANCE
(Dollars in charts are shown in billions)
IOTG REVENUE
IOTG OPERATING INCOME
$2.3
$2.0
$0.3
2015
$2.6
$2.3
$0.3
2016
$3.2
$2.6
$0.5
2017
$0.5
$0.6
$0.7
2015
2016
2017
Revenue Summary
2017 vs. 2016
Net revenue increased $531 million, driven by $329 million higher IOTG platform unit sales and $176 million growth in IOTG
adjacent products including $74 million from milestone-based revenue. Revenue grew across the retail, industrial, and smart
video market segments.
2016 vs. 2015
Net revenue increased $340 million, driven by $192 million higher IOTG platform unit sales and $122 million higher IOTG
platform ASP.
Operating Income Summary
2017 vs. 2016
Operating income increased $65 million due to higher revenue offset by higher investment in growth areas such as automotive,
and by increased share of technology development and MG&A costs.
2016 vs. 2015
Operating income increased $70 million, driven by higher gross margin from IOTG revenue and partially offset by higher IOTG
operating expenses.
MD&A - RESULTS OF OPERATIONS
Internet of Things Group
27
NON-VOLATILE MEMORY SOLUTIONS GROUP
OVERVIEW
NSG offers lntel® Optane™ and lntel® 3D NAND technologies, which drive innovation in solid-
state drives (SSDs). The primary customers are enterprise and cloud-based data centers,
users of business and consumer desktops and laptops, and a variety of embedded and
Internet of Things application providers. In 2017, we released our first Intel Optane
technology-based products, with 3D XPoint™ memory media as a building block, and were
first to deliver products based on 64-layer, triple-level cell (TLC) 3D NAND.
HIGHLIGHTS AND SEGMENT IMPERATIVES
•
NSG delivers platform-connected solutions for Intel by
partnering with and helping to accelerate the CCG and DCG
business units.
•
•
•
Transitioned our manufacturing capacity from 2D NAND to 3D
NAND, reaching 100% 3D NAND production at the end of 2017.
NSG led the industry with the first SSDs based on 64-layer, TLC
3D NAND for client, embedded, and data center segments.
Achieved production volume with Intel® Optane™ technology-
based products, designed for the data center and client
computing segments.
5-YEAR TREND
$3.5
36.6%
$2.6
$2.6
$2.1
$1.8
21.1%
21.0%
(0.8)%
2013
2014
2015
2016
2017
Revenue $B
YoY Growth
KEY PRODUCTS - DATA CENTER
CLIENT SYSTEMS
EMBEDDED SOLUTIONS
MD&A - RESULTS OF OPERATIONS
Non-Volatile Memory Solutions Group
28
MARKET AND BUSINESS OVERVIEW
Market trends and strategy
The world is grappling with increasing amounts of data created by such applications as social media, smart hospitals, airplanes,
smart factories, and autonomous driving. This data all needs to be stored, accessed, and analyzed, easily and quickly. The TAM in
2017 for storage and memory is approximately $150 billion1. With our breadth of products, our focus is on segments that have a
growing need for storage, including cloud service providers, financial services, high-performance computing, and Internet usage.
With data growth expanding, our customers face the challenge of getting
critical, or “hot,” data close to the CPU for rapid access. Intel’s innovations in
technology address the need for various storage tiers, based on different
usages, while keeping a focus on performance and cost. As customers look to
improve the performance of their storage and memory devices, we are seeing
and leading a transition to the PCI Express* interface with Non-Volatile
Memory Express* for SSDs.
In the face of these growing volumes of data, Intel took on the exacting needs
of data centers for growing capacity, easy serviceability, and thermal efficiency
and announced our invention of the innovative “ruler” form factor that will
solve customer requirements without the constraints of legacy form factors.
The innovative ruler will enable up to one petabyte of storage in a single
server rack unit.
Products and competitiveness
Intel Optane technology is a major memory breakthrough with revolutionary performance profiles. This innovative technology
combines the performance, density, power, non-volatility, and cost advantages of existing non-volatile memories with the
attributes of conventional memories like DRAM. In 2017, we expanded our portfolio by delivering products based on Intel Optane
technology, specifically Intel Optane memory, a PC system acceleration module, and highly responsive SSDs for both the data
center and enthusiast markets.
Our Intel 3D NAND technology offers the highest density in the industry, enabling higher capacity media and more gigabytes per
wafer. By transitioning our manufacturing capacity from a 2D NAND/3D NAND mix to 100% 3D NAND by the end of 2017, we
helped drive a transformation in storage economics, with our cost-per-gigabyte approaching the cost of traditional hard disk
drives. In 2017, we led the industry with the first 64-layer, TLC, 3D NAND SSDs for data center, client, and embedded segments.
“Ruler” form factor
Lower cost &
higher density
Higher
performance
REWOL
COST
HIGHER
LESS
DELAY
MORE
1 Source: Storage and memory market opportunity is based on Forward Insights Q4’17 for Client and DC SSDs; DRAM Market Statistics, Worldwide,
2014-2021; Hard-Disk Drives, Worldwide, 2014-2021; NAND Flash Supply and Demand, Worldwide, 1Q16-4Q18. Note: DRAM and Hard-Disk
Drives are excluded from Intel TAM of $260 billion in 2021.
MD&A - RESULTS OF OPERATIONS
Non-Volatile Memory Solutions Group
29
Investing in the future
CAPACITY
R&D AND ENGINEERING
CONNECTED PLATFORM
(cid:129)
(cid:129)
Ramp and growth of Fab 68
(cid:129) Expanded portfolio for
Jointly owned/managed
factory (IMFT) for 3D XPointTM
multiple segments: data center,
client, and embedded
(cid:129) Working with internal partners
and other operating segments to
strengthen overall Intel platform
Intel Fab 68
Memory Manufacturing Facility, entered production on 3D NAND in July 2016
FINANCIAL PERFORMANCE
(Dollars in charts are shown in billions)
NSG REVENUE
$3.5
$2.6
$2.6
2015
2016
2017
Revenue Summary
2017 vs. 2016
NSG OPERATING INCOME
$0.2
2015
$(0.5)
2016
$(0.3)
2017
Net revenue increased $944 million, driven by $1.6 billion from higher unit sales due to strong demand in data center, partially
offset by $655 million lower ASP due to market conditions and the ramp of our new TLC 3D NAND product line, which has a lower
cost, and ASP compared to our primary multi-level cell 3D NAND.
2016 vs. 2015
Net revenue decreased $21 million due to lower ASP offset by higher unit sales.
Operating Income Summary
2017 vs. 2016
Operating loss decreased $284 million driven primarily by $725 million unit cost reductions due to the cost improvements
associated with Fab 68 and lower costs from the ramp of the Intel® 3D NAND product line compared to prior generation NAND
products. The lower unit cost impact was offset by $380 million lower gross margin from NSG revenue. We expect NSG to be
profitable for the full year of 2018.
2016 vs. 2015
Operating income decreased $783 million in 2016 to an operating loss compared to 2015, driven by lower ASP on competitive
pricing pressures, offset by higher volume. The decrease in operating income was also affected by higher costs on the ramp of
Intel® 3D NAND flash memory in Fab 68, and higher spending on 3D XPoint technology, and partially offset by lower unit costs.
MD&A - RESULTS OF OPERATIONS
Non-Volatile Memory Solutions Group
30
PROGRAMMABLE SOLUTIONS GROUP
OVERVIEW
PSG offers programmable semiconductors, primarily FPGAs and related products for a broad
range of market segments, including communications, data center, industrial, military, and
automotive. PSG accelerates the Virtuous Cycle of Growth through collaborating with our
other businesses and integrating FPGAs with microprocessors. This integration broadens the
use of FPGAs and combines the benefits of both technologies to allow more flexibility for
systems to operate with increased efficiency and higher performance.
HIGHLIGHTS AND SEGMENT IMPERATIVES
•
•
•
•
In 2017, we introduced the FPGA-based Programmable Acceleration Card, which operates seamlessly with Intel Xeon processors and an
acceleration software stack; began shipping the Intel® Stratix® 10 SX monolithic FPGA, which tackles the design challenges of next-
generation, high-performance systems; and announced availability of the Intel Stratix 10 MX device, the industry’s first FPGA integrated
with HBM DRAM, which will help speed up mass data movements and stream data pipeline frameworks.
Throughout 2017, PSG accelerated design wins and its opportunity pipeline, driven mainly by FPGAs built on Intel’s 14nm process
technology. These FPGAs, now in production, accelerate workloads in data-centric applications like 5G, Network Function Virtualization
(NFV), cyber analytics, and artificial intelligence.
Intel FPGAs, a key platform technology, are driving our growth in transformational markets. We anticipate accelerated revenue, operating
margin growth, and increased market share by 2022, primarily driven by data center, network infrastructure, intelligent edge, and
embedded markets.
In 2018, PSG will focus on becoming the multi-function acceleration solution of choice for continuously changing workloads, when CPUs
need an offload engine and applications like deep learning inference need low latency.
KEY PRODUCTS
CUSTOMER EXPERIENCES
End-user form factors
High
Performance
Balanced
Performance
and Power
Lowest
Power
Instant-On
Power
Management
MD&A - RESULTS OF OPERATIONS
Programmable Solutions Group
31
MARKET AND BUSINESS OVERVIEW
Market trends and strategy
PSG delivers solutions in the programmable logic device (PLD) market, primarily FPGAs, to enable smarter and more connected
systems. Our focus is on enabling a broad range of solutions, including in the data center, wireless, networking, automotive,
military, medical, and industrial markets. We expect the PLD market to grow at 9% CAGR through 2021.1 FPGAs are a key
technology, enabling transformative applications such as AI, baseband processing and radio for 5G wireless connectivity, packet
processing and virtual network functions offload for NFV, edge acceleration like video and vision for analytics and intelligence,
and workload consolidation of things through fog computing for Industry 4.0.
Intel® FPGAs: Positioned for accelerated computing
5G
WIRELESS
CLOUD
COMPUTING
RADAR &
AEROSPACE
NETWORKING
SMART CITIES
INDUSTRY 4.0
Products and competitiveness
With the rise of pervasive connectivity and autonomous transactions, a vast network of devices and systems are linked from the
edge through infrastructure to the cloud. The Intel® FPGA portfolio enables this transformation with discrete FPGAs and software
defined-hardware based multi-function acceleration cards that allow faster end-product development times, high performance,
and power efficiency with overall lower total cost of ownership. In the cloud, where workloads shift dynamically and algorithms
change, Intel FPGAs are the ideal solution for adapting to new demands through reconfigurability.
In 2017, PSG began shipping the industry’s first high-density >1million logic elements ARM-based FPGA (Intel Stratix 10 SX
FPGAs), which provide an ideal solution for 5G wireless communication, software defined radios, secure computing for military
applications, NFV, and data center acceleration. In addition, we announced availability of the Intel Stratix 10 MX FPGA, the
industry’s first FPGA with integrated High Bandwidth Memory DRAM for high-performance computing, data centers, NFV, and
broadcast applications. It enables the ability to compress and decompress data before or after mass data movements. To simplify
and expedite the benefits of FPGA-accelerated solutions, PSG developed a combination of hardware platforms, a software
acceleration stack, and ecosystem support in a compelling new approach and introduced the first in a family of Intel
Programmable Acceleration Cards. These cards, when combined with an Acceleration Stack, plug easily into any Intel Xeon
processor-based server and boost performance while minimizing power consumption for complex, data-intensive applications
such as AI inference, video streaming analytics, database acceleration, and more.
1 Source: The PLD market growth is based on Gartner, Inc., 3Q17 Forecast Analysis; Electronics and Semiconductors, Worldwide, 2017-2021.
MD&A - RESULTS OF OPERATIONS
Programmable Solutions Group
32
FINANCIAL PERFORMANCE
(Dollars in charts are shown in billions)
PSG REVENUE
$1.9
$1.7
PSG OPERATING INCOME
2016
2017
($0.1)
2016
Revenue Summary
2017 vs. 2016
$0.5
2017
PSG revenue increased $233 million, driven by growth in industrial, military, and automotive market segments as well as in our
advanced products and last-time buys of our legacy products. Also, in 2016 a one-time $99 million deferred revenue write-down
due to the acquisition of Altera negatively impacted 2016 PSG revenue.
Operating Income Summary
2017 vs. 2016
PSG operating income increased $562 million. Higher revenue and operational synergies contributed $111 million of the year
over year increase. The remainder was due to one-time acquisition-related charges, including a $99 million deferred revenue
write-down with a $64 million operating income impact and an inventory valuation adjustment of approximately $387 million.
MD&A - RESULTS OF OPERATIONS
Programmable Solutions Group
33
RESTRUCTURING AND OTHER CHARGES
Years Ended
(In Millions)
2016 Restructuring Program
2015 and 2013 Restructuring Programs
ISecG separation costs and other charges
Total restructuring and other charges
2016 RESTRUCTURING PROGRAM
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
135 $
1,823 $
—
249
—
63
384 $
1,886 $
—
354
—
354
We commenced the 2016 Restructuring Program in the second quarter of 2016. This program was completed in 2017.
Restructuring actions related to this program, which were approved in 2016, impacted approximately 16,000 employees. The
charges incurred as part of the 2016 Restructuring Program resulted in net annual headcount savings of approximately
$1.8 billion as we re-balanced our workforce. On an annual basis, $1.6 billion of these savings reduced our R&D and MG&A
spending, and the remainder reduced our cost of sales. We began to realize these savings in Q2 2016 and most of these savings
were realized by the end of 2017. We reallocated these savings to our growth segments, such as the data center and Internet of
Things, and continue to invest in areas that extend our leadership in Moore’s Law and expand market opportunities in areas such
as memory and autonomous driving.
OTHER CHARGES
Other charges consist primarily of expenses associated with the divestiture of ISecG that was completed in Q2 2017.
For further information, see “Note 7: Restructuring and Other Charges” within the Consolidated Financial Statements.
GAINS (LOSSES) ON EQUITY INVESTMENTS AND INTEREST AND OTHER, NET
Years Ended
(In Millions)
Gains (losses) on equity investments, net
Interest and other, net
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
2,651 $
(235) $
506 $
(444) $
315
(105)
GAINS (LOSSES) ON EQUITY INVESTMENTS, NET
We recognized higher net realized gains on sales of a portion of our interest in ASML Holding N.V. (ASML) of $3.4 billion in 2017
compared to $407 million in 2016. The higher net realized gains were partially offset by $833 million of impairment charges and
our share of equity method investee losses in 2017.
We recognized higher net gains on equity investments in 2016 compared to 2015 primarily due to gains of $407 million related to
sales of a portion of our interest in ASML.
INTEREST AND OTHER, NET
We recognized a lower net loss in interest and other in 2017 compared to 2016 primarily due to higher interest income in 2017.
We recognized a higher net loss in interest and other in 2016 compared to 2015 primarily due to higher interest expense from
debt issued or acquired in 2015 and 2016, as well as lower capitalized interest due to lower eligible capital expenditures in 2016.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
34
PROVISION FOR TAXES
Years Ended
(Dollars in Millions)
Income before taxes
Provision for taxes
Effective tax rate
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
20,352
10,751
$
$
12,936
2,620
$
$
14,212
2,792
52.8%
20.3%
19.6%
Substantially all of the increase in our effective tax rate in 2017 compared to 2016 was driven by the one-time provisional impacts
from the U.S. Tax Cuts and Jobs Act (Tax Reform) that was enacted in December 2017, the 2017 ISecG divestiture, and a higher
proportion of our income in higher tax rate jurisdictions. In addition to the one-time impacts from Tax Reform, we expect the new
legislation will significantly lower our effective tax rate starting in 2018. For further information on Tax Reform and its impacts, see
“Note 8: Income Taxes” within the Consolidated Financial Statements.
The majority of the increase in our effective tax rate in 2016 compared to 2015 was driven by one-time items and our 2015
decision to indefinitely reinvest some of our prior years’ non-U.S. earnings, partially offset by a higher proportion of our income in
lower tax jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
We consider the following when assessing our liquidity and capital resources:
(Dollars in Millions)
Cash and cash equivalents, short-term investments, and trading assets
Other long-term investments
Loans receivable and other
Reverse repurchase agreements with original maturities greater than three months
Total debt
Temporary equity
Debt as a percentage of permanent stockholders’ equity
Dec 30,
2017
Dec 31,
2016
$
$
$
$
$
$
14,002
3,712
1,097
250
26,813
866
38.8%
$
$
$
$
$
$
17,099
4,716
996
250
25,283
882
38.2%
Cash generated by operations is our primary source of liquidity. We maintain a diverse investment portfolio that we continually
analyze based on issuer, industry, and country. When assessing our sources of liquidity, we include investments as shown in the
preceding table. Substantially all of our investments in debt instruments and financing receivables are in investment-grade
securities.
Other potential sources of liquidity include our commercial paper program and our automatic shelf registration statement on file
with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities. Under our commercial
paper program, we have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion. This amount includes
an increase of $5.0 billion in the authorization limit approved by our Board of Directors in April 2017. No commercial paper
remained outstanding as of December 30, 2017. During 2017, we issued a total of $7.7 billion aggregate principal amount of
senior notes. Additionally, we redeemed our $1.0 billion, 4.90% senior notes due August 2045. We used the net proceeds from
the offerings of the notes to finance a portion of the redemption price of our 4.90% senior notes due August 2045 and for general
corporate purposes. During 2017, we repaid $500 million of our 1.75% senior notes that matured in May 2017, and $3.0 billion of
our 1.35% senior notes that matured in December 2017. In Q4 2017, we paid $2.8 billion in cash to convert our $1.6 billion 2.95%
junior subordinated convertible debentures due 2035.
The enactment of Tax Reform in December 2017, imposes a tax on all previously untaxed earnings of non-U.S. subsidiaries of U.S.
corporations. Future distributions of non-U.S. assets to the U.S. will no longer be subject to U.S. taxation. As a result, we
recognized a one-time provisional transition tax expense of $6.1 billion. We expect to pay the tax over a period of eight years
based on a defined payment schedule and believe that our current U.S. sources of cash and liquidity are sufficient to meet our tax
liability.
As of December 30, 2017, $8.4 billion of our $14.0 billion of cash and cash equivalents, short-term investments, and trading
assets was held by our non-U.S. subsidiaries.
During Q3 2017, we acquired 97.3% of Mobileye’s outstanding ordinary shares for $14.5 billion net cash. We funded the
acquisition of shares, and expect to fund the acquisition of the remaining shares, with cash held by our non-U.S. subsidiaries.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
35
During Q2 2017, we completed the divestiture of our ISecG business for total consideration of $4.2 billion. The consideration
included cash proceeds of $924 million and $2.2 billion in the form of promissory notes. During Q3 2017, McAfee and TPG VII
Manta Holdings, L.P., now known as Manta Holdings, L.P. (TPG) repaid the $2.2 billion of promissory notes and McAfee paid us a
$735 million dividend.
We believe we have sufficient financial resources to meet our business requirements in the next 12 months, including capital
expenditures for worldwide manufacturing and assembly and test; working capital requirements; and potential dividends,
common stock repurchases, acquisitions, and strategic investments.
SOURCES AND USES OF CASH
(In Millions)
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
36
In summary, our cash flows for each period were as follows:
Years Ended
(In Millions)
Net cash provided by operating activities
Net cash used for investing activities
Net cash provided by (used for) financing activities
Net increase (decrease) in cash and cash equivalents
OPERATING ACTIVITIES
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
22,110 $
21,808 $
19,018
(15,762)
(8,475)
(25,817)
(5,739)
(8,183)
1,912
(2,127) $
(9,748) $
12,747
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.
For 2017 compared to 2016, the $302 million increase in cash provided by operating activities was due to changes to working
capital partially offset by adjustments for non-cash items and lower net income. Tax Reform did not have an impact on our 2017
cash provided by operating activities. The increase in cash provided by operating activities was driven by increased income before
taxes and $1.0 billion receipts of customer deposits. These increases were partially offset by increased inventory and accounts
receivable. Income taxes paid, net of refunds, in 2017 compared to 2016 were $2.9 billion higher due to higher income before
taxes, taxable gains on sales of ASML, and taxes on the ISecG divestiture. We expect approximately $2.0 billion of additional
customer deposits in 2018.
For 2016 compared to 2015, the $2.8 billion increase in cash provided by operating activities was due to adjustments for
non-cash items and changes in working capital, partially offset by lower net income. The adjustments for non-cash items were
higher in 2016 primarily due to restructuring and other charges and the change in deferred taxes, partially offset by lower
depreciation.
INVESTING ACTIVITIES
Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; and
proceeds from divestitures and cash used for acquisitions. Our capital expenditures were $11.8 billion in 2017 ($9.6 billion in
2016 and $7.3 billion in 2015).
The decrease in cash used for investing activities in 2017 compared to 2016 was primarily due to higher net activity of
available-for sale-investments in 2017, proceeds from our divestiture of ISecG in 2017, and higher maturities and sales of trading
assets in 2017. This activity was partially offset by higher capital expenditures in 2017.
The increase in cash used for investing activities in 2016 compared to 2015 was primarily due to our completed acquisition of
Altera, net purchases of trading assets in 2016 compared to net sales of trading assets in 2015, and higher capital expenditures in
2016. This increase was partially offset by lower investments in non-marketable equity investments.
FINANCING ACTIVITIES
Financing cash flows consist primarily of repurchases of common stock, payment of dividends to stockholders, issuance and
repayment of short-term and long-term debt, and proceeds from the sale of shares of common stock through employee equity
incentive plans.
The increase in cash used for financing activities in 2017 compared to 2016 was primarily due to net long-term debt activity,
which was a use of cash in 2017 compared to a source of cash in 2016. During 2017, we repurchased $3.6 billion of common
stock under our authorized common stock repurchase program, compared to $2.6 billion in 2016. As of December 30, 2017,
$13.2 billion remained available for repurchasing common stock under the existing repurchase authorization limit. We base our
level of common stock repurchases on internal cash management decisions, and this level may fluctuate. Proceeds from the sale
of common stock through employee equity incentive plans totaled $770 million in 2017 compared to $1.1 billion in 2016. Our
total dividend payments were $5.1 billion in 2017 compared to $4.9 billion in 2016. We have paid a cash dividend in each of the
past 101 quarters. In January 2018, our Board of Directors approved an increase to our cash dividend to $1.20 per share on an
annual basis. The board has declared a quarterly cash dividend of $0.30 per share of common stock for Q1 2018. The dividend is
payable on March 1, 2018 to stockholders of record on February 7, 2018.
Cash was used for financing activities in 2016 compared to cash provided by financing activities in 2015, primarily due to fewer
debt issuances and the repayment of debt in 2016. This activity was partially offset by repayment of commercial paper in 2015
and fewer common stock repurchases in 2016.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
37
CONTRACTUAL OBLIGATIONS
Significant contractual obligations as of December 30, 2017 were as follows:
(In Millions)
Operating lease obligations
Capital purchase obligations1
Other purchase obligations and commitments2
Tax obligations3
Long-term debt obligations4
Other long-term liabilities5
Total6
Payments Due by Period
Total
Less Than
1 Year
1–3 Years
3–5 Years
More Than
5 Years
$
1,245 $
215 $
348 $
241 $
12,068
2,692
6,120
42,278
1,544
9,689
1,577
490
1,495
799
2,266
1,040
979
5,377
422
113
55
979
8,489
190
441
—
20
3,672
26,917
133
$
65,947 $
14,265 $
10,432 $
10,067 $
31,183
1 Capital purchase obligations represent commitments for the construction or purchase of property, plant and equipment. They were not
recorded as liabilities on our consolidated balance sheets as of December 30, 2017, as we had not yet received the related goods nor taken
title to the property.
2 Other purchase obligations and commitments include payments due under various types of licenses and agreements to purchase goods or
services, as well as payments due under non-contingent funding obligations.
3 Tax obligations represent the future cash payments related to Tax Reform enacted in 2017 for the one-time provisional transition tax on
our previously untaxed foreign earnings. For further information, see “Note 8: Income Taxes” within the Consolidated Financial Statements.
4 Amounts represent principal and interest cash payments over the life of the debt obligations, including anticipated interest payments that
are not recorded on our consolidated balance sheets. Debt obligations are classified based on their stated maturity date, regardless of their
classification on the consolidated balance sheets. Any future settlement of convertible debt would impact our cash payments.
5 Amounts represent future cash payments to satisfy other long-term liabilities recorded on our consolidated balance sheets, including the
short-term portion of these long-term liabilities. Derivative instruments are excluded from the preceding table, as they do not represent the
amounts that may ultimately be paid.
6 Total excludes contractual obligations already recorded on our consolidated balance sheets as current liabilities, except for the short-term
portions of long-term debt obligations and other long-term liabilities.
The expected timing of payments of the obligations in the preceding table is estimated based on current information. Timing of
payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-
upon amounts for some obligations.
Contractual obligations for purchases of goods or services included in “Other purchase obligations and commitments” in the
preceding table include agreements that are enforceable and legally binding on Intel and that specify all significant terms,
including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing
of the transaction. For obligations with cancellation provisions, the amounts included in the preceding table were limited to the
non-cancelable portion of the agreement terms or the minimum cancellation fee.
For the purchase of raw materials, we have entered into certain agreements that specify minimum prices and quantities based on
a percentage of the total available market or based on a percentage of our future purchasing requirements. Due to the uncertainty
of the future market and our future purchasing requirements, as well as the non-binding nature of these agreements, obligations
under these agreements have been excluded from the preceding table. Our purchase orders for other products are based on our
current manufacturing needs and are fulfilled by our vendors within short time horizons. In addition, some of our purchase orders
represent authorizations to purchase rather than binding agreements.
Contractual obligations that are contingent upon the achievement of certain milestones have been excluded from the preceding
table. Most of our milestone-based contracts are tooling related for the purchase of capital equipment. These arrangements are
not considered contractual obligations until the milestone is met by the counterparty. As of December 30, 2017, assuming that all
future milestones are met, the additional required payments would be approximately $2.0 billion.
For the majority of restricted stock units (RSUs) granted, the number of shares of common stock issued on the date the RSUs vest
is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of
our employees. The obligation to pay the relevant taxing authority is excluded from the preceding table, as the amount is
contingent upon continued employment. In addition, the amount of the obligation is unknown, as it is based in part on the market
price of our common stock when the awards vest.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
38
During 2014, we entered into a series of agreements with Tsinghua Unigroup Ltd. (Tsinghua Unigroup), an operating subsidiary of
Tsinghua Holdings Co. Ltd., to, among other things, jointly develop Intel architecture and communications-based solutions for
phones. Subject to regulatory approvals and other closing conditions, we have agreed to invest up to $9.0 billion Chinese yuan
(approximately $1.5 billion as of the date of the agreement) for a minority stake of approximately 20% of Beijing UniSpreadtrum
Technology Ltd. (UniSpreadtrum). During 2015, we invested $966 million to complete the first phase of the equity investment and
the second phase of the investment will require additional funding of approximately $500 million; however, as our obligation is
contingent upon regulatory approvals and other closing conditions, it has been excluded from the preceding table.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are affected by changes in currency exchange and interest rates, as well as equity and commodity prices. Our risk
management programs reduce, but may not entirely eliminate, the impacts of these risks. All of the following potential changes
are based on sensitivity analyses performed on our financial positions as of December 30, 2017 and December 31, 2016. Actual
results may differ materially.
CURRENCY EXCHANGE RATES
We are exposed to currency exchange risks of non-U.S.-dollar-denominated investments in debt instruments and loans
receivable, and may economically hedge this risk with foreign currency contracts, such as currency forward contracts or currency
interest rate swaps. Gains or losses on these non-U.S.-currency investments are generally offset by corresponding losses or gains
on the related hedging instruments. We are exposed to currency exchange risks from our non-U.S.-dollar-denominated debt
indebtedness and may use foreign currency contracts designated as cash flow hedges to manage this risk.
Substantially all of our revenue is transacted in U.S. dollars. However, a significant portion of our operating expenditures and
capital purchases are incurred in other currencies, primarily the euro, the Japanese yen, the Israeli shekel, and the Chinese yuan.
We have established currency risk management programs to protect against currency exchange rate risks associated with
non-U.S. dollar forecasted future cash flows and existing non-U.S. dollar monetary assets and liabilities. We may also hedge
currency risk arising from funding of foreign currency-denominated future investments. We may utilize foreign currency contracts,
such as currency forwards or option contracts in these hedging programs. We considered the historical trends in currency
exchange rates and determined that it was reasonably possible that a weighted average adverse change of 20% in currency
exchange rates could be experienced in the near term. Such an adverse change, after taking into account balance sheet hedges
only and offsetting recorded monetary asset and liability positions, would have resulted in an adverse impact on income before
taxes of less than $95 million as of December 30, 2017 (less than $80 million as of December 31, 2016).
INTEREST RATES
We are exposed to interest rate risk related to our fixed-rate investment portfolio and outstanding debt. The primary objective of
our investment policy is to preserve principal and the financial flexibility to fund our business while maximizing yields, which
generally track the U.S. dollar three-month LIBOR. We generally enter into interest rate contracts to convert the returns on our
fixed-rate debt investment with remaining maturities longer than six months into U.S. dollar three-month LIBOR-based returns.
We may enter into swaps to convert fixed-rate coupon payments into floating-rate coupon payments for our existing
indebtedness. Gains or losses on these instruments are generally offset by corresponding losses or gains on the related hedging
instruments.
A hypothetical decrease in benchmark interest rates of up to 1.0%, after taking into account investment hedges, would have
resulted in an increase in the fair value of our investment portfolio of approximately $100 million as of December 30, 2017 (an
increase of approximately $100 million as of December 31, 2016). After taking into account interest rate and currency swaps, a
hypothetical decrease in interest rates of up to 1.0% would have resulted in an increase in the fair value of our indebtedness of
approximately $1.6 billion as of December 30, 2017 (an increase of approximately $1.3 billion as of December 31, 2016). The
fluctuations in fair value of our investment portfolio and indebtedness reflect only the direct impact of the change in interest
rates. Other economic variables, such as equity market fluctuations and changes in relative credit risk, could result in a
significantly higher fluctuation in the fair value of our net investment position.
EQUITY PRICES
Our investments include marketable equity securities and equity derivative instruments. We typically do not attempt to reduce or
eliminate our equity market exposure through hedging activities at the inception of our investments. In the event we do decide to
enter into hedge arrangements, before doing so we evaluate legal, market, and economic factors, as well as the expected timing of
disposal, to determine whether hedging is appropriate. Our equity market risk management program may include equity
derivatives with or without hedge accounting designation that utilize warrants, equity options, or other equity derivatives.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
39
We also utilize total return swaps to offset changes in liabilities related to the equity market risks of certain deferred
compensation arrangements. Gains or losses from changes in fair value of these total return swaps are generally offset by the
losses or gains on the related liabilities.
As of December 30, 2017, the fair value of our marketable equity investments and our equity derivative instruments, including
hedging positions, was $4.2 billion ($6.2 billion as of December 31, 2016). A substantial majority of our marketable equity
investments portfolio as of December 30, 2017 was concentrated in our investment in ASML of $3.6 billion ($6.1 billion as of
December 31, 2016). Our marketable equity method investments are excluded from our analysis, as the carrying value does not
fluctuate based on market price changes unless an impairment is deemed necessary. To determine reasonably possible decreases
in the market value of our marketable equity investments, we have analyzed the historical market price sensitivity of our
marketable equity investment portfolio. Assuming a decline of 25% in market prices, and after reflecting the impact of hedges and
offsetting positions, the aggregate value of our marketable equity investments could decrease by approximately $1.1 billion,
based on the value as of December 30, 2017 (a decrease in value of approximately $1.9 billion, based on the value as of
December 31, 2016 using an assumed decline of 30%). Beginning in 2018, as explained in “Note 3: Recent Accounting Standards”
within the Consolidated Financial Statements, changes in the fair value of our marketable equity securities will be measured and
recorded at fair value with changes in fair value recorded through the income statement.
Many of the same factors that could result in an adverse movement of equity market prices affect our non-marketable equity
investments, although we cannot always quantify the impacts directly. Financial markets are volatile, which could negatively affect
the prospects of the companies we invest in, their ability to raise additional capital, and the likelihood of our ability to realize value
in our investments through liquidity events such as initial public offerings, mergers, and private sales. These types of investments
involve a great deal of risk, and there can be no assurance that any specific company will grow or become successful;
consequently, we could lose all or part of our investment. Our non-marketable cost method equity investments had a carrying
amount of $2.6 billion as of December 30, 2017 ($3.1 billion as of December 31, 2016) and included our investment in
UniSpreadtrum of $658 million ($966 million for UniSpreadtrum as of December 31, 2016). The carrying amount of our
non-marketable equity method investments was $1.9 billion as of December 30, 2017 ($1.3 billion as of December 31, 2016). A
substantial majority of our non-marketable equity method investments balance as of December 30, 2017 was concentrated in our
IMFT investment of $1.5 billion ($849 million for IMFT as of December 31, 2016).
COMMODITY PRICE RISK
Although we operate facilities that consume commodities, we are not directly affected by commodity price risk to a material
degree. We have established forecasted transaction risk management programs to protect against fluctuations in commodity
prices. We may use commodity derivatives contracts, such as commodity swaps, in these hedging programs. In addition, we have
sourcing plans in place that mitigate the risk of a potential supplier concentration for our key commodities.
MD&A - RESULTS OF OPERATIONS
Consolidated Results and Analysis
40
OTHER KEY INFORMATION
STOCK PERFORMANCE GRAPH
The graph and table that follow compare the cumulative total stockholder return on Intel’s common stock with the cumulative
total return of the Dow Jones U.S. Technology Index* and the Standard & Poor’s 500 Stock Index (S&P 500 Index*) for the five
years ended December 30, 2017. The cumulative returns shown on the graph are based on Intel’s fiscal year.
Comparison of Five-Year Cumulative Return for Intel,
The Dow Jones U.S. Technology Index*, and the S&P 500 Index*
$300
$250
$200
$150
$100
2012
2013
2014
2015
2016
2017
Intel Corporation
S&P 500 Index
Dow Jones U.S. Technology Index
Years Ended
Intel Corporation
Dow Jones U.S. Technology Index
S&P 500 Index
Dec 29,
2012
Dec 28,
2013
Dec 27,
2014
Dec 26,
2015
Dec 31,
2016
Dec 30,
2017
$
$
$
100 $
100 $
100 $
132 $
129 $
134 $
199 $
160 $
155 $
191 $
163 $
156 $
205 $
185 $
174 $
268
254
212
1 The graph and table assume that $100 was invested on the last day of trading for the fiscal year December 29, 2012 in Intel’s common stock,
the Dow Jones U.S. Technology Index, and the S&P 500 Index, and that all dividends were reinvested.
OTHER KEY INFORMATION
41
SELECTED FINANCIAL DATA
Years Ended
(Dollars in Millions, Except Per Share Amounts)
Dec 28,
2013
Dec 27,
2014
Dec 26,
2015
Dec 31,
2016
Dec 30,
2017
Net revenue
Gross margin
Gross margin percentage
Research and development (R&D)
Marketing, general and administrative (MG&A)
R&D and MG&A as a percentage of revenue
Operating income
Net income1
Effective tax rate1
Earnings per share1
Basic
Diluted
Weighted average diluted shares of common stock
outstanding
Dividends per share of common stock, declared
and paid
Net cash provided by operating activities
Additions to property, plant and equipment
Repurchase of common stock
Payment of dividends to stockholders
(Dollars in Millions)
Property, plant and equipment, net
Total assets
Debt
Stockholders’ equity
Employees (in thousands)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
52,708
31,521
59.8%
10,611
8,088
35.5%
12,291
9,620
23.7%
1.94
1.89
5,097
0.90
20,776
10,711
2,147
4,479
Dec 28,
2013
31,428
89,789
13,385
58,256
107.6
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
55,870
35,609
63.7%
11,537
8,136
35.2%
15,347
11,704
25.9%
2.39
2.31
5,056
0.90
20,418
10,105
10,792
4,409
Dec 27,
2014
33,238
90,012
13,655
55,865
106.7
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
55,355
34,679
62.6%
12,128
7,930
36.2%
14,002
11,420
19.6%
2.41
2.33
4,894
0.96
19,018
7,326
3,001
4,556
Dec 26,
2015
31,858
101,459
22,670
61,085
107.3
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
59,387
36,191
60.9%
12,740
8,397
35.6%
12,874
10,316
20.3%
2.18
2.12
4,875
1.04
21,808
9,625
2,587
4,925
Dec 31,
2016
36,171
113,327
25,283
66,226
106.0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
62,761
39,069
62.3%
13,098
7,474
32.8%
17,936
9,601
52.8%
2.04
1.99
4,835
1.0775
22,110
11,778
3,615
5,072
Dec 30,
2017
41,109
123,249
26,813
69,019
102.7
1 In Q4 2017, we recognized a $5.4 billion higher income tax expense as a result of one-time impacts from Tax Reform.
OTHER KEY INFORMATION
42
SALES AND MARKETING
CUSTOMERS
We sell our products primarily to original equipment manufacturers (OEMs) and original design manufacturers (ODMs). ODMs
provide design and manufacturing services to branded and unbranded private-label resellers. In addition, our customers include
other manufacturers and service providers, such as industrial and communication equipment manufacturers and cloud service
providers, who buy our products through distributor, reseller, retail, and OEM channels throughout the world. For more
information about our customers, including customers who accounted for greater than 10% of our net consolidated revenue, see
“Note 4: Operating Segments” within the Consolidated Financial Statements.
Our worldwide reseller sales channel consists of thousands of indirect customers—systems builders that purchase Intel®
processors and other products from our distributors. We have incentive programs that allow distributors to sell our
microprocessors and other products in small quantities to customers of systems builders. Our microprocessors and other
products are also available in direct retail outlets.
SALES ARRANGEMENTS
Our products are sold through sales offices throughout the world. Sales of our products are frequently made via purchase order
acknowledgments that contain standard terms and conditions covering matters such as pricing, payment terms, and warranties, as
well as indemnities for issues specific to our products, such as patent and copyright indemnities. From time to time, we may enter
into additional agreements with customers covering, for example, changes from our standard terms and conditions, new product
development and marketing, and private-label branding. Our sales are routinely made using electronic and web-based processes
that allow the customer to review inventory availability and track the progress of specific goods ordered. Pricing on particular
products may vary based on volumes ordered and other factors. We also offer discounts, rebates, and other incentives to
customers to increase acceptance of our products and technology.
Our products are generally shipped under terms that transfer title to the customer, even in arrangements for which the
recognition of revenue and related cost of sales is deferred. Our standard terms and conditions of sale typically provide that
payment is due at a later date, 30 days after shipment or delivery. We assess credit risk through quantitative and qualitative
analysis. From this analysis, we establish shipping and credit limits, and determine whether we will seek to use one or more credit
support protection devices, such as obtaining a parent guarantee, standby letter of credit, or credit insurance. Credit losses may
still be incurred due to bankruptcy, fraud, or other failure of the customer to pay.
Our sales to distributors are typically made under agreements allowing for price protection on unsold merchandise and a right of
return on stipulated quantities of unsold merchandise. Under the price protection program, we give distributors credits for the
difference between the original price paid and the current price that we offer. Our products typically have no contractual limit on
the amount of price protection, nor is there a limit on the time horizon under which price protection is granted. The right of return
granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the
number of qualified purchases made by the distributor.
DISTRIBUTION
Distributors typically handle a wide variety of products, including those that compete with our products, and fill orders for many
customers. Customers may place orders directly with us or through distributors. We have several distribution warehouses that are
located in proximity to key customers.
BACKLOG
Our customers generally operate with lean-inventory or just-in-time operations rather than maintaining larger inventories of our
products. As our customers continue to lower their inventories, our processes to fulfill their orders have evolved to meet their
needs. As a result, our manufacturing production is based on estimates and advance non-binding commitments from customers
as to future purchases. Our order backlog as of any particular date is a mix of these commitments and specific firm orders that are
primarily made pursuant to standard purchase orders for delivery of products. Only a small portion of our orders are
non-cancelable, and the dollar amount associated with the non-cancelable portion is not significant.
SEASONAL TRENDS
Historically, our net revenue has typically been higher in the second half of the year than in the first half of the year, accelerating in
the third quarter and peaking in the fourth quarter.
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MARKETING
Our global marketing objectives are to build a strong, well-known, differentiated, and meaningful Intel corporate brand that drives
preference with businesses and consumers, and to offer a limited number of meaningful and valuable brands in our portfolio to
aid businesses and consumers in making informed choices about technology purchases. The Intel Core processor family and the
Intel® Quark™, Intel Atom®, Intel® Celeron®, Intel® Pentium®, Intel® Xeon®, Intel® Xeon Phi™, and Intel® Itanium® trademarks make up
our processor brands.
We promote brand awareness and preference, and generate demand through our own direct marketing, as well as through
co-marketing programs. Our direct marketing activities primarily include advertising through digital and social media and
television, as well as consumer and trade events, industry and consumer communications, and press relations. We market to
consumer and business audiences, and focus on building awareness and generating demand for new form factors such as
all-in-one devices and 2 in 1 systems powered by Intel technologies. Our key messaging focuses on increased performance,
improved energy efficiency, and other capabilities such as connectivity and communications.
Purchases by customers often allow them to participate in cooperative advertising and marketing programs such as the Intel
Inside program. This program broadens the reach of our brands beyond the scope of our own direct marketing. Through the Intel
Inside program, certain customers are licensed to place Intel® logos on computing devices containing our microprocessors and
processor technologies, and to use our brands in their marketing activities. The program includes a market development
component that accrues funds based on purchases and partially reimburses customers for marketing activities for products
featuring Intel® brands, subject to customers meeting defined criteria. These marketing activities primarily include advertising
through digital and social media and television, as well as press relations. We have also entered into joint marketing arrangements
with certain customers.
COMPETITION
The computing industry continuously evolves with new and enhanced technologies and products from existing and new
providers. The marketplace can change quickly in response to the introduction of such technologies and products and other
factors such as changes in customer and end-user requirements, expectations, and preferences. As technologies evolve and new
market segments emerge, the boundaries between the market segments that we compete in are also subject to change.
Intel faces significant competition in the development and market acceptance of our products in this environment. Our platforms,
based on Intel architecture, are positioned to compete across the compute continuum, from low-power devices to the most
powerful data center servers. These platforms have integrated hardware and software and offer our customers benefits such as
ease of use, savings in total cost of ownership, and the ability to scale systems to accommodate increased usage.
COMPETITORS
We compete against other companies that make and sell platforms, other silicon components, and software to businesses that
build and sell computing and communications systems to end users. Our competitors also include companies that sell goods and
services to businesses that use them for their internal and/or customer-facing processes (e.g., businesses running large data
centers). In addition, we face competition from OEMs, ODMs, and other industrial and communications equipment manufacturers
that, to some degree, choose to vertically integrate their own proprietary semiconductor and software assets. By doing so, these
competitors may be attempting to offer greater differentiation in their products and to increase their share of the profits for each
finished product they sell. Continuing changes in industry participants through, for example, acquisitions or business
collaborations could also have a significant impact on our competitive position.
In the PC market segment, we are a leading provider of platforms for notebooks, 2 in 1 systems, and desktops (including
all-in-ones and high-end enthusiast PCs). We face existing and emerging competition in these product areas. Tablets, phones, and
other mobile devices offered by numerous vendors are significant competitors to traditional PCs for many usages, and
considerable blurring of system form factors currently exists in the marketplace. We face strong competition from vendors who
use applications processors that are based on the ARM* architecture, feature low-power or long battery-life operation, and are
built in SoC formats that integrate numerous functions on one chip.
In the data center market segment, we are a leading provider of data center platforms, and face competition from companies
using ARM architecture or other technologies. Internet cloud computing, storage, and networking are areas of significant targeted
growth for us in the data center segment, including as a result of increasing amounts of data created by artificial intelligence,
autonomous driving, and other applications. We face strong competition in these market segments.
In the Internet of Things market segment, we have a long-standing position as a supplier of components and software for
embedded products. This marketplace continues to expand significantly with increasing types and numbers of smart and
connected devices for retail, automotive, industrial, and consumer uses, including smart video. As this market segment evolves, we
face numerous large and small incumbent processor competitors, as well as new entrants that use ARM architecture and other
operating systems and software. In addition, the Internet of Things requires a broad range of connectivity solutions and we face
competition from companies providing traditional wireless solutions such as cellular, WiFi, and Bluetooth*, as well as several new
entrants who are taking advantage of new focused communications protocols.
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In the memory market segment, we compete against other providers of NAND flash memory products. We focus our efforts
primarily on incorporating NAND flash memory into solution products, such as SSDs supporting enterprise and consumer
applications. We believe that our memory offerings, including innovative developments such as Intel Optane technology,
complement our product offerings in our other segments.
In the programmable solutions market segment, we are a leading provider of programmable semiconductors and related
products, including FPGAs and SoC FPGAs. We face competition from other programmable logic companies, as well as companies
that make other types of semiconductor products, such as application-specific integrated circuits, application-specific standard
products, graphics processing units, digital signal processors, and CPUs. Targeted growth areas for our programmable solutions
include communications, data center, and automotive applications. The FPGA life cycle is long relative to other Intel products—
from the time that a design win is secured, it generally takes three or more years before a customer starts volume production and
we receive the associated revenue from such design win.
Our products primarily compete based on performance, energy efficiency, integration, innovative design, features, price, quality,
reliability, brand recognition, technical support, and availability. The importance of these factors varies by the type of end system
for the products. For example, performance might be among the most important factors for our products for data center servers,
while energy efficiency and price, as well as density and non-volatility, might be among the most important factors for our
memory products.
COMPETITIVE ADVANTAGES
Our key competitive advantages include:
• Well-positioned for growth in smart, connected world. We offer solutions across every segment of the smart, connected
world—from the cloud, to the network, to devices—and believe that we are well-positioned for growth through our strategy of
the Virtuous Cycle of Growth. The expansion and proliferation of the cloud and data center, Internet of Things, memory, and
FPGAs—all of which are connected—help grow our business. As more devices connect to the cloud, we have increased
opportunities for growth. We are uniquely positioned to meet customer needs with platform solutions that leverage our breadth
of products. Our range of silicon products and associated software gives us an end-to-end capability supported by our
manufacturing expertise and intellectual property.
• Transitions to next-generation technologies. We have a market lead in transitioning to the next-generation process technology
and bringing products to market using such technology. In Q4 2017, we began to ship products utilizing our 10nm process
technology and we are continuing to work on the development of our next-generation 7nm process technology. We believe that
these advancements will offer significant improvements in one or more of the following areas: performance, new features,
energy efficiency, and cost.
• Combination of our network of manufacturing and assembly and test facilities with our global architecture design teams. We
have made significant capital and R&D investments into our integrated manufacturing network, which enables us to have more
direct control over our design, development, and manufacturing processes; quality control; product cost; production timing;
performance; power consumption; and manufacturing yield. The increased cost of constructing new fabrication facilities to
support smaller transistor geometries and larger wafers has led to a reduced number of companies that can build and equip
leading-edge manufacturing facilities. Most of our competitors rely on third-party foundries and subcontractors for
manufacturing and assembly and test needs. We provide foundry services as an alternative to such foundries.
INTELLECTUAL PROPERTY RIGHTS AND LICENSING
Intel owns and develops significant intellectual property (IP) and related IP rights around the world that relate to our products,
services, R&D, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, trade dress
rights, and maskwork rights. We actively seek to protect our global IP rights and to deter unauthorized use of our IP and other
assets. Such efforts can be difficult, however, particularly in countries that provide less protection to IP rights and in the absence
of harmonized international IP standards. While our IP rights are important to our success, our business as a whole is not
significantly dependent on any single patent, copyright, or other IP right.
We have obtained patents in the U.S. and other countries. Because of the fast pace of innovation and product development, and
the comparative pace of governments’ patenting processes, our products are often obsolete before the patents related to them
expire; in some cases, our products may be obsolete before the patents related to them are granted. As we expand our products
into new industries, we also seek to extend our patent development efforts to patent such products. In addition to developing
patents based on our own R&D efforts, we may purchase or license patents from third parties. Established competitors in existing
and new industries, as well as companies that purchase and enforce patents and other IP, may already have patents covering
similar products. There is no assurance that we will be able to obtain patents covering our own products, or that we will be able to
obtain licenses from other companies on favorable terms or at all.
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The software that we distribute, including software embedded in our component-level and platform products, is entitled to
copyright and other IP protection. To distinguish our products from our competitors’ products, we have obtained trademarks and
trade names for our products, and we maintain cooperative advertising programs with customers to promote our brands and to
identify products containing genuine Intel components. We also protect details about our processes, products, and strategies as
trade secrets, keeping confidential the information that we believe provides us with a competitive advantage.
CRITICAL ACCOUNTING ESTIMATES
The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments
regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make
assumptions that were uncertain when the judgment was made, and (2) changes in the estimate assumptions, or selection of a
different estimate methodology could have a significant impact on our financial position and the results that we report in our
consolidated financial statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are
based on information available when the estimate was made.
Refer to “Note 2: Accounting Policies” within the Consolidated Financial Statements for further information on our critical
accounting estimates and policies, which are as follows:
• Inventories—the transition of manufacturing costs to inventory excluding factory excess capacity costs. Inventoried product
reflected at the lower of cost or net realizable value considering future demand and market conditions;
• Property, plant and equipment—the useful life determination and the related timing of when depreciation begins;
• Long-lived assets—the valuation methods and assumptions used in assessing the impairment of property, plant and
equipment, identified intangibles, and goodwill, including the determination of asset groupings and the identification and
allocation of goodwill to reporting units;
• Non-marketable equity investments—the valuation estimates and assessment of other-than-temporary impairment;
• Business combinations—the assumptions used to allocate the purchase price paid for assets acquired and liabilities assumed in
connection with our acquisitions;
• Income taxes—the identification and measurement of deferred tax assets and liabilities and the provisional estimates
associated with Tax Reform; and
• Loss contingencies—the estimation of when a loss is probable and reasonably estimable.
RISK FACTORS
The following risks could materially and adversely affect our business, financial condition, cash flows, and results of operations,
and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations
could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our
operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future
performance, and historical trends should not be used to anticipate results or trends in future periods. Refer also to the other
information set forth in this Annual Report on Form 10-K, including “MD&A—Results of Operations” and our financial statements
and the related notes.
CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS.
Demand for our products is variable and hard to predict. Our platform products are used across different market segments, and
demand for our platforms may vary within or among our client computing, data center, Internet of Things, and other market
segments. It is difficult to anticipate the impact of these changes, as demand may increase in one or more market segments while
decreasing in others. Changes in the demand for our products, particularly in the client computing or data center market
segments, may reduce our revenue, lower our gross margin, or require us to write down the value of our assets.
Important factors that could lead to variation in the demand for our products include changes in:
• business conditions, including downturns in the market segments in which we operate, or in the global or regional economies;
• consumer confidence or income levels caused by changes in market conditions, including changes in government borrowing,
taxation, or spending policies; the credit market; or expected inflation, employment, and energy or other commodity prices;
• the level of our customers’ inventories;
• competitive and pricing pressures, including actions taken by competitors;
• customer order patterns, including order cancellations;
• failure to timely introduce competitive products; and
• market acceptance and industry support of our new and maturing products.
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Due to the complexity of our manufacturing operations, we may be unable to timely respond to fluctuations in demand and we
may incur significant charges and costs. Because we own and operate high-tech fabrication facilities, our operations have high
costs that are fixed or difficult to reduce in the short term, including our costs related to utilization of existing facilities, facility
construction and equipment, R&D, and the employment and training of a highly skilled workforce. If product demand decreases or
we fail to forecast demand accurately, we could be required to write off inventory or record excess capacity charges, which would
lower our gross margin. If the demand decrease is prolonged, our manufacturing or assembly and test capacity could be
underutilized, and we may be required to write down our long-lived assets, which would increase our expenses. We may also be
required to shorten the useful lives of under-used facilities and equipment and accelerate depreciation. Conversely, if product
demand increases, we may be unable to add capacity fast enough to meet market demand.
We face significant competition. The industry in which we operate is highly competitive and subject to rapid technological and
market developments, changes in industry standards, changes in customer needs, and frequent product introductions and
improvements. If we do not anticipate and respond to these developments, our competitive position may weaken, and our
products or technologies might be uncompetitive or become obsolete. Additionally, a number of business combinations—
including mergers, asset acquisitions, and strategic partnerships—in the semiconductor industry have occurred over the last
several years, and more could occur in the future. Consolidation in the industry could lead to fewer customers, partners, or
suppliers, any of which could negatively affect our financial results.
In recent years, in connection with our strategic transformation to a data-centric company, we have entered new areas and
introduced adjacent products in programmable solutions, AI, and autonomous driving; we have also expanded our adjacent
product offerings in client computing, the data center, the Internet of Things, and memory, with offerings such as modems, silicon
photonics solutions, and 3D XPoint technology products. As a result, we face new sources of competition, including, in certain of
these market segments, from incumbent competitors with established customer bases and greater brand recognition. These
developing products and market segments may not grow as significantly as projected, or at all, or may utilize technologies that are
different from the ones that we develop and manufacture. To be successful, we need to cultivate new industry relationships with
customers and partners in these market segments. In addition, we must continually improve the cost, performance, integration,
and energy efficiency of our products, as well as expand our software capabilities to provide customers with comprehensive
computing solutions. Despite our ongoing efforts, there is no guarantee that we will achieve or maintain market demand or
acceptance for our products and services in these various market segments.
To compete successfully, we must maintain a successful R&D effort, develop new products and production processes, and
improve our existing products and processes ahead of competitors. For example, we invest substantially in our network of
manufacturing and assembly and test facilities, including the construction of new fabrication facilities to support smaller transistor
geometries and larger wafers. We do not expect all of our R&D investments to be successful. We may be unable to develop and
market new products successfully, and the products and technologies we invest in and develop may not be well-received by
customers. Our R&D investments may not contribute to our future operating results for several years, if at all, and such
contributions may not meet our expectations or even cover the costs of such investments. Additionally, the products and
technologies offered by others may affect demand for, or pricing of, our products.
If we are not able to compete effectively, our financial results will be adversely affected, including reduced revenue and gross
margin, and we may be required to accelerate the write-down of the value of certain assets.
Changes in the mix of products sold may impact our financial results. Our pricing and margins vary across our products and
market segments due in part to marketability of our products and differences in their features or manufacturing costs. For
example, our platform product offerings range from lower-priced and entry-level platforms, such as those based on Intel Atom
processors, to higher-end platforms based on Intel Xeon processors. If demand shifts from our higher-priced to lower-priced
products in any of our market segments, our gross margin and revenue would decrease.
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WE OPERATE GLOBALLY AND ARE SUBJECT TO SIGNIFICANT RISKS IN MANY JURISDICTIONS.
Global or regional conditions may harm our financial results. We have manufacturing, assembly and test, R&D, sales, and other
operations in many countries, and some of our business activities may be concentrated in one or more geographic areas.
Moreover, sales outside the U.S. accounted for approximately 83% of our revenue for the fiscal year ended December 30, 2017.
As a result, our operations and our financial results, including our ability to manufacture, assemble and test, design, develop, or
sell products, may be adversely affected by a number of factors outside of our control, including:
• global and regional economic conditions;
• geopolitical and security issues, such as armed conflict and civil or military unrest, political instability (including geopolitical
uncertainty on the Korean peninsula), human rights concerns, and terrorist activity;
• natural disasters, public health issues, and other catastrophic events;
• inefficient infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable
provision of services from utilities, transportation, data hosting, or telecommunications providers;
• government restrictions on, or nationalization of our operations in any country, or restrictions on our ability to repatriate
earnings from a particular country;
• differing employment practices and labor issues;
• formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions
and tariffs, which could be changed without notice;
• ineffective legal protection of our IP rights in certain countries;
• local business and cultural factors that differ from our current standards and practices; and
• continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including the
United Kingdom’s vote to withdraw from the European Union.
We are subject to laws and regulations worldwide, which may differ among jurisdictions, affecting our operations in areas
including, but not limited to: IP ownership and infringement; tax; import and export requirements; anti-corruption; foreign
exchange controls and cash repatriation restrictions; data privacy requirements; competition; advertising; employment; product
regulations; environment, health, and safety requirements; and consumer laws. Compliance with such requirements may be
onerous and expensive, and may otherwise impact our business operations negatively. For example, unfavorable developments
with evolving laws and regulations worldwide related to 5G technology may limit its global introduction and adoption, which could
impede our modem strategy and negatively impact our long-term outlook. Although we have policies, controls, and procedures
designed to help ensure compliance with applicable laws, there can be no assurance that our employees, contractors, suppliers,
and/or agents will not violate such laws or our policies. Violations of these laws and regulations could result in fines; criminal
sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation.
We may be affected by fluctuations in currency exchange rates. We are potentially exposed to adverse as well as beneficial
movements in currency exchange rates. Although most of our sales occur in U.S. dollars, expenses may be paid in local currencies.
An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside the
U.S. where we sell in dollars, and a weakened dollar could increase the cost of expenses such as payroll, utilities, tax, and
marketing expenses, as well as overseas capital expenditures. We also conduct certain investing and financing activities in local
currencies. Our hedging programs reduce, but do not eliminate, the impact of currency exchange rate movements; therefore,
changes in exchange rates could harm our results of operations and financial condition.
Catastrophic events could have a material adverse effect on our operations and financial results. Our operations and business
could be disrupted by natural disasters; industrial accidents; public health issues; cybersecurity incidents; interruptions of service
from utilities, transportation, or telecommunications providers; or other catastrophic events. Such events could make it difficult or
impossible to manufacture or deliver products to our customers, receive production materials from our suppliers, or perform
critical functions, which could adversely affect our revenue and require significant recovery time and expenditures to resume
operations. While we maintain business recovery plans that are intended to enable us to recover from natural disasters or other
events that can be disruptive to our business, some of our systems are not fully redundant and we cannot be sure that our plans
will fully protect us from all such disruptions.
We maintain a program of insurance coverage for a variety of property, casualty, and other risks. The types and amounts of
insurance we obtain vary depending on availability, cost, and decisions with respect to risk retention. Some of our policies have
large deductibles and broad exclusions. In addition, one or more of our insurance providers may be unable or unwilling to pay a
claim. Losses not covered by insurance may be large, which could harm our results of operations and financial condition.
WE ARE VULNERABLE TO PRODUCT AND MANUFACTURING-RELATED RISKS.
We are subject to risks associated with the development and implementation of new manufacturing process technology.
Production of integrated circuits is a complex process. Our strategy is significantly dependent upon the timely advancement of
Moore’s Law and we are continually engaged in the development of next-generation process technologies. We may not be
successful or efficient in developing or implementing new process nodes and production processes. Our efforts to innovate
involve significant expense and carry inherent risks, including difficulties in designing and developing such next-generation
process technologies, and investments in manufacturing assets and facilities years in advance of the process node introduction.
OTHER KEY INFORMATION
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Risks inherent in the development of next-generation process technologies include production timing delays, lower than
anticipated manufacturing yields, and product defects and errata. Disruptions in the production process can also result from
errors, defects in materials, delays in obtaining or revising operating permits and licenses, interruption in our supply of materials
or resources, and disruptions at our fabrication and assembly and test facilities due to accidents, maintenance issues, or unsafe
working conditions—all of which could affect the timing of production ramps and yields. Production issues can lead to increased
costs and may affect our ability to meet product demand, which could adversely impact our business and the results of
operations. In addition, if we face unexpected delays in the timing of our product introductions, our revenue and gross margin
could be adversely affected because we incur significant costs up front in the product development stage and earn revenue to
offset these costs over time.
We face supply chain risks. Thousands of suppliers provide materials and equipment that we use in production and other aspects
of our business. Where possible, we seek to have several sources of supply. However, for certain materials, we may rely on a single
or a limited number of suppliers, or upon suppliers in a single location. In addition, consolidation among suppliers could impact
the nature, quality, availability, and pricing of the products and services available to us. The inability of suppliers to deliver
necessary production materials or equipment could disrupt our production processes and make it more difficult for us to
implement our business strategy. Production could be disrupted by the unavailability of resources, such as water, silicon,
electricity, gases, and other materials. The unavailability or reduced availability of materials or resources may require us to reduce
production or incur additional costs, which could harm our business and results of operations. Our manufacturing operations and
ability to meet product demand may also be impacted by IP or other litigation between our suppliers, where an injunction against
Intel or a supplier could interrupt the availability of goods or services supplied to Intel by others.
We also rely on third-party providers to manufacture and assemble and test certain components or products, particularly those
related to networking, communications, programmable semiconductor solutions, and NAND flash memory. If any of these third
parties are unable to perform these services on a timely or cost-effective basis, we may encounter supply delays or disruptions
that could adversely affect our business and financial results.
In addition, increased regulation or stakeholder expectations regarding responsible sourcing practices could cause our
compliance costs to increase or result in publicity that negatively affects our reputation. Moreover, given that we use many
materials in the manufacturing of our products and rely on many suppliers to provide these materials, but do not directly control
the procurement or employment practices of such suppliers, we could be subject to similar financial or reputational risks as a
result of our suppliers’ conduct.
We are subject to the risks of product defects, errata, or other product issues. Product defects and errata (deviations from
published specifications) may result from problems in our product design or our manufacturing and assembly and test processes.
Components and products we purchase or license from third-party suppliers, or attain through acquisitions, may also contain
defects. We could face risks if products that we design, manufacture, or sell, or that include our technology, cause personal injury
or property damage, even where the cause is unrelated to product defects or errata. These risks may increase as our products are
introduced into new devices, market segments, technologies, or applications, including wearables, drones and transportation,
health care and financial transactions, and other industrial and consumer uses. Costs from defects, errata, or other product issues
could include:
• writing off some or all of the value of inventory;
• recalling products that have been shipped;
• providing product replacements or modifications;
• reimbursing customers for certain costs they incur;
• defending against litigation and/or paying resulting damages; and
• paying fines imposed by regulatory agencies.
These costs could be large and may increase expenses and lower gross margin, and result in delay or loss of revenue. Any product
defects, errata, or other issues could also damage our reputation, negatively affect product demand, delay product releases, or
result in legal liability. The announcement of product defects or errata could cause customers to purchase products from
competitors. Any of these occurrences could harm our business and financial results. In addition, although we maintain liability
insurance, our coverage has certain exclusions and/or may not adequately cover liabilities incurred. Our insurance providers may
be unable or unwilling to pay a claim, and losses not covered by insurance could be large, which could harm our financial
condition.
We are subject to risks associated with environmental, health, and safety regulations and climate change. The manufacturing and
assembly and test of our products require the use of hazardous materials that are subject to a broad array of environmental,
health, and safety laws and regulations. Our failure to comply with these laws or regulations could result in:
• regulatory penalties, fines, and legal liabilities;
• suspension of production;
• alteration of our manufacturing and assembly and test processes;
• damage to our reputation; and
• restrictions on our operations or sales.
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Our failure to manage the use, transportation, emissions, discharge, storage, recycling, or disposal of hazardous materials could
lead to increased costs or future liabilities. Our ability to expand or modify our manufacturing capability in the future may be
impeded by environmental regulations, such as air quality and wastewater requirements. Environmental laws and regulations
could also require us to acquire additional pollution abatement or remediation equipment, modify product designs, or incur other
expenses. Many new materials that we are evaluating for use in our operations may be subject to regulation under environmental
laws and regulations. These restrictions could harm our business and results of operations by increasing our expenses or requiring
us to alter manufacturing and assembly and test processes.
Climate change may also pose regulatory and environmental risks that could harm our results of operations and affect the way we
conduct business. For example, climate change regulation could result in increased manufacturing costs associated with air
pollution control requirements, and increased or new monitoring, recordkeeping, and reporting of greenhouse gas emissions. We
also see the potential for higher energy costs driven by climate change regulations if, for example, utility companies pass on their
costs to their customers. Furthermore, many of our operations are located in semi-arid regions such as Arizona, New Mexico, and
Israel that may become increasingly vulnerable to rising average temperatures or prolonged droughts due to climate change. Our
fabrication facilities require significant water use and, while we recycle and reuse a portion of the water used, we may have
difficulties obtaining sufficient water to fulfill our operational needs. In addition, climate change may pose physical and regulatory
risks to our suppliers, including increased extreme weather events that could result in supply delays or disruptions.
WE ARE SUBJECT TO CYBERSECURITY AND PRIVACY RISKS.
Third parties regularly attempt to gain unauthorized access to our network, products, services, and infrastructure. We regularly
face attempts by others to gain unauthorized access through the Internet or to introduce malicious software to our IT systems.
Additionally, individuals or organizations, including malicious hackers or intruders into our physical facilities, may attempt to gain
unauthorized access and corrupt the processes of hardware and software products that we manufacture and services we provide.
Due to the widespread use of our products, we are a frequent target of computer hackers and organizations that intend to
sabotage, take control of, or otherwise corrupt our manufacturing or other processes, products, and services. We are also a target
of malicious attackers who attempt to gain access to our network or data centers or those of our customers or end users; steal
proprietary information related to our business, products, employees, and customers; or interrupt our systems and services or
those of our customers or others. We believe such attempts are increasing in number and in technical sophistication. As we
become a more data-centric company, our processors may be used in more and different critical application areas and may be
subject to increased cybersecurity and privacy risks.
From time to time, we encounter intrusions or unauthorized access to our network, products, services, or infrastructure. To date,
none have resulted in any material adverse impact to our business or operations. Such incidents, whether or not successful, could
result in our incurring significant costs related to, for example, rebuilding internal systems, writing down inventory value,
implementing additional threat protection measures, providing modifications to our products and services, defending against
litigation, responding to regulatory inquiries or actions, paying damages, providing customers with incentives to maintain the
business relationship, or taking other remedial steps with respect to third parties. In addition, these threats are constantly
evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative
measures. While we seek to detect and investigate all unauthorized attempts and attacks against our network, products, and
services, and to prevent their recurrence where practicable through changes to our internal processes and tools and/or changes
or updates to our products and services, we remain potentially vulnerable to additional known or unknown threats. In some
instances, we, our customers, and the users of our products and services may be unaware of an incident or its magnitude and
effects.
Security vulnerabilities may exist with respect to our processors and other products as well as the operating systems and
workloads running on them. Mitigation techniques designed to address these security vulnerabilities, including software and
firmware updates or other preventative measures, may not operate as intended or effectively resolve these vulnerabilities. In
addition, we may be required to rely on third parties, including hardware, software, and services vendors, as well as end users, to
develop and deploy mitigation techniques, and the effectiveness of mitigation techniques may depend solely or in part on the
actions of these third parties. Security vulnerabilities and/or mitigation techniques, including software and firmware updates, may
result in adverse performance, reboots, system instability, data loss or corruption, unpredictable system behavior, or the
misappropriation of data by third parties, which could adversely impact our business and harm our reputation.
A side-channel exploit is a type of security vulnerability that has recently received attention as a result of the variants referred to
as “Spectre” and “Meltdown.” Information on these variants was prematurely reported publicly before mitigation techniques to
address all vulnerabilities were made widely available, and certain of the mitigation techniques did not operate as intended. To
date, we do not expect a material financial impact to our business or operations from these security vulnerabilities. However,
subsequent events or new information could develop which changes our expectations, including additional information learned as
we deploy updates, evaluate the competitiveness of existing and new products, address future warranty or other claims or
customer satisfaction considerations, as well as developments in the course of responding to any litigation or investigations over
these matters. The recent publicity regarding side-channel exploits may also result in increased attempts by third parties to
identify additional variants. We will continue to reassess whether or not we expect to be exposed to a loss that could be material.
OTHER KEY INFORMATION
50
As a result of the foregoing risks, we have and may continue to face product claims, litigation, and adverse publicity and customer
relations from security vulnerabilities and/or mitigation techniques. Publicity about security vulnerabilities and attempted or
successful exploits, whether accurate or inaccurate, may result in increased attempts by third parties to identify additional
vulnerabilities. This publicity could damage our reputation with customers or users and reduce demand for our products and
services. In addition, future vulnerabilities and mitigation of those vulnerabilities may also adversely impact our results of
operations, financial condition, customer relationships, and reputation. Moreover, we may be unable to anticipate the timing of the
release of information by third parties regarding potential vulnerabilities of our products, which, in turn, has and could adversely
impact our ability to timely introduce mitigation techniques and thereby harm our business and reputation.
We may be subject to theft, loss, or misuse of personal data about our employees, customers, or other third parties, which could
increase our expenses, damage our reputation, or result in legal or regulatory proceedings. The theft, loss, or misuse of personal
data collected, used, stored, or transferred by us to run our business could result in significantly increased business and security
costs or costs related to defending legal claims. Global privacy legislation, enforcement, and policy activity in this area are rapidly
expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related
and data protection measures could be significant. In addition, even our inadvertent failure to comply with federal, state, or
international privacy-related or data protection laws and regulations could result in proceedings against us by governmental
entities or others.
WE ARE SUBJECT TO IP RISKS AND RISKS ASSOCIATED WITH LITIGATION AND REGULATORY PROCEEDINGS.
We may be unable to enforce or protect our IP rights. We regard our patents, copyrights, trade secrets, and other IP rights as
important to the success of our business. We rely on IP law—as well as confidentiality and licensing agreements with our
customers, employees, technology development partners, and others—to protect our IP rights. Our ability to enforce these rights
is subject to general litigation risks, as well as uncertainty as to the enforceability of our IP rights in various countries. When we
seek to enforce our rights, we may be subject to claims that our IP rights are invalid, not enforceable, or licensed to an opposing
party. Our assertion of IP rights may result in another party seeking to assert claims against us, which could harm our business.
Governments may adopt regulations—and governments or courts may render decisions—requiring compulsory licensing of IP
rights, or governments may require products to meet standards that favor local companies. Our inability to enforce our IP rights
under any of these circumstances may harm our competitive position and business. In addition, the theft or unauthorized use or
publication of our trade secrets and other confidential business information could harm our competitive position and reduce
acceptance of our products; as a result, the value of our investment in R&D, product development, and marketing could be
reduced.
Our licenses with other companies and participation in industry initiatives may allow competitors to use our patent rights.
Technology companies often bilaterally license patents between each other to settle disputes or as part of business agreements.
Our competitors may have licenses to our patents, and under current case law, some of the licenses may exhaust our patent rights
as to licensed product sales under some circumstances. Our participation in industry standards organizations or with other
industry initiatives may require us to license our patents to companies that adopt industry-standard specifications. Depending on
the rules of the organization, government regulations, or court decisions, we might have to grant licenses to our patents for little
or no cost, and as a result, we may be unable to enforce certain patents against others, our costs of enforcing our licenses or
protecting our patents may increase, and the value of our IP rights may be impaired.
Third parties may assert claims based on IP rights against us or our products, which could harm our business. We may face claims
based on IP rights from individuals and companies, including claims from those who have aggregated patents acquired from
multiple sources to form a new, larger portfolio to assert claims against us and other companies. Additionally, large patent
portfolio owners may divest portions of their portfolios to more than one individual or company increasing the number of parties
who own IP rights previously all held by a single party. We are typically engaged in a number of disputes involving IP rights. Claims
that our products or processes infringe the IP rights of others, regardless of their merits, could cause us to incur large costs to
respond to, defend, and resolve the claims, and they may divert the efforts and attention of our management and technical
personnel from our business and operations. In addition, we may face claims based on the alleged theft or unauthorized use or
disclosure of third-party trade secrets and other confidential information or end-user data that we obtain in conducting our
business. Any such incidents and claims could severely disrupt our business, and we could suffer losses, including the cost of
product recalls and returns, and reputational harm. Furthermore, we have agreed to indemnify customers for certain IP rights
claims against them. As a result of IP rights claims, we could:
• pay monetary damages, including payments to satisfy indemnification obligations;
• stop manufacturing, using, selling, offering to sell, or importing products or technology subject to claims;
• need to develop other products or technology not subject to claims, which could be time-consuming or costly; and/or
• enter into settlement and license agreements, which agreements may not be available on commercially reasonable terms.
These IP rights claims could harm our competitive position, result in expenses, or require us to impair our assets. If we alter or
stop production of affected items, our revenue could be harmed.
OTHER KEY INFORMATION
51
We rely on access to third-party IP, which may not be available to us on commercially reasonable terms or at all. Many of our
products include third-party technology and/or implement industry standards, and may require licenses from third parties. Based
on past experience and industry practice, we believe such licenses generally can be obtained on commercially reasonable terms.
However, there is no assurance that the necessary licenses can be obtained on acceptable terms or at all. Failure to obtain the
right to use third-party technology, or to license IP on commercially reasonable terms, could preclude us from selling certain
products or otherwise have a material adverse impact on our financial condition and operating results.
We are subject to the risks associated with litigation and regulatory proceedings. We may face legal claims or regulatory matters
involving stockholder, consumer, competition, and other issues on a global basis. As described in “Note 20: Commitments and
Contingencies” within the Consolidated Financial Statements, we are engaged in a number of litigation and regulatory matters.
Litigation and regulatory proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or
an injunction stopping us from manufacturing or selling certain products, engaging in certain business practices, or requiring other
remedies, such as compulsory licensing of patents. An unfavorable outcome may result in a material adverse impact on our
business, financial condition and results of operations. In addition, regardless of the outcome, litigation and regulatory
proceedings can be costly, time-consuming, disruptive to our operations, and distracting to management.
WE MUST ATTRACT, RETAIN, AND MOTIVATE KEY EMPLOYEES.
To be competitive, we must attract, retain, and motivate executives and other key employees. Hiring and retaining qualified
executives, scientists, engineers, technical staff, and sales representatives are critical to our business, and competition for
experienced employees can be intense. To help attract, retain, and motivate qualified employees, we use share-based and other
performance-based incentive awards such as RSUs and cash bonuses. Also key to our employee hiring and retention is our ability
to build and maintain an inclusive business culture and be viewed as an employer of choice. If our share-based or other
compensation programs and workplace culture cease to be viewed as competitive, our ability to attract, retain, and motivate
employees could be weakened, which could harm our results of operations.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR STRATEGIC TRANSACTIONS.
We invest in companies for strategic reasons and may not realize a return on our investments. We make investments in public and
private companies around the world to further our strategic objectives and support key business initiatives. Many of the
instruments in which we invest are non-marketable at the time of our initial investment. Companies in which we invest range from
early-stage companies still defining their strategic direction to mature companies with established revenue streams and business
models. The success of our investment in any company is typically dependent on the company’s access to additional funding on
favorable terms, or a liquidity event, such as a public offering or acquisition. If any of the companies in which we invest fail, we
could lose all or part of our investment.
Our acquisitions, divestitures, and other strategic transactions could fail to achieve our financial or strategic objectives, disrupt our
ongoing business, and adversely impact our results of operations. In pursuing our business strategy, we routinely conduct
discussions, evaluate opportunities, and enter into agreements for possible acquisitions, divestitures, and other strategic
transactions. These transactions involve numerous risks, including:
• the transaction may not advance our business strategy and its anticipated benefits may never materialize;
• we may experience disruption of our ongoing operations and our management’s attention may be diverted;
• we may not realize a satisfactory return on our investment, potentially resulting in an impairment;
• we may be unable to retain key personnel of acquired businesses or may have difficulty integrating employees, business
systems, and technology;
• we may not be able to identify opportunities in a timely manner or on terms acceptable to us;
• controls, processes, and procedures of acquired businesses may not adequately ensure compliance with laws and regulations,
and we may fail to identify compliance issues or liabilities;
• we may be unable to effectively enter new market segments through our strategic transactions or retain customers and partners
of acquired businesses;
• we may fail to identify the existence of unknown, underestimated, and/or undisclosed commitments or liabilities; and/or
• we may fail to complete a transaction in a timely manner, if at all, due to our inability to obtain required government or other
approvals, IP disputes or other litigation, difficulty in obtaining financing on terms acceptable to us, or other unforeseen factors.
Moreover, our resources are limited and our decision to pursue a transaction has opportunity costs; accordingly, if we pursue a
particular transaction, we may need to forgo the prospect of entering into other transactions that could help us achieve our
financial or strategic objectives.
Any of these risks could have a material adverse effect on our business, results of operations, financial condition, or cash flows,
particularly in the case of a large acquisition or several concurrent acquisitions.
OTHER KEY INFORMATION
52
WE ARE SUBJECT TO SALES-RELATED RISKS.
We face risks related to sales through distributors and other third parties. We sell a significant portion of our products through
third parties such as distributors, value-added resellers, and channel partners (collectively referred to as distributors), as well as
OEMs, ODMs and Internet service providers. We depend on many distributors to help us create end-customer demand, provide
technical support and other value-added services to customers, fill customer orders, and stock our products. We may rely on one
or more key distributors for a product, and a material change in our relationship with one or more of these distributors or their
failure to perform as expected could reduce our revenue. Our ability to add or replace distributors for some of our products may
be limited. In addition, our distributors’ expertise in the determination and stocking of acceptable inventory levels for some of our
products may not be easily transferable to a new distributor; as a result, end customers may be hesitant to accept the addition or
replacement of a distributor. Using third parties for distribution exposes us to many risks, including competitive pressure and
concentration, credit, and compliance risks. Distributors and other third parties may sell products that compete with our products,
and we may need to provide financial and other incentives to focus them on the sale of our products. They may face financial
difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. Violations of the
Foreign Corrupt Practices Act or similar laws by distributors or other third-party intermediaries could have a material impact on
our business. Failure to manage risks related to our use of distributors and other third parties may reduce sales, increase
expenses, and weaken our competitive position.
We receive a significant portion of our revenue from a limited number of customers. Collectively, our three largest customers
accounted for approximately 40% of our net revenue in 2017 and 38% of our net revenue in 2016. We expect a small number of
customers will continue to account for a significant portion of our revenue in the foreseeable future. If one of our key customers
stops purchasing from us, materially reduces its demand for our products, or delays its orders for our products, we may
experience a reduction in revenue, which could harm our results of operations and financial condition. For more information about
our customers, including customers who accounted for greater than 10% of our net consolidated revenue, see “Note 4: Operating
Segments” within the Consolidated Financial Statements.
We face risks related to business transactions with U.S. government entities. We receive proceeds from services and products we
provide to the U.S. government. U.S. government demand and payment may be affected by public sector budgetary cycles and
funding authorizations. U.S. government contracts are subject to oversight, including special rules on accounting, IP rights,
expenses, reviews, information handling, and security. Failure to comply with these rules could result in civil and criminal penalties
and sanctions, including termination of contracts, fines, and suspensions, or debarment from future business with the U.S.
government.
CHANGES IN OUR EFFECTIVE TAX RATE MAY REDUCE OUR NET INCOME.
A number of factors may increase our effective tax rates, which could reduce our net income, including:
• changes in jurisdictions in which our profits are determined to be earned and taxed;
• the resolution of issues arising from tax audits;
• changes in the valuation of our deferred tax assets and liabilities, and in deferred tax valuation allowances;
• adjustments to income taxes upon finalization of tax returns;
• increases in expenses not deductible for tax purposes, including impairments of goodwill;
• changes in available tax credits;
• changes in our ability to secure new or renew existing tax holidays and incentives;
• changes in U.S. federal, state, or foreign tax laws or their interpretation, including changes in the U.S. to the taxation of
manufacturing enterprises and of non-U.S. income and expenses;
• changes in accounting standards; and
• our decision to repatriate non-U.S. earnings for which we have not previously provided for local country withholding taxes
incurred upon repatriation.
WE MAY HAVE FLUCTUATIONS IN THE AMOUNT AND FREQUENCY OF OUR STOCK REPURCHASES.
The amount, timing, and execution of our stock repurchase program may fluctuate based on our priorities for the use of cash for
other purposes—such as investing in our business, including operational spending, capital spending, and acquisitions, and
returning cash to our stockholders as dividend payments—and because of changes in cash flows, tax laws, and the market price of
our common stock.
OTHER KEY INFORMATION
53
NON-GAAP FINANCIAL MEASURES
In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial
measures described below. We believe these non-GAAP financial measures provide investors with useful supplemental
information about the financial performance of our business, enable comparison of financial results between periods where
certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used
by management in operating our business and measuring our performance.
Our non-GAAP operating income and diluted earnings per share reflect adjustments for the following items, as well as the related
income tax effects. Income tax effects have been calculated using an appropriate tax rate for each adjustment.
Acquisition-related adjustments:
The non-GAAP financial measures disclosed by the company exclude certain business combination accounting adjustments and
certain expenses related to acquisitions as follow:
• Revenue and gross margin: Non-GAAP financial measures exclude the impact of the deferred revenue write-down, amortization
of acquisition-related intangible assets that impact cost of sales, and the inventory valuation adjustment.
O Deferred revenue write-down: Sales to distributors are made under agreements allowing for subsequent price adjustments
and returns, and are deferred until the products are resold by the distributor. Business combination accounting principles
require us to write down to fair value the deferred revenue assumed in our acquisitions as we have limited performance
obligations associated with this deferred revenue. Our GAAP revenues and related cost of sales for the subsequent
reselling by distributors to end customers after an acquisition do not reflect the full amounts that would have been
reported if the acquired deferred revenue was not written down to fair value. The non-GAAP adjustments made in Q1 2016
eliminate the effect of the deferred revenue write-down associated with our acquisition of Altera. We believe these
adjustments are useful to investors as an additional means to reflect revenue and gross margin trends of our business.
O Inventory valuation adjustment: Business combination accounting principles require us to measure acquired inventory at
fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected
profit margin. The non-GAAP adjustments to our cost of sales exclude the expected profit margin component that is
recorded under business combination accounting principles associated with our acquisitions of Mobileye and Altera. We
believe the adjustments are useful to investors as an additional means to reflect cost of sales and gross margin trends of
our business.
• Amortization of acquisition-related intangible assets: Amortization of acquisition-related intangible assets consists of
amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection
with business combinations. We record charges related to the amortization of these intangibles within both cost of sales and
operating expenses in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are
inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. Consequently, our non-GAAP
adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our
past operating performance.
• Other acquisition-related charges: Other acquisition-related charges exclude the impact of other charges associated with the
acquisitions of Mobileye and Altera. These charges primarily include bankers’ fees, compensation-related costs, and valuation
charges for stock-based compensation incurred related to the acquisitions. We believe these adjustments are useful to
investors as an additional means to reflect the spending trends of our business.
Restructuring and other charges:
Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and
benefit arrangements. Other charges include asset impairments, pension charges, and costs associated with the ISecG divestiture.
We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of
calculating certain non-GAAP measures. We believe that these costs do not reflect our current operating performance.
Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance
and comparisons to our past operating performance.
Gains or losses from divestiture:
We recognized a gain in Q2 2017 as a result of our divestiture of ISecG. We have excluded this gain for purposes of calculating
certain non-GAAP measures. We believe making these adjustments facilitates a better evaluation of our current operating
performance and comparisons to past operating results.
OTHER KEY INFORMATION
54
Tax Reform:
We recognized a higher income tax expense in Q4 2017 as a result of Tax Reform. We have excluded the one-time tax adjustment
relating to the transition tax on our previously untaxed foreign earnings and the remeasurement of our deferred income taxes to
the new U.S. statutory tax rate for purposes of calculating certain non-GAAP measures. We believe making these adjustments
facilitates a better evaluation of our current operating performance and comparisons to past operating results.
Following are the reconciliations of our most comparable GAAP measures to our non-GAAP measures presented:
(In Millions)
Operating income
Deferred revenue write-down, net of cost of sales
Inventory valuation
Amortization of acquisition-related intangibles
Restructuring and other charges
Other acquisition-related charges
Non-GAAP operating income
Earnings per share—Diluted
Deferred revenue write-down, net of cost of sales
Inventory valuation
Amortization of acquisition-related intangibles
Restructuring and other charges
Other acquisition-related charges
(Gains)/Losses from divestiture
Tax Reform
Income tax effect
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
17,936 $
12,874 $
14,002
—
55
1,089
384
113
64
387
1,231
1,886
100
—
—
608
354
—
19,577 $
16,542 $
14,964
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
1.99 $
2.12 $
—
0.01
0.22
0.08
0.02
(0.08)
1.13
0.09
0.01
0.08
0.25
0.39
0.02
—
—
(0.15)
2.33
—
—
0.13
0.07
—
—
—
(0.04)
2.49
Non-GAAP Earnings per share—Diluted
$
3.46 $
2.72 $
PROPERTIES
As of December 30, 2017, our major facilities consisted of:
(Square Feet in Millions)
Owned facilities
Leased facilities
Total facilities
United
States
Other
Countries
Total
31.3
1.6
32.9
17.9
6.3
24.2
49.2
7.9
57.1
Our principal executive offices are located in the U.S. and the majority of our wafer manufacturing activities in 2017 were also
located in the U.S. In 2017, we restarted construction on one of our Arizona wafer fabrication facilities that was previously on hold
and held in a safe state. For more information on our wafer fabrication and our assembly and test facilities, see “Research and
Development (R&D) and Manufacturing” within Fundamentals of Our Business.
We believe that the facilities described above are suitable and adequate for our present purposes and that the productive capacity
in our facilities is substantially being utilized or we have plans to utilize it.
We do not identify or allocate assets by operating segment as they are interchangeable in nature and used by multiple operating
segments. For information on net property, plant and equipment by country, see “Note 6: Other Financial Statement Details”
within the Consolidated Financial Statements.
OTHER KEY INFORMATION
55
MARKET FOR REGISTRANT’S COMMON EQUITY
The principal U.S. market on which Intel’s common stock (symbol INTC) is traded is the Nasdaq Global Select Market. For
information regarding the market price range of Intel common stock and dividend information, see “Financial Information by
Quarter (Unaudited)” within the Consolidated Financial Statements.
As of February 7, 2018, there were approximately 120,000 registered holders of record of Intel’s common stock. A substantially
greater number of holders of Intel common stock are “street name” or beneficial holders, whose shares of record are held by
banks, brokers, and other financial institutions.
ISSUER PURCHASES OF EQUITY SECURITIES
We have an ongoing authorization, originally approved by our Board of Directors in 2005, and subsequently amended, to
repurchase shares of our common stock in open market or negotiated transactions. As of December 30, 2017, we were authorized
to repurchase up to $75.0 billion, of which $13.2 billion remained available. This amount includes an increase of $10.0 billion in
the authorization limit approved by our Board of Directors in April 2017.
Common stock repurchase activity under our publicly announced stock repurchase plan during each quarter of 2017 was as
follows:
Period
January 1, 2017—April 1, 2017
April 2, 2017—July 1, 2017
July 2, 2017—September 30, 2017
October 1, 2017—December 30, 2017
Total
Total Number of
Shares Purchased
(In Millions)
Average Price
Paid Per Share
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
(In Millions)
35.1 $
37.6 $
28.6 $
— $
101.3
35.94 $
35.66 $
35.19 $
— $
5,538
14,198
13,191
13,191
We issue RSUs as part of our equity incentive plans. In our consolidated financial statements, we treat shares of common stock
withheld for tax purposes on behalf of our employees in connection with the vesting of RSUs as common stock repurchases
because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock
are not considered common stock repurchases under our authorized common stock repurchase plan, and accordingly are not
included in the common stock repurchase totals in the preceding table.
AVAILABILITY OF COMPANY INFORMATION
Our Internet address is www.intel.com. We publish voluntary reports on our website that outline our performance with respect to
corporate responsibility, including environmental, health, and safety compliance.
We use our Investor Relations website, www.intc.com, as a routine channel for distribution of important information, including
news releases, analyst presentations, financial information, corporate governance practices, and corporate responsibility
information. We post our filings at www.intc.com/sec the same day they are electronically filed with, or furnished to, the SEC,
including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K; our proxy statements; and
any amendments to those reports or statements. We post our quarterly and annual earnings results at www.intc.com/results.cfm,
and do not distribute our financial results via a news wire service. All such postings and filings are available on our Investor
Relations website free of charge. In addition, our Investor Relations website allows interested persons to sign up to automatically
receive e-mail alerts when we post financial information. The SEC’s website, www.sec.gov, contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC. The content on any website referred to in
this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
OTHER KEY INFORMATION
56
FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
Basis
Note 1: Basis of Presentation
Note 2: Accounting Policies
Note 3: Recent Accounting Standards
Performance & Operations
Note 4: Operating Segments
Note 5: Earnings Per Share
Note 6: Other Financial Statement Details
Note 7: Restructuring and Other Charges
Note 8: Income Taxes
Investments, Long-term Assets & Debt
Note 9: Investments
Note 10: Acquisitions and Divestitures
Note 11: Goodwill
Note 12: Identified Intangible Assets
Note 13: Other Long-Term Assets
Note 14: Borrowings
Note 15: Fair Value
Risk Management & Other
Note 16: Other Comprehensive Income (Loss)
Note 17: Derivative Financial Instruments
Note 18: Retirement Benefit Plans
Note 19: Employee Equity Incentive Plans
Note 20: Commitments and Contingencies
INDEX TO SUPPLEMENTAL DETAILS
Financial Information by Quarter
Controls and Procedures
Exhibits and Financial Statement Schedules
Form 10-K Cross-Reference Index
Page
58
60
61
62
63
64
65
65
65
71
74
76
77
78
80
83
85
88
89
90
90
94
95
97
99
103
104
108
109
110
116
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF INTEL CORPORATION
OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated balance sheets of Intel Corporation (the Company) as of December 30, 2017 and
December 31, 2016, the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity
for each of the three years in the period ended December 30, 2017, and the related notes and Schedule II—Valuation and
Qualifying Accounts (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 30, 2017 and December 31,
2016, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2017, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 30, 2017, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated February 16, 2018 expressed an unqualified opinion thereon.
BASIS FOR OPINION
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1968.
San Jose, California
February 16, 2018
/s/ Ernst & Young LLP
AUDITOR’S REPORT
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF INTEL CORPORATION
OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We have audited Intel Corporation’s internal control over financial reporting as of December 30, 2017, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Intel Corporation (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 30, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2017 consolidated financial statements of the Company and our report dated February 16, 2018 expressed an
unqualified opinion thereon.
BASIS FOR OPINION
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING
A company‘s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
San Jose, California
February 16, 2018
/s/ Ernst & Young LLP
AUDITOR’S REPORT
59
INTEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
(In Millions, Except Per Share Amounts)
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Net revenue
Cost of sales
Gross margin
Research and development
Marketing, general and administrative
Restructuring and other charges
Amortization of acquisition-related intangibles
Operating expenses
Operating income
Gains (losses) on equity investments, net
Interest and other, net
Income before taxes
Provision for taxes
Net income
Earnings per share—Basic
Earnings per share—Diluted
Weighted average shares of common stock outstanding:
Basic
Diluted
See accompanying notes.
$
62,761 $
59,387 $
23,692
39,069
13,098
7,474
384
177
21,133
17,936
2,651
(235)
20,352
10,751
23,196
36,191
12,740
8,397
1,886
294
23,317
12,874
506
(444)
12,936
2,620
55,355
20,676
34,679
12,128
7,930
354
265
20,677
14,002
315
(105)
14,212
2,792
$
$
$
9,601 $
10,316 $
11,420
2.04 $
2.18 $
1.99 $
2.12 $
4,701
4,835
4,730
4,875
2.41
2.33
4,742
4,894
FINANCIAL STATEMENTS
Consolidated Statements of Income
60
INTEL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended
(In Millions)
Net income
Changes in other comprehensive income, net of tax:
Net unrealized holding gains (losses) on available-for-sale investments
Deferred tax asset valuation allowance
Net unrealized holding gains (losses) on derivatives
Actuarial valuation and other pension expenses
Net foreign currency translation adjustment
Other comprehensive income (loss)
Total comprehensive income
See accompanying notes.
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
9,601 $
10,316 $
11,420
(436)
—
365
317
510
756
415
(8)
7
(364)
(4)
46
(710)
(18)
157
135
(170)
(606)
$
10,357 $
10,362 $
10,814
FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
61
INTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Par Value)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Trading assets
Accounts receivable, net of allowance for doubtful accounts of $25 ($37 in 2016)
Inventories
Assets held for sale
Other current assets
Total current assets
Property, plant and equipment, net
Marketable equity securities
Other long-term investments
Goodwill
Identified intangible assets, net
Other long-term assets
Total assets
Liabilities, temporary equity, and stockholders’ equity
Current liabilities:
Short-term debt
Accounts payable
Accrued compensation and benefits
Deferred income
Liabilities held for sale
Other accrued liabilities
Total current liabilities
Long-term debt
Long-term deferred tax liabilities
Other long-term liabilities
Commitments and Contingencies (Note 20)
Temporary equity
Stockholders’ equity:
Preferred stock, $0.001 par value, 50 shares authorized; none issued
Common stock, $0.001 par value, 10,000 shares authorized; 4,687 shares issued and
outstanding (4,730 issued and outstanding in 2016) and capital in excess of par value
Accumulated other comprehensive income (loss)
Retained earnings
Total stockholders’ equity
Dec 30,
2017
Dec 31,
2016
$
3,433 $
1,814
8,755
5,607
6,983
—
2,908
29,500
41,109
4,192
3,712
24,389
12,745
7,602
5,560
3,225
8,314
4,690
5,553
5,210
2,956
35,508
36,171
6,180
4,716
14,099
9,494
7,159
$
123,249 $
113,327
$
1,776 $
2,928
3,526
1,656
—
7,535
17,421
25,037
3,046
7,860
866
—
26,074
862
42,083
69,019
4,634
2,475
3,465
1,718
1,920
6,090
20,302
20,649
1,730
3,538
882
—
25,373
106
40,747
66,226
Total liabilities, temporary equity, and stockholders’ equity
$
123,249 $
113,327
See accompanying notes.
FINANCIAL STATEMENTS
Consolidated Balance Sheets
62
INTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
(In Millions)
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Cash and cash equivalents, beginning of period
$
5,560 $
15,308 $
2,561
Cash flows provided by (used for) operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
9,601
10,316
11,420
activities:
Depreciation
Share-based compensation
Restructuring and other charges
Amortization of intangibles
(Gains) losses on equity investments, net
Loss on debt conversion and extinguishment
(Gains) losses on divestitures
Deferred taxes
Changes in assets and liabilities:1
Accounts receivable
Inventories
Accounts payable
Accrued compensation and benefits
Income taxes payable and receivable
Other assets and liabilities
Total adjustments
Net cash provided by operating activities
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment
Acquisitions, net of cash acquired
Purchases of available-for-sale investments
Sales of available-for-sale investments
Maturities of available-for-sale investments
Purchases of trading assets
Maturities and sales of trading assets
Investments in non-marketable equity investments
Proceeds from divestitures
Other investing
Net cash used for investing activities
Cash flows provided by (used for) financing activities:
Issuance of long-term debt, net of issuance costs
Repayment of debt and debt conversion
Proceeds from sales of common stock through employee equity incentive plans
Repurchase of common stock
Payment of dividends to stockholders
Other financing
Net cash provided by (used for) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, end of period
Supplemental disclosures:
Acquisition of property, plant and equipment included in accounts payable and
accrued liabilities
Non-marketable equity investment in McAfee from divestiture
Cash paid during the year for:
Interest, net of capitalized interest and interest rate swap payments/receipts
Income taxes, net of refunds
$
$
$
$
$
6,752
1,358
384
1,377
(2,583)
476
(387)
1,548
(781)
(1,300)
191
(73)
5,230
317
12,509
22,110
(11,778)
(14,499)
(2,764)
6,978
3,687
(13,700)
13,975
(1,601)
3,124
816
(15,762)
7,716
(8,080)
770
(3,615)
(5,072)
(194)
(8,475)
(2,127)
6,266
1,444
1,886
1,524
(432)
—
—
257
65
119
182
(1,595)
1,382
394
11,492
21,808
(9,625)
(15,470)
(9,269)
3,852
5,654
(12,237)
10,907
(963)
—
1,334
(25,817)
2,734
(1,500)
1,108
(2,587)
(4,925)
(569)
(5,739)
(9,748)
3,433 $
5,560 $
7,821
1,305
354
890
(263)
—
—
(1,270)
(355)
(764)
(312)
(711)
386
517
7,598
19,018
(7,326)
(913)
(8,259)
2,090
6,168
(11,485)
13,372
(2,011)
—
181
(8,183)
9,476
—
866
(3,001)
(4,556)
(873)
1,912
12,747
15,308
1,417 $
1,078 $
624 $
3,824 $
979 $
— $
682 $
877 $
392
—
186
3,439
1 The impact of assets and liabilities reclassified as held for sale was not considered in the changes in assets and liabilities within cash flows
from operating activities. See “Note 10: Acquisitions and Divestitures” for additional information.
See accompanying notes.
FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
63
Common Stock and Capital
in Excess of Par Value
Number of
Shares
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
4,748 $
21,781 $
666 $
33,418 $
55,865
—
—
—
(606)
11,420
—
INTEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In Millions, Except Per Share Amounts)
Balance as of December 27, 2014
Components of comprehensive income, net of tax:
Net income
Other comprehensive income (loss)
Total comprehensive income
Proceeds from sales of common stock through
employee equity incentive plans, net tax benefit,
and other
Share-based compensation
Repurchase of common stock
Restricted stock unit withholdings
Cash dividends declared ($0.96 per share of
common stock)
—
—
87
—
(96)
(14)
—
1,091
1,314
(453)
(322)
—
Balance as of December 26, 2015
Components of comprehensive income, net of tax:
4,725
23,411
Net income
Other comprehensive income (loss)
Total comprehensive income
Proceeds from sales of common stock through
employee equity incentive plans, net excess tax
benefit, and other
Share-based compensation
Repurchase of common stock
Restricted stock unit withholdings
Cash dividends declared ($1.04 per share of
common stock)
Balance as of December 31, 2016
Components of comprehensive income, net of tax:
Net income
Other comprehensive income (loss)
Total comprehensive income
Proceeds from sales of common stock through
employee equity incentive plans, net excess tax
benefit, and other1
Share-based compensation
Convertible debt
Repurchase of common stock
Restricted stock unit withholdings
Cash dividends declared ($1.0775 per share of
common stock)
—
—
101
—
(81)
(15)
—
—
—
1,322
1,438
(412)
(386)
—
4,730
25,373
—
—
—
—
70
—
—
(101)
(12)
—
1,172
1,296
(894)
(552)
(321)
—
11,420
(606)
10,814
1,091
1,314
(3,001)
(442)
(4,556)
61,085
10,316
46
10,362
1,322
1,438
(2,592)
(464)
(4,925)
66,226
9,601
756
10,357
1,171
1,296
(894)
(3,609)
(456)
—
—
(2,548)
(120)
(4,556)
37,614
10,316
—
—
—
(2,180)
(78)
(4,925)
40,747
9,601
—
(1)
—
—
(3,057)
(135)
—
—
—
—
—
60
—
46
—
—
—
—
—
106
—
756
—
—
—
—
—
—
Balance as of December 30, 2017
4,687 $
26,074 $
862 $
42,083 $
69,019
1 Includes approximately $375 million of noncontrolling interest activity due to our acquisition of Mobileye.
See accompanying notes.
FINANCIAL STATEMENTS
Consolidated Statements of Stockholders’ Equity
64
(5,072)
(5,072)
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2017 was a 52-week fiscal year, while
fiscal year 2016 was a 53-week fiscal year with the first quarter of 2016 being a 14-week quarter. Fiscal year 2015 was a 52-week
year. Our consolidated financial statements include the accounts of Intel Corporation (Intel) and our subsidiaries. We have
eliminated intercompany accounts and transactions. We have reclassified certain prior period amounts to conform to current
period presentation.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP)
requires us to make estimates and judgments that affect the amounts reported in our consolidated financial statements and the
accompanying notes. The actual results that we experience may differ materially from our estimates.
During our 2015 annual assessment of the useful lives of our property, plant and equipment, we determined that the estimated
useful lives of machinery and equipment in our wafer fabrication facilities should be increased from 4 to 5 years because the
lengthening of the process technology cadence resulted in longer node transitions on both 14 nanometer (nm) and 10nm
products. We have also increased the re-use of machinery and tools across each generation of process technology. This change in
estimate was applied prospectively, effective at the beginning of 2016. During 2016, this change increased our operating income
by approximately $1.3 billion, our net income by approximately $950 million, and our diluted earnings per share by approximately
$0.19.
NOTE 2: ACCOUNTING POLICIES
REVENUE RECOGNITION
We recognize net product revenue when the earnings process is complete and the risks and rewards of product ownership have
transferred to our customers, as evidenced by the existence of an agreement, delivery having occurred, pricing being deemed
fixed, and collection being considered probable. We record pricing allowances, including discounts based on contractual
arrangements with customers, when we recognize revenue as a reduction to both accounts receivable and net revenue. On sales
made to distributors that allow for price protections or right of return until the distributor sells through the merchandise, we defer
product revenue, and related costs of sales, due to sales price reductions and rapid technology obsolescence in our industry. The
right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products
based on the number of qualified purchases made by the distributor. Under the price protection program, we give distributors
credits for the difference between the original price paid and the current price that we offer. We include shipping charges billed to
customers in net revenue, and include the related shipping costs in cost of sales.
We make payments to our customers through cooperative advertising programs, such as our Intel Inside® program, for marketing
activities for certain of our products. We accrue cooperative advertising obligations and record the costs at the same time that the
related revenue is recognized. We record cooperative advertising costs as marketing, general and administrative (MG&A) expenses
to the extent that an advertising benefit separate from the revenue transaction can be identified and the fair value of that
advertising benefit received is determinable. We record any excess in cash paid to customers over the fair value of the advertising
benefit we receive as a reduction in revenue.
During the first half of 2017, our cooperative advertising costs under the Intel Inside program met the criteria to be recorded as
MG&A. During the second half of 2017, we transitioned customers from previous offerings under the Intel Inside program to
cooperative advertising offerings more tailored to customers and their marketing audiences. In the second half of 2017,
cooperative advertising costs were recorded as a reduction of revenue, as we no longer met the criteria for recording these
expenses within MG&A.
FINANCIAL STATEMENTS
Notes to Financial Statements
65
INVENTORIES
We compute inventory cost on a first-in, first-out basis. Our process and product development life cycle corresponds with
substantive engineering milestones. These engineering milestones are regularly and consistently applied in assessing the point at
which our activities, and associated costs, change in nature from research and development (R&D) to cost of sales and when cost
of sales can be capitalized as inventory.
For a product to be manufactured in high volumes and sold to our customers under our standard warranty, it must meet our
rigorous technical quality specifications. This milestone is known as product release qualification (PRQ). We have identified PRQ as
the point at which the costs incurred to manufacture our products are included in the valuation of inventory. Prior to PRQ, costs
that do not meet the criteria for R&D are included in cost of sales in the period incurred. If the point at which we estimate that
inventory meets PRQ criteria changes in the future, the timing and recognition of costs would shift between inventory, and R&D
and costs of sales. A single PRQ has previously ranged up to $770 million and is dependent on product type.
The valuation of inventory includes determining which fixed production overhead costs can be included in inventory based on the
normal capacity of our manufacturing and assembly and test facilities. We apply our historical loadings compared to our total
available capacity in a statistical model to determine our normal capacity level. If the factory loadings are below the established
normal capacity level, a portion of our fixed production overhead costs would not be included in the cost of inventory; instead, it
would be recognized as cost of sales in that period. We refer to these costs as excess capacity charges. Excess capacity charges are
insignificant in the years presented, charges in certain prior years have ranged from $46 million to $1.1 billion. The high end of the
range would be $540 million when excluding the $1.1 billion charge taken in connection with the 2009 economic recession.
Inventory is valued at the lower of cost or net realizable value, based upon assumptions about future demand and market
conditions. Product-specific facts and circumstances reviewed in the inventory valuation process include a review of our customer
base, the stage of the product life cycle, and an assessment of selling price in relation to product cost. Inventory reserves
increased by approximately $185 million in 2017 compared to 2016.
The valuation of inventory also requires us to estimate obsolete and excess inventory, as well as inventory that is not of saleable
quality. We use the demand forecast to develop our short-term manufacturing plans to enable consistency between inventory
valuations and build decisions. We compare the estimate of future demand to work in process and finished goods inventory levels
to determine the amount, if any, of obsolete or excess inventory. If our demand forecast for specific products is greater than actual
demand and we fail to reduce manufacturing output accordingly, we could be required to write off inventory.
PROPERTY, PLANT AND EQUIPMENT
We compute depreciation using the straight-line method over the estimated useful life of assets. We also capitalize interest on
borrowings related to eligible capital expenditures. Capitalized interest is added to the cost of qualified assets and depreciated
together with that asset cost. We record capital-related government grants earned as a reduction to property, plant and
equipment.
Annually, we evaluate the period over which we expect to recover the economic value of our property, plant and equipment,
considering factors such as the process technology cadence between node transitions, changes in machinery and equipment
technology, and re-use of machinery and tools across each generation of process technology. As we make manufacturing process
conversions and other factory planning decisions, we use assumptions involving the use of management judgments regarding the
remaining useful lives of assets, primarily process-specific semiconductor manufacturing tools and building improvements. When
we determine that the useful lives of assets are shorter or longer than we had originally estimated, we adjust the rate of
depreciation to reflect the assets’ revised useful lives.
We assess property, plant and equipment for impairment when events or changes in circumstances indicate that the carrying
value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an
impairment review include significant under-performance of a business or product line in relation to expectations, significant
negative industry or economic trends, and significant changes or planned changes in our use of the assets. We measure the
recoverability of assets that we will continue to use in our operations by comparing the carrying value of the asset grouping to our
estimate of the related total future undiscounted net cash flows arising from the use of that asset grouping. If an asset grouping
carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.
We measure the impairment by comparing the difference between the asset grouping carrying value and its fair value.
We may have certain facilities, included within construction in progress, being held in a safe state and not currently in use that we
plan to place into service at a future date. The time at which these assets are placed into service depends on our existing
manufacturing capacity, market demand for our products, and where we are in the transition of products on our roadmap.
Management makes judgments about the timing of when these facilities will be readied for their intended use and placed into
service for the manufacturing of our products. Depreciation is not recognized on these assets and they are not eligible for
capitalized interest when construction is on hold.
FINANCIAL STATEMENTS
Notes to Financial Statements
66
FAIR VALUE
When determining fair value, we consider the principal or most advantageous market in which we would transact, as well as
assumptions that market participants would use when pricing the asset or liability. Our financial assets are measured and
recorded at fair value, except for cost method investments, cost method loans receivable, equity method investments, grants
receivable, and reverse repurchase agreements with original maturities greater than three months.
The three levels of inputs that may be used to measure fair value are:
• Level 1. Quoted prices in active markets for identical assets or liabilities. We evaluate security-specific market data when
determining whether a market is active.
• Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less
active markets, or model-derived valuations. All significant inputs used in our valuations, such as discounted cash flows, are
observable or can be derived principally from or corroborated with observable market data for substantially the full term of the
assets or liabilities. We use LIBOR-based yield curves, currency spot and forward rates, and credit ratings as significant inputs in
our valuations. Level 2 inputs also include non-binding market consensus prices as well as quoted prices that were adjusted for
security-specific restrictions. When we use non-binding market consensus prices, we corroborate them with quoted market
prices for similar instruments or compare them to output from internally developed pricing models such as discounted cash
flow models.
• Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or
liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements
are reasonable and consistent with market experience in similar asset classes. Level 3 inputs also include non-binding market
consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.
CASH EQUIVALENTS
We consider all highly liquid debt investments with original maturities from the date of purchase of three months or less as cash
equivalents. Cash equivalents can include investments such as corporate debt, financial institution instruments, government debt,
and reverse repurchase agreements.
TRADING ASSETS
Marketable debt instruments are generally designated as trading assets when a market risk is economically hedged at inception
with a related derivative instrument, or when the marketable debt instrument itself is used to economically hedge currency
exchange rate risk from remeasurement. Investments designated as trading assets are reported at fair value. The gains or losses
on these investments arising from changes in fair value due to interest rate and currency market fluctuations and credit market
volatility, largely offset by losses or gains on the related derivative instruments and balance sheet remeasurement, are recorded in
interest and other, net.
AVAILABLE-FOR-SALE INVESTMENTS
Available-for-sale investments are classified within cash and cash equivalents, short-term investments, marketable equity
securities, or long-term investments based on the remaining maturity of the investment.
Investments designated as available-for-sale are reported at fair value, with unrealized gains or losses, net of tax, recorded in
accumulated other comprehensive income (loss), except as noted in our other-than-temporary impairment policy. We determine
the cost of the investment sold based on an average cost basis at the individual security level. Our available-for-sale investments
include:
• Marketable debt instruments when the interest rate and foreign currency risks are not hedged at the inception of the
investment or when our criteria for designation as trading assets are not met. We record the interest income and realized gains
or losses on the sale of these instruments in interest and other, net.
• Marketable equity securities when there is no plan to sell or hedge the investment at the time of original classification. We
acquire these equity securities to promote business and strategic objectives. We record the realized gains or losses on the sale
or exchange of marketable equity securities in gains (losses) on equity investments, net.
NON-MARKETABLE AND EQUITY METHOD INVESTMENTS
We regularly invest in non-marketable equity instruments of private companies. We account for marketable and non-marketable
equity securities as equity method investments when we have the ability to exercise significant influence but do not have control
over the investee. Our proportionate share of the income or loss from equity method investments is recognized on a one-quarter
lag and is recorded in gains (losses) on equity investments, net. Non-marketable equity investments over which we cannot
exercise significant influence are accounted for as cost method investments.
The carrying value of our non-marketable equity investment portfolio totaled $4.5 billion as of December 30, 2017 ($4.4 billion as
of December 31, 2016), and is included in other long-term assets.
FINANCIAL STATEMENTS
Notes to Financial Statements
67
Our quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant impact on the
investee’s fair value. Qualitative factors considered include industry and market conditions, the financial performance and near-
term prospects of the investee, and other relevant events and factors affecting the investee. We prepare quarterly quantitative
assessments of the fair value of our non-marketable equity investments using both the market and income approaches, which
require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of
private and public companies, among others.
OTHER-THAN-TEMPORARY IMPAIRMENT
Our available-for-sale debt securities, marketable equity securities, and non-marketable equity investments are subject to
periodic impairment reviews.
• For available-for-sale debt securities, we consider whether it is more likely than not that we will be required to sell the security
before recovery of its amortized cost basis, or whether recovery of the entire amortized cost basis of the security is unlikely
because a credit loss exists. When we do not expect to recover the entire amortized cost basis of the security, we separate
other-than-temporary impairments into amounts representing credit losses, which are recognized in interest and other, net, and
amounts not related to credit losses, which are recognized in other comprehensive income (loss).
• For marketable equity securities, we consider the severity and duration of the decline in fair value below cost and our ability and
intent to hold the security for a sufficient period of time to allow for recovery of value in the foreseeable future based on the
financial health of, and business outlook for, the investee.
• For non-marketable equity investments, we consider the severity and duration of the impairment, the investee’s financial
condition and business outlook, industry and sector performance, market for technology, operational and financing cash flow
factors, and changes in the investee’s credit rating, among other qualitative and quantitative criteria. Impairments of
non-marketable equity investments were $555 million in 2017 ($184 million in 2016 and $166 million in 2015).
We record other-than-temporary impairments for marketable equity securities, non-marketable cost method investments, and
equity method investments in gains (losses) on equity investments, net.
DERIVATIVE FINANCIAL INSTRUMENTS
Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk,
and, to a lesser extent, equity market risk, commodity price risk, and credit risk. We enter into master netting arrangements to
mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. A master
netting arrangement allows counterparties to net settle amounts owed to each other as a result of multiple, separate derivative
transactions. We also enter into collateral security arrangements with certain of our counterparties to exchange cash collateral
when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. We record the
collateral within current other assets and long-term other assets with a corresponding liability. For presentation on our
consolidated balance sheets, we do not offset fair value amounts recognized for derivative instruments under master netting
arrangements. Our derivative financial instruments are presented at fair value on a gross basis and are included in other current
assets, other long-term assets, other accrued liabilities, or other long-term liabilities.
Cash Flow Hedges
We use foreign currency contracts, such as currency forwards and currency interest rate swaps, to hedge exposures for the
following items:
• Variability in the U.S.-dollar equivalent of non-U.S.-dollar-denominated cash flows associated with our forecasted operating and
capital purchases spending; and
• Coupon and principal payments for our non-U.S.-dollar-denominated indebtedness.
The after-tax gains or losses from the effective portion of a cash flow hedge is reported as a component of accumulated other
comprehensive income (loss) and reclassified into earnings in the same period or periods in which the hedged transaction affects
earnings, and in the same line item on the consolidated statements of income as the impact of the hedge transaction. For foreign
currency contracts hedging our capital purchases, forward points are excluded from the hedge effectiveness assessment.
Ineffective portions of cash flow hedges, as well as amounts excluded from the hedge effectiveness assessment, are recognized in
earnings in interest and other, net. If the cash flow hedge transactions become probable not to occur, the corresponding amounts
deferred in accumulated other comprehensive income (loss) would be immediately reclassified to interest and other, net. These
derivatives are classified in the consolidated statements of cash flows in the same section as the underlying item.
Fair Value Hedges
We use interest rate contracts, such as interest rate swaps, to hedge against changes in the fair value on certain of our fixed-rate
indebtedness attributable to changes in the benchmark interest rate. The gains or losses on these hedges, as well as the offsetting
losses or gains related to the changes in the fair value of the underlying hedged item attributable to the hedged risk, are
recognized in earnings in the current period, primarily in interest and other, net. These derivatives are classified in the
consolidated statements of cash flows in the same section as the underlying item, primarily within cash flows from financing
activities.
FINANCIAL STATEMENTS
Notes to Financial Statements
68
Non-Designated Hedges
We use foreign currency contracts to economically hedge the functional currency equivalent cash flows of recognized monetary
assets and liabilities, non-U.S.-dollar-denominated debt instruments classified as trading assets, and non-U.S.-dollar-
denominated loans receivables recognized at fair value. We also use interest rate contracts to hedge interest rate risk related to
our U.S.-dollar-denominated fixed-rate debt instruments classified as trading assets.
The change in fair value of these derivatives is recorded through earnings in the line item on the consolidated statements of
income to which the derivatives most closely relate, primarily in interest and other, net. Changes in the fair value of the underlying
assets and liabilities associated with the hedged risk are generally offset by the changes in the fair value of the related derivatives.
LOANS RECEIVABLE
We elect the fair value option when the interest rate or foreign currency exchange rate risk is economically hedged at the
inception of the loan with a related derivative instrument. When the fair value option is not elected, the loans are carried at
amortized cost. We measure interest income for all loans receivable using the interest method, which is based on the effective
yield of the loans rather than the stated coupon rate. We classify our loans within other current and long-term assets.
CREDIT RISK
Financial instruments that potentially subject us to concentrations of credit risk consist principally of investments in debt
instruments, derivative financial instruments, loans receivable, reverse repurchase agreements, and trade receivables. We enter
into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions
with the same counterparty.
We generally place investments with high-credit-quality counterparties and, by policy, we limit the amount of credit exposure to
any one counterparty based on our analysis of that counterparty’s relative credit standing. As required per our investment policy,
substantially all of our investments in debt instruments and financing receivables are in investment-grade instruments. Credit-
rating criteria for derivative instruments are similar to those for other investments. Due to master netting arrangements, the
amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which the
counterparty’s obligations exceed our obligations with that counterparty. As of December 30, 2017, our total credit exposure to
any single counterparty, excluding money market funds invested in U.S. treasury and U.S. agency securities and reverse
repurchase agreements collateralized by treasury and agency securities, did not exceed $800 million. To further reduce credit risk,
we obtain and secure available collateral from counterparties against obligations, including securities lending transactions, when
we deem it appropriate.
A substantial majority of our trade receivables are derived from sales to original equipment manufacturers and original design
manufacturers. We also have accounts receivable derived from sales to industrial and communications equipment manufacturers
in the computing and communications industries. We believe that the net accounts receivable balances from our three largest
customers (36% in 2017) do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past
collection experience. For more information about the customers that represent our accounts receivable balance, see “Note 4:
Operating Segments.”
We have adopted credit policies and standards intended to accommodate industry growth and inherent risk. We believe that
credit risks are moderated by the financial stability of our major customers. We assess credit risk through quantitative and
qualitative analysis. From this analysis, we establish shipping and credit limits, and determine whether we will seek to use one or
more credit support protection devices, such as obtaining a parent guarantee, standby letter of credit, or credit insurance.
BUSINESS COMBINATIONS
We allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions based on their
estimated fair values at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments that
could materially affect the timing or amounts recognized in our financial statements. The most subjective areas include
determining the fair value of the following:
• intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, market segment growth
rates, our assumed market segment share, as well as the estimated useful life of intangible assets;
• deferred tax assets and liabilities, uncertain tax positions, and tax-related valuation allowances, which are initially estimated as
of the acquisition date;
• inventory; property, plant and equipment; pre-existing liabilities or legal claims; deferred revenue; and contingent consideration,
each as may be applicable; and
• goodwill as measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets
acquired and the liabilities assumed.
Our assumptions and estimates are based upon comparable market data and information obtained from our management and
the management of the acquired companies. We allocate goodwill to the reporting units of the business that are expected to
benefit from the business combination.
FINANCIAL STATEMENTS
Notes to Financial Statements
69
GOODWILL
We perform an annual impairment assessment of goodwill at the reporting unit level in the fourth quarter of each year, or more
frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess
the likelihood of an impairment. The reporting unit’s carrying value used in an impairment test represents the assignment of
various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt.
Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and
factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the
qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit’s fair value.
Our quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair
value. Significant estimates include market segment growth rates, our assumed market segment share, estimated costs, and
discount rates based on a reporting unit’s weighted average cost of capital.
We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available market data. In the
current year the fair value for all of our reporting units substantially exceeds their carrying value, and our annual qualitative
assessment did not indicate that a more detailed quantitative analysis was necessary.
IDENTIFIED INTANGIBLE ASSETS
We amortize acquisition-related intangible assets that are subject to amortization over their estimated useful life. Acquisition-
related in-process R&D assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as
of the date of acquisition; initially, these are classified as in-process R&D and are not subject to amortization. Once these R&D
projects are completed, the asset balances are transferred from in-process R&D to acquisition-related developed technology and
are subject to amortization from this point forward. The asset balances relating to projects that are abandoned after acquisition
are impaired and expensed to R&D.
We perform a quarterly review of significant finite-lived identified intangible assets to determine whether facts and circumstances
indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external
factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for
specific product lines.
EMPLOYEE EQUITY INCENTIVE PLANS
We use the straight-line amortization method to recognize share-based compensation over the service period of the award net of
estimated forfeitures. Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of
restricted stock units (RSUs), we eliminate deferred tax assets for options and RSUs with multiple vesting dates for each vesting
period on a first-in, first-out basis as if each vesting period were a separate award.
INCOME TAXES
We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of
assets and liabilities, and for operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using
the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be
realized or settled.
We assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our
provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be
recoverable. We believe that we will ultimately recover the deferred tax assets recorded on our consolidated balance sheets.
Recovery of a portion of our deferred tax assets is affected by management’s plans with respect to holding or disposing of certain
investments; therefore, such changes could also affect our future provision for taxes.
We recognize tax benefits from uncertain tax positions only if (based on the technical merits of the position) it is more likely than
not that the tax positions will be sustained on examination by the tax authority. The tax benefits recognized in the financial
statements from such positions are measured based on the largest amount that is more than 50% likely to be realized upon
ultimate settlement. We recognize interest and penalties related to unrecognized tax benefits within the provision for taxes on the
consolidated statements of income.
We have recorded provisional estimates associated with the December 22, 2017 enactment of the U.S. Tax Cuts and Jobs Act (Tax
Reform). The SEC has provided accounting and reporting guidance that allows us to report provisional amounts within a
measurement period up to one year due to the complexities inherent in adopting the changes. We consider both the recognition
of the transition tax and the remeasurement of deferred income taxes incomplete. New guidance from regulators, interpretation of
the law, and refinement of our estimates from ongoing analysis of data and tax positions may change the provisional amounts.
FINANCIAL STATEMENTS
Notes to Financial Statements
70
The transition tax is based on our total post-1986 foreign earnings and profits that were previously deferred from U.S.
taxation. We have not yet completed our substantiation of the underlying data and therefore our taxable base estimates may
change. Our estimates of foreign tax credits may also change as we substantiate tax credits claimed. Further, the transition tax is
based in part on the amount of foreign earnings held in cash and other liquid assets. The transition tax may change as we more
precisely calculate amounts held in liquid and illiquid assets at the various measurement dates. If the final tax outcome of these
matters is different than provisional amounts, its will impact the provision for income taxes and the effective tax rate in the period
recorded. For more information about Tax Reform impacts, see “Note 8: Income Taxes.”
We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. We have not recognized
deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S.
earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis
differences. Remittances of non-U.S. earnings are based on estimates and judgments of projected cash flow needs, as well as the
working capital and investment requirements of our non-U.S. and U.S. operations. Material changes in our estimates of cash,
working capital, and investment needs in various jurisdictions could require repatriation of indefinitely reinvested non-U.S.
earnings, which could be subject to applicable non-U.S. income and withholding taxes.
LOSS CONTINGENCIES
We are subject to loss contingencies, including various legal and regulatory proceedings, asserted and potential claims, liabilities
related to repair or replacement of parts in connection with product defects, as well as product warranties and potential asset
impairments that arise in the ordinary course of business. An estimated loss from such contingencies is recognized as a charge to
income if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
NOTE 3: RECENT ACCOUNTING STANDARDS
ACCOUNTING STANDARDS ADOPTED
Effective Date and Adoption
Considerations
Effect on Financial Statements or Other Significant Matters
We elected to early adopt
this accounting standard
update in the second quarter
of 2017 on a prospective
basis.
We expect the adoption of this update to simplify our
annual goodwill impairment testing process, by eliminating
the need to estimate the implied fair value of a reporting
unit’s goodwill, if its respective carrying value exceeds fair
value.
Standard/Description
Intangibles - Goodwill and Other -
Simplifying the Test for Goodwill
Impairment. This accounting
standard update eliminates Step 2
from the existing guidance to
simplify how goodwill impairment
tests are performed. With the
elimination of this step, a goodwill
impairment test is performed by
comparing the fair value of a
reporting unit to its carrying value.
An impairment charge is
recognized for the amount by
which the reporting unit’s carrying
value exceeds its fair value.
FINANCIAL STATEMENTS
Notes to Financial Statements
71
ACCOUNTING STANDARDS NOT YET ADOPTED
Effective Date and Adoption
Considerations
Effective in the first quarter
of 2018.
We plan to adopt the
standard retrospectively with
the cumulative effect of
initially applying it
recognized at the date of
initial application (“modified
retrospective” approach).
Standard/Description
Revenue Recognition—Contracts
with Customers. This standard was
issued to achieve a consistent
application of revenue recognition
within the U.S., resulting in a
single revenue model to be
applied by all companies. Under
the new model, recognition of
revenue occurs when a customer
obtains control of promised
goods or services in an amount
that reflects the consideration to
which the entity expects to be
entitled in exchange for those
goods or services. In addition, the
new standard requires that
companies disclose the nature,
amount, timing, and uncertainty of
revenue and cash flows arising
from contracts with customers.
Effect on Financial Statements or Other Significant Matters
Our assessment has identified a change in revenue
recognition timing on our component sales made to
distributors. We expect to recognize revenue when we
deliver to the distributor rather than deferring recognition
until the distributor sells the components.
On the date of initial application, we will remove the
deferred income and related receivables on component
sales made to distributors through a cumulative
adjustment to retained earnings. We expect the revenue
deferral, historically recognized in the following period, to
be offset by the acceleration of revenue recognition as
control of the product transfers to our customer.
Our assessment has also identified a change in expense
recognition timing related to payments we make to our
customers for distinct services they perform as part of
cooperative advertising programs, which were previously
recorded as operating expenses. We expect to recognize
the expense for cooperative advertising in the period the
marketing activities occur. We currently recognize the
expense in the period the customer is entitled to
participate in the program, which coincides with the period
of sale. On the date of initial adoption, we will capitalize the
expense of cooperative advertising not performed through
a cumulative adjustment to retained earnings.
We have completed our assessment and implemented
policies, processes, and controls to support the standards
measurement and disclosure requirements. Refer to the
table below, which summarizes the anticipated impacts of
the changes discussed above to Intel’s financial
statements. This will be an adjustment to opening balances
for the fiscal year beginning December 31, 2017.
FINANCIAL STATEMENTS
Notes to Financial Statements
72
Standard/Description
Financial Instruments—
Recognition and
Measurement. Requires changes
to the accounting for financial
instruments that primarily affect
equity investments, financial
liabilities measured using the fair
value option, and the presentation
and disclosure requirements for
such instruments.
Effective Date and Adoption
Considerations
Effective in the first quarter of
2018.
Changes to our marketable
equity securities are required
to be adopted using a modified
retrospective approach
through a cumulative effect
adjustment to retained
earnings for the fiscal year
beginning December 31, 2017.
Since management has elected
to apply the measurement
alternative to non-marketable
equity securities, changes to
these securities are being
adopted prospectively.
Effect on Financial Statements or Other Significant Matters
Marketable equity securities previously classified as
available-for-sale equity investments will be measured
and recorded at fair value with changes in fair value
recorded through the income statement.
All non-marketable equity securities formerly classified as
cost method investments will be measured and recorded
using the measurement alternative upon adoption. Equity
securities measured and recorded using the
measurement alternative are recorded at cost minus
impairment, if any, plus or minus changes resulting from
qualifying observable price changes. Adjustments
resulting from impairments and observable price changes
will be recorded in the income statement.
Beginning in the first quarter of 2018, in accordance with
the standard, fair value disclosures will no longer be
provided for equity securities measured using the
measurement alternative. In addition, the existing
impairment model will be replaced with a new one-step
qualitative impairment model. No initial adoption
adjustment will be recorded for these instruments since
the standard is required to be applied prospectively for
securities measured using the measurement alternative.
We have completed our assessment and implemented
policies, processes, and controls to support the
standard’s measurement and disclosure requirements.
Refer to the table below, which summarizes the
anticipated impacts, net of tax, of the changes discussed
above to Intel’s financial statements. This will be an
adjustment to opening balances for the fiscal year
beginning December 31, 2017.
We expect the adoption of the amended standard to
result in the reclassification of approximately $115 million
from non-service components above the subtotal of
operating income to interest and other, net, for the year
ended December 30, 2017 ($260 million for the year
ended December 31, 2016).
Effective in the first quarter of
2018.
Changes to the presentation of
benefit costs are required to be
adopted retrospectively, while
changes to the capitalization of
service costs into inventories
are required to be adopted
prospectively. The standard
permits, as a practical
expedient, use of the amounts
disclosed in the Retirement
Benefit Plans footnote for the
prior comparative periods as
the estimation basis for
applying the retrospective
presentation requirement.
Compensation—Retirement
Benefits - Improving the
Presentation of Net Periodic
Pension Cost and Net Periodic
Postretirement Benefit Cost. This
amended standard was issued to
provide additional guidance on
the presentation of net benefit
cost in the income statement and
on the components eligible for
capitalization in assets. The
service cost component of the net
periodic benefit cost will continue
to be reported within operating
income on the consolidated
income statement. All other
non-service components are
required to be presented
separately outside operating
income, and only service costs will
be eligible for inventory
capitalization.
Leases. This new lease accounting
standard requires that we
recognize leased assets and
corresponding liabilities on the
balance sheet and provide
enhanced disclosure of lease
activity.
Effective in the first quarter of
2019.
We plan to adopt the new
standard using a modified
retrospective transition
approach.
We expect the valuation of our right-of-use assets and
lease liabilities, previously described as operating leases,
to approximate the present value of our forecasted future
lease commitments. We are currently implementing
process and system changes in order to comply with the
measurement and disclosure requirements.
FINANCIAL STATEMENTS
Notes to Financial Statements
73
The following table summarizes the effects of adopting Revenue Recognition—Contracts with Customers and Financial
Instruments—Recognition and Measurement on our financial statements for the fiscal year beginning December 31, 2017 as an
adjustment to the opening balance:
Fiscal Year Beginning
(In Millions)
Assets:
Accounts receivable, net
Inventories
Other current assets
Equity investments
Marketable equity securities
Other long-term assets
Liabilities:
Accounts payable
Deferred income
Other accrued liabilities
Long-term deferred tax liabilities
Stockholders’ equity:
Accumulated other comprehensive income (loss)
Retained earnings
NOTE 4: OPERATING SEGMENTS
Adjustments from
Dec 30, 2017
Revenue
Standard
Financial
Instruments
Update
Dec 31, 2017
As Adjusted
$
$
$
$
$
$
$
$
$
$
$
$
5,607 $
6,983 $
2,908 $
— $
4,192 $
7,602 $
2,928 $
1,656 $
7,535 $
3,046 $
(530) $
47 $
64 $
— $
— $
— $
55 $
(1,356) $
26 $
191 $
— $
— $
— $
8,579 $
(4,192) $
(4,387) $
— $
— $
— $
— $
5,077
7,030
2,972
8,579
—
3,215
2,983
300
7,561
3,237
862 $
42,083 $
— $
665 $
(1,745) $
1,745 $
(883)
44,493
We manage our business through the following operating segments:
• Client Computing Group (CCG)
• Data Center Group (DCG)
• Internet of Things Group (IOTG)
• Non-Volatile Memory Solutions Group (NSG)
• Programmable Solutions Group (PSG)
• All other
In the third quarter of 2017, we completed our tender offer for the outstanding ordinary shares of Mobileye B.V. (Mobileye),
formerly known as Mobileye N.V. In the second quarter of 2017, we completed the planned divestiture of the Intel Security Group
(ISecG). The results for both are reported within the “all other” category. For further information, see “Note 10: Acquisitions and
Divestitures.”
The Chief Operating Decision Maker (CODM) is our Chief Executive Officer (CEO). The CODM allocates resources to and assesses
the performance of each operating segment using information about its revenue and operating income (loss).
We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a
stand-alone System-on-Chip (SoC), or a multichip package. A platform product may be enhanced by additional hardware,
software, and services offered by Intel. Platform products are used in various form factors across our CCG, DCG, and IOTG
operating segments. We derive a substantial majority of our revenue from platform products, which are our principal products and
considered as one class of product.
CCG and DCG are our reportable operating segments. IOTG, NSG, and PSG do not meet the quantitative thresholds to qualify as
reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are
generally allocated to the operating segments.
FINANCIAL STATEMENTS
Notes to Financial Statements
74
The “all other” category includes revenue and expenses such as:
• results of operations from non-reportable segments not otherwise presented;
• historical results of operations from divested businesses;
• results of operations of start-up businesses that support our initiatives, including our foundry business;
• amounts included within restructuring and other charges;
• a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
• acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The CODM does not evaluate operating segments using discrete asset information and we do not identify or allocate assets by
operating segments. Based on the interchangeable nature of our manufacturing and assembly and test assets, most of the related
depreciation expense is not directly identifiable within our operating segments, as it is included in overhead cost pools and
subsequently absorbed into inventory as each product passes through our manufacturing process. As our products are then sold
across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of
each operating segment’s operating income (loss) results. Operating segments do not record inter-segment revenue. We do not
allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM
uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. Except for
these differences, the accounting policies for segment reporting are the same as for Intel as a whole.
Net revenue and operating income (loss) for each period were as follows:
Years Ended
(In Millions)
Net revenue:
Client Computing Group
Platform
Adjacent
Data Center Group
Platform
Adjacent
Internet of Things Group
Platform
Adjacent
Non-Volatile Memory Solutions Group
Programmable Solutions Group
All other
Total net revenue
Operating income (loss):
Client Computing Group
Data Center Group
Internet of Things Group
Non-Volatile Memory Solutions Group
Programmable Solutions Group
All other
Total operating income
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
31,226 $
30,751 $
2,777
34,003
17,439
1,625
19,064
2,645
524
3,169
3,520
1,902
1,103
2,157
32,908
15,895
1,341
17,236
2,290
348
2,638
2,576
1,669
2,360
30,680
1,539
32,219
14,856
1,125
15,981
1,976
322
2,298
2,597
—
2,260
$
$
62,761 $
59,387 $
55,355
12,919 $
10,646 $
8,395
650
(260)
458
7,520
585
(544)
(104)
8,166
7,847
515
239
—
(4,226)
(5,229)
(2,765)
$
17,936 $
12,874 $
14,002
FINANCIAL STATEMENTS
Notes to Financial Statements
75
Disaggregated net revenue for each period was as follows:
Years Ended
(In Millions)
Platform revenue
Desktop platform
Notebook platform
DCG platform
Other platform1
Adjacent revenue2
ISecG divested business
Total revenue
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
11,647 $
12,371 $
19,414
17,439
2,810
51,310
10,917
534
18,203
15,895
2,467
48,936
8,290
2,161
12,754
17,945
14,856
1,957
47,512
5,858
1,985
$
62,761 $
59,387 $
55,355
1 Includes our tablet, phone, service provider, and IOTG platform revenue.
2 Includes all of our non-platform products for CCG, DCG, and IOTG like modem, ethernet, and silicon photonic, as well as NSG, PSG, and
Mobileye products.
In 2017, our three largest customers accounted for 40% of our net revenue (38% in 2016), with Dell Inc. (Dell) accounting for 16%
(15% in 2016), Lenovo Group Limited (Lenovo) accounting for 13% (13% in 2016), and HP Inc. accounting for 11% (10% in 2016).
These three customers accounted for 36% of our accounts receivable as of December 30, 2017 (31% as of December 31, 2016).
The Hewlett-Packard Company, HP Inc., and Hewlett Packard Enterprise Company collectively accounted for 18% in 2015, Dell
accounted for 15% in 2015, and Lenovo accounted for 13% in 2015. Substantially all of the revenue from these customers was
from the sale of platforms and other components by the CCG and DCG operating segments.
Net revenue by country as presented below is based on the billing location of the customer. Revenue from unaffiliated customers
for each period was as follows:
Years Ended
(In Millions)
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
China (including Hong Kong)
$
14,796 $
13,977 $
14,285
12,543
10,518
10,619
12,780
12,957
9,953
9,720
11,679
11,544
11,121
10,661
10,350
$
62,761 $
59,387 $
55,355
Singapore
United States
Taiwan
Other countries
Total net revenue
NOTE 5: EARNINGS PER SHARE
We computed basic earnings per share of common stock based on the weighted average number of shares of common stock
outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number
of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.
Years Ended
(In Millions, Except Per Share Amounts)
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Net income available to common stockholders
$
9,601 $
10,316 $
Weighted average shares of common stock outstanding—basic
4,701
4,730
Dilutive effect of employee incentive plans
Dilutive effect of convertible debt
47
87
53
92
Weighted average shares of common stock outstanding—diluted
4,835
4,875
Earnings per share - Basic
Earnings per share - Diluted
$
$
2.04 $
1.99 $
2.18 $
2.12 $
FINANCIAL STATEMENTS
Notes to Financial Statements
11,420
4,742
64
88
4,894
2.41
2.33
76
Potentially dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock
method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed
issuance of common stock under the stock purchase plan. Potentially dilutive shares of common stock for our junior subordinated
convertible debentures due 2035 (2005 convertible) debentures are determined by applying the if-converted method. In
December 2017, we paid cash to convert our 2035 debentures which we excluded from our diluted earnings per share
computation in the fourth quarter and are no longer dilutive. For information on the conversion of the 2035 debentures, see “Note
14: Borrowings.” Our junior subordinated convertible debentures due 2039 (2009 debentures) require settlement of the principal
amount of the debt in cash upon conversion, with the conversion premium paid in cash or stock at our option, potentially dilutive
shares of common stock are determined by applying the treasury stock method.
In all years presented, potentially dilutive securities that would have been antidilutive are insignificant and are excluded from the
computation of diluted earnings per share. In all years presented, we included our 2009 debentures in the calculation of diluted
earnings per share of common stock because the average market price was above the conversion price. We could potentially
exclude the 2009 debentures in the future if the average market price is below the conversion price.
NOTE 6: OTHER FINANCIAL STATEMENT DETAILS
INVENTORIES
(In Millions)
Raw materials
Work in process
Finished goods
Total inventories
PROPERTY, PLANT AND EQUIPMENT
(In Millions)
Land and buildings
Machinery and equipment
Construction in progress
Total property, plant and equipment, gross
Less: accumulated depreciation
Total property, plant and equipment, net
Dec 30,
2017
Dec 31,
2016
$
$
1,098 $
3,893
1,992
6,983 $
695
3,190
1,668
5,553
Dec 30,
2017
Dec 31,
2016
$
27,391 $
57,192
15,812
100,395
59,286
26,627
52,608
10,870
90,105
53,934
$
41,109 $
36,171
Substantially all of our depreciable property, plant and equipment assets were depreciated over the following estimated useful
lives: machinery and equipment, 2 to 5 years, and buildings, 10 to 25 years. There are no construction in progress assets held in
safe state as of December 30, 2017 (approximately $2.2 billion as of December 31, 2016).
Net property, plant and equipment by country at the end of each period was as follows:
(In Millions)
United States
Israel
China
Ireland
Other countries
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
24,459 $
23,598 $
22,611
6,501
4,275
3,938
1,936
3,923
2,306
4,865
1,479
1,661
537
5,789
1,260
Total property, plant and equipment, net
$
41,109 $
36,171 $
31,858
FINANCIAL STATEMENTS
Notes to Financial Statements
77
DEFERRED INCOME
(In Millions)
Deferred income on shipments of components to distributors
Deferred income from software, services, and other
Current deferred income
OTHER ACCRUED LIABILITIES
Dec 30,
2017
Dec 31,
2016
$
$
1,320 $
336
1,656 $
1,475
243
1,718
Other accrued liabilities include deferred compensation liabilities of $1.7 billion as of December 30, 2017 ($1.5 billion as of
December 31, 2016).
ADVERTISING
Advertising costs, including direct marketing costs, recorded within MG&A expenses were $1.4 billion in 2017 ($1.8 billion in 2016
and $1.8 billion in 2015).
GAINS (LOSSES) ON EQUITY INVESTMENTS, NET
The components of gains (losses) on equity investments, net for each period were as follows:
Years Ended
(In Millions)
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Share of equity method investee losses, net
$
(232) $
(38) $
Impairments
Gains on sales, net
Dividends
Other, net
(833)
3,499
68
149
(187)
562
74
95
Total gains (losses) on equity investments, net
$
2,651 $
506 $
INTEREST AND OTHER, NET
The components of interest and other, net for each period were as follows:
(95)
(185)
145
52
398
315
Years Ended
(In Millions)
Interest income
Interest expense
Other, net
Total interest and other, net
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
441 $
222 $
(646)
(30)
(733)
67
(235) $
(444) $
124
(337)
108
(105)
Interest expense in the preceding table is net of $313 million of interest capitalized in 2017 ($135 million in 2016 and
$258 million in 2015).
NOTE 7: RESTRUCTURING AND OTHER CHARGES
Years Ended
(In Millions)
2016 Restructuring Program
2015 and 2013 Restructuring Programs
ISecG separation costs and other charges
Total restructuring and other charges
FINANCIAL STATEMENTS
Notes to Financial Statements
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
135 $
1,823 $
—
249
—
63
384 $
1,886 $
—
354
—
354
78
2016 RESTRUCTURING PROGRAM
In the second quarter of 2016, management approved and commenced the 2016 Restructuring Program to accelerate our
transformation from a PC company to one that powers the cloud and billions of smart, connected computing devices. Under this
program, we closed certain facilities and reduced headcount globally to align our operations with evolving business needs by
investing in our growth businesses and improving efficiencies. This program was completed in 2017.
Restructuring and other charges by type for the 2016 Restructuring Program were as follows:
Years Ended
(In Millions)
Employee severance and benefit arrangements
Pension settlement charges
Asset impairment and other charges
Total restructuring and other charges
Dec 30,
2017
Dec 31,
2016
$
$
70 $
1,737
25
40
57
29
135 $
1,823
Restructuring and other activity for the 2016 Restructuring Program were as follows:
(In Millions)
Employee
Severance
and Benefits
Asset
Impairments
and Other
Total
Accrued restructuring balance as of December 26, 2015
$
— $
— $
Additional accruals
Adjustments
Cash payments
Non-cash settlements
Accrued restructuring balance as of December 31, 2016
Additional accruals
Adjustments
Cash payments
Non-cash settlements
1,556
92
(1,063)
—
585
—
70
(352)
—
29
—
—
(19)
10
40
—
(25)
(3)
Accrued restructuring balance as of December 30, 2017
$
303 $
22 $
—
1,585
92
(1,063)
(19)
595
40
70
(377)
(3)
325
We recorded the additional accruals as restructuring and other charges in the consolidated statements of income and within the
“all other” operating segments category. A substantial majority of the accrued restructuring balance as of December 30, 2017 is
expected to be paid within the next 12 months, and was recorded within accrued compensation and benefits on the consolidated
balance sheets. Restructuring actions related to this program, which were approved in 2016, impacted approximately 16,000
employees.
2015 AND 2013 RESTRUCTURING PROGRAMS
During 2015 and 2013, management approved and commenced implementation of restructuring actions, including targeted
workforce reductions and the exit of certain businesses and facilities, as we adjusted resources from areas of disinvestment to
areas of investment. The 2013 restructuring program included the wind down of our 200mm wafer fabrication facility in
Massachusetts and the closure of our assembly and test facility in Costa Rica. Both programs were completed in 2015.
FINANCIAL STATEMENTS
Notes to Financial Statements
79
NOTE 8: INCOME TAXES
Tax Reform was enacted in December 2017 and reduced the U.S. federal corporate tax rate from 35.0% to 21.0% starting in 2018,
assessed a one-time transition tax on earnings of non-U.S. subsidiaries that have not been taxed previously in the U.S., and
created new taxes on certain future foreign sourced earnings. We recorded a provisional income tax expense of $5.4 billion, net
within our 2017 results related to Tax Reform. Our provisional estimates will be refined throughout 2018 from our ongoing
analysis of data and tax positions along with new guidance from regulators and interpretation of the law. The components of the
provisional income tax expense are as follows:
• Recognition of the transition tax imposed on undistributed earnings from non-U.S. subsidiaries. We have previously asserted an
intent to indefinitely reinvest our earnings and other basis differences in operations outside the U.S., and have not recognized
U.S. deferred income taxes. Tax Reform imposes a one-time transition tax on all of our previously untaxed historical non-U.S.
earnings and profits at various tax rates. We recognized a provisional tax expense of $6.1 billion in the fourth quarter of 2017.
The move to a participation exemption system allows us to make distributions of non-U.S. earnings to the U.S. without incurring
additional U.S. tax, however these distributions may be subject to applicable non-U.S. taxation.
• Remeasurement of deferred income taxes using the newly enacted statutory tax rate of 21.0%. The new statutory U.S. federal
income tax rate is effective for the 2018 tax year. We remeasured our deferred tax assets and liabilities, including associated
valuation allowances, with the new tax rate. We have recognized a provisional tax benefit of $676 million in the fourth quarter of
2017.
INCOME TAX PROVISION
Income before taxes and the provision for taxes consisted of the following:
Years Ended
(In Millions)
Income before taxes:
U.S.
Non-U.S.
Total income before taxes
Provision for taxes:
Current:
Federal
State
Non-U.S.
Total current provision for taxes
Deferred:
Federal
Other
Total deferred provision for taxes
Total provision for taxes
Effective tax rate
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$ 11,141
$
9,211
20,352
10,207
27
899
11,133
(220)
(162)
(382)
$
6,957
5,979
8,800
5,412
12,936
14,212
1,319
13
756
2,088
658
(126)
532
2,828
40
842
3,710
(862)
(56)
(918)
$ 10,751
$
2,620
$
2,792
52.8%
20.3%
19.6%
FINANCIAL STATEMENTS
Notes to Financial Statements
80
The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income
before income taxes (effective tax rate) for each period was as follows:
Years Ended
Statutory federal income tax rate
Increase (reduction) in rate resulting from:
Non-U.S. income taxed at different rates
Research and development tax credits
Domestic manufacturing deduction benefit
Settlements, effective settlements, and related remeasurements
Tax Reform
ISecG divestiture
Other
Effective tax rate
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
35.0%
35.0%
35.0%
(7.6)
(2.3)
(1.3)
—
26.8
3.3
(1.1)
(11.7)
(2.3)
(1.4)
(0.1)
—
—
0.8
(7.9)
(1.7)
(2.0)
(2.9)
—
—
(0.9)
52.8%
20.3%
19.6%
Substantially all of the increase in our effective tax rate in 2017 compared to 2016 was driven by the one-time provisional impacts
from the Tax Reform enacted on December 22, 2017, the 2017 ISecG divestiture, and a higher proportion of our income in higher
tax rate jurisdictions.
The majority of the increase in our effective tax rate in 2016 compared to 2015 was driven by one-time items and our 2015
decision to indefinitely reinvest some of our prior years’ non-U.S. earnings, partially offset by a higher proportion of our income in
lower tax jurisdictions.
We derive the effective tax rate benefit attributed to non-U.S. income taxed at different rates primarily from our operations in
China, Hong Kong, Ireland, and Israel. The statutory tax rates in these jurisdictions range from 12.5% to 25.0%. In addition, we are
subject to reduced tax rates in China and Israel as long as we conduct certain eligible activities and make certain capital
investments. These conditional reduced tax rates expire at various dates through 2026 and we expect to apply for renewals upon
expiration.
FINANCIAL STATEMENTS
Notes to Financial Statements
81
DEFERRED AND CURRENT INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and
liabilities at the end of each period were as follows:
(In Millions)
Deferred tax assets:
Accrued compensation and other benefits
Share-based compensation
Deferred income
Inventory
State credits and net operating losses
Other, net
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Licenses and intangibles
Convertible debt
Unrealized gains on investments and derivatives
Transition tax
Other, net
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Reported as:
Deferred tax assets
Deferred tax liabilities
Dec 30,
2017
Dec 31,
2016
$
711 $
1,182
241
211
675
1,081
887
3,806
(1,171)
2,635
(943)
(881)
(374)
(421)
(1,850)
(373)
(4,842)
(2,207)
840
(3,046)
373
596
1,044
846
1,187
5,228
(953)
4,275
(1,574)
(1,036)
(1,098)
(940)
—
(450)
(5,098)
(823)
907
(1,730)
Net deferred tax assets (liabilities)
$
(2,207) $
(823)
Deferred tax assets are included within other long-term assets on the consolidated balance sheets.
The valuation allowance as of December 30, 2017 included allowances related to unrealized state credit carryforwards of
$1.1 billion and matters related to our non-U.S. subsidiaries of $99 million.
As of December 30, 2017, our federal, state, and non-U.S. net operating loss carryforwards for income tax purposes were
$264 million, $149 million, and $431 million, respectively. The majority of the non-U.S. net operating loss carryforwards have no
expiration date. The remaining non-U.S. and U.S. federal and state net operating loss carryforwards expire at various dates
through 2036. A significant amount of the net operating loss carryforwards in the U.S. relates to acquisitions and, as a result, is
limited in the amount that can be recognized in any one year. The non-U.S. net operating loss carryforwards include $249 million
that is not likely to be recovered and has been reduced by a valuation allowance.
As of December 30, 2017, we have not recognized deferred income tax on certain outside basis differences in our subsidiaries,
because we have the intent and ability to indefinitely reinvest these basis differences. Determining the unrecognized deferred tax
liability for these outside basis differences is not practicable.
Current income taxes receivable of $71 million as of December 30, 2017 ($86 million as of December 31, 2016) are included in
other current assets. Current income taxes payable of $1.4 billion as of December 30, 2017 ($329 million as of December 31,
2016) are included in other accrued liabilities.
FINANCIAL STATEMENTS
Notes to Financial Statements
82
Long-term income taxes payable of $4.1 billion as of December 30, 2017 ($125 million as of December 31, 2016) are included in
other long-term liabilities, and include uncertain tax positions, reduced by the associated federal deduction for state taxes and
non-U.S. tax credits, and may also include other long-term tax liabilities that are not uncertain but have not yet been paid,
including the substantial majority of the transition tax from the Tax Reform, which is payable over the next eight years. The Tax
Reform transition tax drove most of the increase in long-term income taxes payable from 2016.
UNCERTAIN TAX POSITIONS
Unrecognized tax benefits were $211 million as of December 30, 2017 ($154 million as of December 31, 2016 and $101 million
as of December 26, 2015). If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result
in a tax benefit of $139 million as of December 30, 2017 ($87 million as of December 31, 2016) and a reduction in the effective tax
rate. The related tax benefit for settlements, effective settlements, and remeasurements was insignificant for 2017 (insignificant in
2016 and $419 million in 2015). Interest, penalties, and accrued interest related to unrecognized tax benefits were insignificant in
the periods presented.
We comply with the laws, regulations, and filing requirements of all jurisdictions in which we conduct business. We regularly
engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. Although the timing of
the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S. federal and non-U.S. tax
audits may be concluded within the next 12 months, which could significantly increase or decrease the balance of our gross
unrecognized tax benefits. However, the estimated impact on income tax expense and net income is not expected to be
significant.
We file federal, state, and non-U.S. tax returns. For non-U.S. tax returns, we are generally no longer subject to tax examinations for
years prior to 2004. For U.S. federal and state tax returns, we are no longer subject to tax examination for years prior to 2004. We
have filed petitions before the U.S. Tax Court relating to the treatment of stock-based compensation expense in an inter-company
cost-sharing transaction for certain pre-acquisition Altera Corporation (Altera) tax years. The U.S. Tax Court ruled in favor of Altera
and the U.S. Internal Revenue Service appealed the ruling to the U.S. Court of Appeals for the Ninth Circuit. During 2017, the U.S.
Court of Appeals heard oral arguments and the outcome of those appeals is pending.
NOTE 9: INVESTMENTS
AVAILABLE-FOR-SALE INVESTMENTS
(In Millions)
December 30, 2017
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Adjusted
Cost
Fair
Value
Adjusted
Cost
December 31, 2016
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Fair
Value
Corporate debt
$
2,294 $
4 $
(13) $
2,285 $
3,847 $
4 $
(14) $
3,837
Financial institution
instruments
Government debt
Marketable equity
securities
Total available-for-sale
3,387
961
3
—
1,507
2,686
(9)
(6)
(1)
3,381
955
6,098
1,581
5
—
(11)
(8)
6,092
1,573
4,192
2,818
3,363
(1)
6,180
investments
$
8,149 $
2,693 $
(29) $
10,813 $
14,344 $
3,372 $
(34) $
17,682
Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution
instruments include instruments issued or managed by financial institutions in various forms, such as commercial paper, fixed-
and floating-rate bonds, money market fund deposits, and time deposits. Substantially all time deposits were issued by
institutions outside the U.S. as of December 30, 2017. Most time deposits were issued by institutions outside of the U.S. as of
December 31, 2016.
During 2017, we sold available-for-sale investments for proceeds of $7.1 billion, ($4.1 billion in 2016 and $2.2 billion in 2015).
The gross realized gains on sales of available-for-sale investments were $3.5 billion in 2017 ($538 million in 2016 and
$133 million in 2015).
FINANCIAL STATEMENTS
Notes to Financial Statements
83
On April 28, 2017, Cloudera, Inc. (Cloudera) completed its initial public offering and we designated our previous equity and cost
method investments in Cloudera as available-for-sale. During 2017, we determined we had an other-than-temporary decline in
the fair value of our investment and recognized an impairment charge of $278 million. We recognized the impairment due to the
duration and severity of the decline in the investment’s fair value, which we determined was below cost based upon observable
market prices after the initial public offering.
The fair values of available-for-sale debt investments, by contractual maturity, as of December 30, 2017 were as follows:
(In Millions)
Due in 1 year or less
Due in 1–2 years
Due in 2–5 years
Due after 5 years
Instruments not due at a single maturity date
Total
EQUITY METHOD INVESTMENTS
$
Fair Value
2,573
1,776
1,866
71
335
$
6,621
Equity method investments, classified within other long-term assets, at the end of each period were as follows:
(Dollars In Millions)
IM Flash Technologies, LLC
McAfee
Cloudera, Inc.
Other equity method investments
December 30, 2017
December 31, 2016
Carrying
Value
Ownership
Percentage
Carrying
Value
Ownership
Percentage
$
1,505
49% $
153
n/a
229
49%
n/a
849
n/a
225
254
49%
n/a
16%
Total
$
1,887
$
1,328
IM Flash Technologies, LLC
Since the inception of IM Flash Technologies, LLC (IMFT) in 2006, Micron Technology, Inc. (Micron) and Intel have jointly
developed NAND flash memory and 3D XPoint technology products. Intel also purchases jointly developed products directly from
Micron under certain supply agreements.
The IMFT operating agreement continues through 2024 unless terminated earlier, and provides for certain buy-sell rights of the
joint venture. Intel has the right to cause Micron to buy our interest in IMFT and, if exercised, Micron could elect to receive
financing from us for one to two years. Commencing in January 2019, Micron has the right to call our interest in IMFT with the
closing date to be effective within one year.
IMFT is a variable interest entity, and all costs of IMFT are passed on to Micron and Intel through sale of products or services in
proportional share of ownership. Our portion of IMFT costs was approximately $415 million in 2017 (approximately $400 million
in 2016 and $400 million in 2015). In the event that IMFT has excess cash, IMFT will make payments to Micron and Intel in the
form of dividends.
IMFT depends on Micron and Intel for any additional cash. In addition to making capital contributions throughout the year, during
the fourth quarter of 2017, we extended $650 million in member debt financing (MDF) to IMFT to fund the ramp of 3D XPoint
technology. The MDF balance may be converted to a capital contribution at our request, or may be repaid upon availability of
funds. Our known maximum exposure to loss approximated the carrying value of our investment balance (which included the
$650 million of MDF as of December 30, 2017). Our potential future losses could be higher than the carrying amount of our
investment, as Intel and Micron are liable for other future operating costs or obligations of IMFT and future cash calls. In addition,
because we are currently committed to purchasing 49% of IMFT’s production output and production-related services, we may be
required to purchase products at a cost in excess of realizable value.
We have determined that we do not have the characteristics of a consolidating investor in the variable interest entity, and
therefore, we account for our interest in IMFT using the equity method of accounting.
FINANCIAL STATEMENTS
Notes to Financial Statements
84
McAfee
During the second quarter of 2017, we closed our divestiture of the ISecG business and retained a 49% interest in McAfee as
partial consideration. Our investment is accounted for under the equity method of accounting and is classified within other long-
term assets. During the third quarter of 2017, we received a $735 million dividend from McAfee. For further information related to
the divestiture of the ISecG business, see “Note 10: Acquisitions and Divestitures.”
NON-MARKETABLE COST METHOD INVESTMENTS
The carrying value of our non-marketable cost method investments was $2.6 billion as of December 30, 2017 ($3.1 billion as of
December 31, 2016). In 2017, we recognized impairments of $548 million on non-marketable cost method investments
($178 million in 2016 and $164 million in 2015).
Beijing UniSpreadtrum Technology Ltd. (UniSpreadtrum)
During 2014, we entered into a series of agreements with Tsinghua Unigroup Ltd. (Tsinghua Unigroup), an operating subsidiary of
Tsinghua Holdings Co. Ltd., to, among other things, jointly develop Intel architecture- and communications-based solutions for
phones. During 2017, we reduced our expectation of the future operating performance for Beijing UniSpreadtrum Technology Ltd.
(UniSpreadtrum) due to competitive pressures, which resulted in other-than-temporary impairment charges of $308 million. The
carrying value of our investment was $658 million as of December 30, 2017 ($966 million as of December 31, 2016).
TRADING ASSETS
Net gains related to trading assets still held at the reporting date were $414 million in 2017 (net losses of $295 million in 2016
and $152 million in 2015). Net losses on the related derivatives were $422 million in 2017 (net gains of $300 million in 2016 and
$137 million in 2015).
NOTE 10: ACQUISITIONS AND DIVESTITURES
2017 ACQUISITIONS
Mobileye
On August 21, 2017, we completed our tender offer for all of the outstanding ordinary shares of Mobileye, a global leader in the
development of computer vision and machine learning, data analysis, localization, and mapping for advanced driver assistance
systems and autonomous driving. This acquisition combines Mobileye’s leading computer vision expertise with Intel’s high-
performance computing and connectivity expertise to create automated driving solutions from car to cloud. The combination is
expected to accelerate innovation for the automotive industry and position Intel as a leading technology provider in the fast-
growing market for highly and fully autonomous vehicles. The transaction also extends Intel’s strategy to invest in data-intensive
market opportunities that build on our strengths in computing and connectivity from the cloud, through the network, to the
device.
As of the completion of the tender offer, we acquired substantially all of the outstanding ordinary shares of Mobileye. We acquired
84.4% of the outstanding shares on August 8, 2017 and 97.3% as of August 21, 2017, and we intend to acquire all remaining
outstanding shares. We have reflected the acquisition of the additional outstanding shares and reduction to the noncontrolling
interest by $1.8 billion in the tables below.
Total consideration to acquire Mobileye was $14.5 billion (net of $366 million of cash and cash equivalents acquired).
The preliminary fair values of the assets acquired and liabilities assumed in the acquisition of Mobileye, by major class, were
recognized as follows:
(In Millions)
Short-term investments and marketable securities
$
Tangible assets
Goodwill
Identified intangible assets
Current liabilities
Deferred tax liabilities and other
Noncontrolling interest
Total
370
227
10,278
4,482
(69)
(418)
(375)
$
14,495
FINANCIAL STATEMENTS
Notes to Financial Statements
85
We assumed outstanding unvested Mobileye stock options and RSUs granted under two Mobileye equity plans. We will not grant
additional equity awards under these two Mobileye equity plans. In connection with the acquisition, we recognized share-based
compensation expense of $71 million for cash-settled awards.
The preliminary allocation of the purchase price was based upon estimates and assumptions that are subject to change within the
one-year measurement period. The primary areas of the purchase price allocation that are not yet finalized are certain tax matters,
identification of contingencies, and goodwill.
The fair value of the non-controlling interest was determined based on the quoted share price of Mobileye as of August 8, 2017,
and the remaining outstanding shares that constitute the non-controlling interest. We recorded the non-controlling interest as a
component of equity.
Goodwill of $10.3 billion arising from the acquisition is attributed to the expected synergies and other benefits that will be
generated from the combination of Intel and Mobileye. Substantially all of the goodwill recognized is not expected to be
deductible for tax purposes. The goodwill recognized from the acquisition is included within “all other.”
The identified intangible assets assumed in the acquisition of Mobileye were recognized as follows:
Developed technology
Customer relationships
Brands
Identified intangible assets subject to amortization
In-process research and development
Identified intangible assets not subject to amortization
Total identified intangible assets
2016 ACQUISITIONS
Altera Corporation
Fair Value
(In Millions)
Weighted Average
Estimated Useful Life
(In Years)
9
12
10
$
$
2,346
713
64
3,123
1,359
1,359
4,482
On December 28, 2015, we completed the acquisition of Altera, a global semiconductor company that designs and sells
programmable semiconductors and related products. We acquired all outstanding shares of Altera common stock and, subject to
certain exceptions, each share of Altera common stock underlying vested stock option awards, RSUs, and performance-based RSU
awards in exchange for cash. The acquired company operates as PSG and continues to design and sell programmable logic
devices (PLDs), which incorporate field-programmable gate arrays (FPGAs) and complex programmable logic devices, and highly
integrated SoC devices. This acquisition is expected to expand our reach within the compute continuum, as the combination of
our leading-edge products and manufacturing process with Altera’s leading FPGA technology enables new classes of platforms
that meet customer needs in the data center and Internet of Things market segments. As we develop future platforms, the
integration of PLDs into our platform solutions is expected to improve the overall performance and lower the cost of ownership
for our customers. For further information, see “Note 4: Operating Segments.”
Total consideration to acquire Altera was $14.5 billion (net of $2.0 billion of cash and cash equivalents acquired).
FINANCIAL STATEMENTS
Notes to Financial Statements
86
The fair values of the assets acquired and liabilities assumed in the acquisition of Altera, by major class, were recognized as
follows:
(In Millions)
Short-term investments
Receivables
Inventory
Other current assets
Property, plant and equipment
Goodwill
Identified intangible assets
Other long-term investments and assets
Deferred income
Other liabilities
Long-term debt
Deferred tax liabilities
Total
$
182
368
555
123
312
5,448
7,566
2,515
(351)
(283)
(1,535)
(449)
$
14,451
The goodwill of $5.4 billion arising from the acquisition is attributed to the expected benefit and other benefits that will be
generated by combining Intel and Altera. Substantially all of the goodwill recognized is not expected to be deductible for tax
purposes. For further information on the assignment of goodwill for the acquisition, see “Note 11: Goodwill.”
The identified intangible assets assumed in the acquisition of Altera were recognized as follows based upon their fair values as of
December 28, 2015:
Developed technology
Customer relationships
Brands
Identified intangible assets subject to amortization
In-process research and development
Identified intangible assets not subject to amortization
Fair Value
(In Millions)
Weighted Average
Estimated Useful Life
(In Years)
$
5,757
1,121
87
6,965
601
601
9
12
6
Total identified intangible assets
$
7,566
OTHER ACQUISITIONS
During 2017, in addition to the Mobileye acquisition, we completed two acquisitions qualifying as business combinations that
were not material to Intel’s operations.
In addition to the Altera acquisition, we completed 11 acquisitions qualifying as business combinations in 2016 and eight in 2015
for aggregate consideration of $1.1 billion and $1.0 billion, respectively. Consideration paid primarily consisted of cash and was
net of cash acquired. For both periods, substantially all of the consideration was allocated to goodwill and identifiable intangible
assets.
Other acquisitions completed in 2017, 2016, and 2015, both individually and in the aggregate, were not significant to our results
of operations. For information on the assignment of goodwill to our operating segments, see “Note 11: Goodwill,” and for
information on the classification of intangible assets, see “Note 12: Identified Intangible Assets.”
DIVESTITURE OF INTEL SECURITY GROUP
On April 3, 2017, we closed the transaction with TPG VII Manta Holdings, L.P., now known as Manta Holdings, L.P. (TPG),
transferring certain assets and liabilities relating to ISecG to a newly formed, jointly owned, separate cybersecurity company called
McAfee.
FINANCIAL STATEMENTS
Notes to Financial Statements
87
Total consideration received was $4.2 billion, consisting of $924 million in cash proceeds, $1.1 billion in the form of equity
representing a 49% ownership interest in McAfee, and $2.2 billion in the form of promissory notes issued by McAfee and TPG.
During the third quarter of 2017, McAfee and TPG repaid the $2.2 billion of promissory notes, which are included within proceeds
from divestiture.
The carrying amounts of the major classes of ISecG assets and liabilities as of the transaction close date included the following:
(In Millions)
Accounts receivable
Goodwill
Identified intangible assets
Other assets
Total assets
Deferred income
Other liabilities
Total liabilities
Apr 1,
2017
317
3,601
965
276
5,159
1,553
276
1,829
$
$
$
$
As of the transaction close date, we recognized a pre-tax gain of $387 million within “Interest and other, net,” which is net of
$507 million of currency translation adjustment losses reclassified from accumulated other comprehensive income (loss)
associated with currency charges on the carrying values of ISecG goodwill and identified intangible assets. In addition, we
recognized a tax expense of $822 million.
NOTE 11: GOODWILL
Goodwill activity for each period was as follows:
(In Millions)
Client Computing Group
Data Center Group
Internet of Things Group
Programmable Solutions Group
All other
Dec 31,
2016
Acquisitions Transfers
Other
Dec 30,
2017
$
4,356 $
5,412
1,123
2,490
718
— $
9
3
—
10,278
— $
—
—
—
—
— $
— $
—
—
—
—
— $
4,356
5,421
1,126
2,490
10,996
24,389
Total
$
14,099 $
10,290 $
(In Millions)
Client Computing Group
Data Center Group
Internet of Things Group
Intel Security Group
Software and Services Group
Programmable Solutions Group
All other
Dec 26,
2015
Acquisitions Transfers
Other
Dec 31,
2016
$
4,078 $
2,404
428
3,599
441
—
382
65 $
2,831
659
—
—
2,490
321
213 $
177
36
—
(441)
—
15
— $
—
—
(3,599)
—
—
—
4,356
5,412
1,123
—
—
2,490
718
Total
$
11,332 $
6,366 $
— $
(3,599) $
14,099
During the third quarter of 2016, ISecG goodwill was reclassified to assets held for sale. This reclassification of goodwill is
presented within the “Other” column in the preceding table. For further information, see “Note 10: Acquisitions and Divestitures.”
During the fourth quarters of 2017, 2016, and 2015, we completed our annual impairment assessments and we concluded that
goodwill was not impaired in any of these years. The accumulated impairment losses as of December 30, 2017 were $719 million:
$365 million associated with CCG, $275 million associated with DCG, and $79 million associated with IOTG.
FINANCIAL STATEMENTS
Notes to Financial Statements
88
NOTE 12: IDENTIFIED INTANGIBLE ASSETS
We recorded $4.5 billion of identified intangible assets from our acquisition of Mobileye during the third quarter of 2017. For
further information about these acquired identified intangible assets, see “Note 10: Acquisitions and Divestitures.”
(In Millions)
Acquisition-related developed technology
Acquisition-related customer relationships
Acquisition-related brands
Licensed technology and patents
December 30, 2017
Accumulated
Amortization
Gross
Assets
Net
$
8,912 $
(1,922) $
2,052
143
3,104
(313)
(29)
(1,370)
6,990
1,739
114
1,734
Identified intangible assets subject to amortization
14,211
(3,634)
10,577
In-process research and development
Identified intangible assets not subject to amortization
2,168
2,168
—
—
2,168
2,168
Total identified intangible assets
$
16,379 $
(3,634) $
12,745
(In Millions)
Acquisition-related developed technology
Acquisition-related customer relationships
Acquisition-related brands
Licensed technology and patents
Identified intangible assets subject to amortization
In-process research and development
Identified intangible assets not subject to amortization
December 31, 2016
Accumulated
Amortization
Gross
Assets
Net
$
7,405 $
(1,836) $
1,449
87
3,285
(260)
(21)
(1,423)
12,226
(3,540)
808
808
—
—
5,569
1,189
66
1,862
8,686
808
808
Total identified intangible assets
$
13,034 $
(3,540) $
9,494
Identified intangible assets recorded for each period and their respective estimated weighted average useful lives were as follows:
Acquisition-related developed technology
Acquisition-related customer relationships
Acquisition-related brands
Licensed technology and patents
December 30, 2017
December 31, 2016
Gross
Assets
(In Millions)
Estimated
Useful Life
(In Years)
Gross
Assets
(In Millions)
Estimated
Useful Life
(In Years)
$
$
$
$
2,346
713
64
162
9 $
12 $
10 $
7 $
5,842
1,148
87
342
9
12
6
12
During 2017, we acquired in-process R&D assets of $1.4 billion that were not subject to amortization.
The estimated useful life ranges for identified intangible assets that are subject to amortization were as follows:
(In Years)
Acquisition-related developed technology
Acquisition-related customer relationships
Acquisition-related brands
Licensed technology and patents
Estimated
Useful Life Range
5 – 9
7 – 12
6 – 10
2 – 17
FINANCIAL STATEMENTS
Notes to Financial Statements
89
343
258
7
282
890
937
171
6
190
Amortization expenses recorded in the consolidated statements of income for each period were as follows:
Location
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Years Ended
(In Millions)
Acquisition-related developed
technology
Cost of sales
$
912 $
937 $
Acquisition-related customer
Amortization of acquisition-related
relationships
intangibles
Acquisition-related brands
Amortization of acquisition-related
Licensed technology and patents
Cost of sales
intangibles
161
16
288
270
24
293
Total amortization expenses
$
1,377 $
1,524 $
We expect future amortization expense for the next five years to be as follows:
(In Millions)
2018
2019
2020
2021
2022
Acquisition-related developed technology
Acquisition-related customer relationships
Acquisition-related brands
Licensed technology and patents
Total future amortization expenses
$
$
NOTE 13: OTHER LONG-TERM ASSETS
(In Millions)
Equity method investments
Non-marketable cost method investments
Non-current deferred tax assets
Pre-payments for property, plant and equipment
Loans receivable
Other
Total other long-term assets
NOTE 14: BORROWINGS
SHORT-TERM DEBT
(In Millions)
Drafts payable
Current portion of long-term debt
Total short-term debt
1,045 $
1,043 $
1,011 $
976 $
181
20
256
180
20
243
179
20
211
179
20
195
1,502 $
1,486 $
1,421 $
1,370 $
1,304
Dec 30,
2017
Dec 31,
2016
$
1,887 $
2,613
840
714
860
688
$
7,602 $
1,328
3,098
907
347
236
1,243
7,159
Dec 30,
2017
Dec 31,
2016
$
$
37 $
1,739
1,776 $
25
4,609
4,634
Our current portion of long-term debt includes our 2009 junior subordinated convertible debentures due 2039, as well as debt
classified as short-term based on contractual maturity.
We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program.
This amount includes an increase of $5.0 billion in the authorization limit approved by our Board of Directors in April 2017.
FINANCIAL STATEMENTS
Notes to Financial Statements
90
LONG-TERM DEBT
(In Millions)
Floating-rate senior notes:
Three-month LIBOR plus 0.08%, due May 2020
Three-month LIBOR plus 0.35%, due May 2022
Fixed-rate senior notes:
1.75%, due May 2017
1.35%, due December 2017
2.50%, due November 2018
3.25%, due December 20191
1.85%, due May 2020
2.45%, due July 2020
1.70%, due May 2021
3.30%, due October 2021
2.35%, due May 2022
3.10%, due July 2022
4.00%, due December 20221
2.70%, due December 2022
4.10%, due November 2023
2.88%, due May 2024
2.70%, due June 2024
3.70%, due July 2025
2.60%, due May 2026
3.15%, due May 2027
4.00%, due December 2032
4.80%, due October 2041
4.25%, due December 2042
4.90%, due July 2045
4.90%, due August 2045
4.70%, due December 2045
4.10%, due May 2046
4.10%, due May 2047
4.10%, due August 2047
3.73%, due December 2047
Junior subordinated convertible debentures:
2.95%, due December 2035
3.25%, due August 20392
Total senior notes and other borrowings
Unamortized premium/discount and issuance costs
Hedge accounting fair value adjustments
Long-term debt
Current portion of long-term debt
Total long-term debt
December 30, 2017
December 31,
2016
Effective
Interest Rate
Amount
Amount
1.40%
1.66%
n/a
n/a
2.14%
2.19%
1.90%
2.50%
1.78%
2.69%
1.86%
2.50%
2.98%
2.08%
3.23%
2.36%
2.12%
3.20%
1.66%
2.82%
4.10%
4.86%
4.39%
4.92%
n/a
2.49%
4.12%
4.13%
2.15%
3.74%
n/a
4.03%
$
700 $
800
—
—
600
194
1,000
1,750
500
2,000
750
1,000
428
1,500
400
1,250
600
2,250
1,000
1,000
750
802
567
772
—
915
1,250
1,000
640
1,967
—
2,000
—
—
500
3,000
600
180
—
1,750
500
2,000
—
1,000
396
1,500
400
—
—
2,250
1,000
—
750
1,500
925
2,000
1,007
915
1,250
—
—
—
1,600
2,000
28,385
(1,357)
(252)
26,776
(1,739)
27,023
(1,581)
(184)
25,258
(4,609)
$
25,037 $
20,649
1 To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest
rate swaps with an aggregate notional amount of $577 million, which effectively converted these notes to U.S.-dollar-denominated notes.
For further discussion on our currency interest rate swaps, see “Note 17: Derivative Financial Instruments.” Principal and unamortized
discount/issuance costs for the Australian-dollar-denominated notes in the table above were calculated using foreign currency exchange
rates as of December 30, 2017 and December 31, 2016.
2 Effective interest rate for the year ended December 31, 2016 was 4.01%.
FINANCIAL STATEMENTS
Notes to Financial Statements
91
In 2017, we began assessing fair value hierarchy levels for our short-term and long-term debt based on the underlying instrument
type. The fair value of our convertible debentures is determined using discounted cash flow models with observable market
inputs, and takes into consideration variables such as interest rate changes, comparable instruments, subordination discount, and
credit-rating changes. As of December 30, 2017 and December 31, 2016, the fair value of short-term debt (excluding drafts
payable) was $2.4 billion and $5.1 billion, respectively, and the fair value of long-term debt, excluding the current portion of long-
term debt, was $27.0 billion and $22.0 billion, respectively. These liabilities are classified as Level 2 within the fair value hierarchy
based on the nature of the fair value inputs.
Senior Notes
During 2017, we issued a total of $7.7 billion aggregate principal amount of senior notes, which excludes the private placement of
$2.0 billion of senior notes issued in December 2017 as discussed in the following paragraph. We used the net proceeds from the
offerings of the notes for general corporate purposes, which included refinancing of outstanding debt and repurchase of shares of
our common stock. Additionally, we redeemed our $1.0 billion, 4.90% senior notes due August 2045.
In December 2017, we completed exchange and cash offers for our outstanding 4.80% senior notes due 2041, 4.25% senior
notes due 2042, and 4.90% senior notes due 2045 (Old Notes). As a result of the exchange offer, we issued in a private placement
$2.0 billion principal amount of 3.73% senior notes due 2047 and paid $293 million cash in exchange for $1.9 billion aggregate
principal amount of the Old Notes. As a result of the cash offer, we paid $518 million to repurchase $425 million aggregate
principal amount and recognized a $93 million loss on the extinguishment of the Old Notes.
During 2016, we issued a total of $2.8 billion aggregate principal amount of senior unsecured notes to refinance existing
indebtedness, including our 1.95% senior notes due 2016 and a portion of our 1.35% senior notes due 2017. In connection with
our completed acquisition of Altera, in the first quarter of 2016, we acquired a total of $1.5 billion aggregate principal amount of
senior unsecured notes.
Our senior floating-rate notes pay interest quarterly and our senior fixed-rate notes pay interest semiannually. We may redeem
the fixed-rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The
obligations under the notes rank equally in right of payment with all of our other existing and future senior unsecured
indebtedness and will effectively rank junior to all liabilities of our subsidiaries.
Convertible Debentures
In December 2017, we paid $2.8 billion to convert our $1.6 billion 2.95% junior subordinated convertible debentures due 2035.
We recognized a loss of $385 million in interest and other, net and $1.4 billion as a reduction to stockholders’ equity related to
the conversion feature.
In 2009, we issued junior subordinated convertible debentures due 2039 (2009 debentures), which pay a fixed rate of interest
semiannually. The 2009 debentures have a contingent interest component that requires us to pay interest based on certain
thresholds or for certain events, commencing on August 1, 2019. After such date, if the 10-day average trading price of $1,000
principal amount of the bond immediately preceding any six-month interest period is less than or equal to $650 or greater than or
equal to $1,500, we are required to pay contingent 0.25% or 0.50% annual interest, respectively.
The 2009 debentures are convertible, subject to certain conditions. Holders can surrender the 2009 debentures for conversion if
the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days
during the 30 consecutive trading-day period ending on the last trading day of the preceding fiscal quarter. We will settle any
conversion of the 2009 debentures in cash up to the face value, and any amount in excess of face value will be settled in cash or
stock at our option. On or after August 5, 2019, we can redeem, for cash, all or part of the 2009 debentures for the principal
amount, plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 150% of the conversion
price then in effect for at least 20 trading days during any 30 consecutive trading-day period. In addition, if certain events occur in
the future, the indenture governing the 2009 debentures provides that each holder of the debentures can, for a pre-defined
period of time, require us to repurchase the holder’s debentures for the principal amount plus any accrued and unpaid interest.
The 2009 debentures are subordinated in right of payment to any existing and future senior debt and to the other liabilities of our
subsidiaries. We have concluded that the 2009 debentures are not conventional convertible debt instruments and that the
embedded stock conversion options qualify as derivatives. In addition, we have concluded that the embedded conversion options
would be classified in stockholders’ equity if they were freestanding derivative instruments and are not accounted for separately
as derivative liabilities.
FINANCIAL STATEMENTS
Notes to Financial Statements
92
During the fourth quarter of 2017, the closing stock price conversion right condition of the 2009 debentures continued to be met
and the debentures will be convertible at the option of the holders during the first quarter of 2018. As a result, the $1.1 billion
carrying amount of the 2009 debentures was classified as short-term debt on our consolidated balance sheet as of December 30,
2017 ($1.1 billion as of December 31, 2016). The excess of the amount of cash payable if converted over the carrying amount of
the 2009 debentures of $866 million has been classified as temporary equity on our consolidated balance sheet as of
December 30, 2017 ($882 million as of December 31, 2016). In future periods, if the closing stock price conversion right condition
is no longer met, all outstanding 2009 debentures would be reclassified to long-term debt and the temporary equity would be
reclassified to stockholders’ equity on our consolidated balance sheet.
(In Millions, Except Per Share Amounts)
Outstanding principal
Equity component (including temporary equity) carrying amount
Unamortized discount1
Net debt carrying amount
Conversion rate (shares of common stock per $1,000 principal amount of debentures)
Effective conversion price (per share of common stock)
1 The unamortized discounts for the 2009 debentures are amortized over the remaining life of the debt.
2009 Debentures
Dec 30,
2017
Dec 31,
2016
2,000 $
2,000
613 $
866 $
1,134 $
48.37
20.68 $
613
882
1,118
47.72
20.95
$
$
$
$
$
The conversion rate adjusts for certain events outlined in the indentures governing the 2009 debentures, such as quarterly
dividend distributions in excess of $0.14 per share, but it does not adjust for accrued interest. In addition, the conversion rate will
increase for a holder of the 2009 debentures who elects to convert the debentures in connection with certain share exchanges,
mergers, or consolidations involving Intel.
Debt Maturities
Our aggregate debt maturities based on outstanding principal as of December 30, 2017, by year payable, were as follows:
(In Millions)
2018
2019
2020
2021
2022
2023 and thereafter
Total
In the preceding table, the 2009 debentures are classified based on their stated maturity date, regardless of their classification on
the consolidated balance sheet.
$
600 $
194 $ 3,450 $ 2,500 $
4,478 $
17,163 $
28,385
FINANCIAL STATEMENTS
Notes to Financial Statements
93
NOTE 15: FAIR VALUE
ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS
December 30, 2017
December 31, 2016
Fair Value Measured and
Recorded at Reporting Date Using
Level 3
Level 2
Level 1
Total
Fair Value Measured and
Recorded at Reporting Date Using
Level 3
Level 2
Level 1
Total
$
— $
30 $
— $
30 $
— $
498 $
— $
498
335
—
640
90
—
—
975
90
1,920
—
—
—
—
—
—
—
59
30
2
—
4,148
—
—
—
—
—
1,399
— 1,399
672
1,009
130
2
2,842
1,064
4,758
277
30
44
1,576
1,397
735
77
610
3
675
— 1,009
130
—
2
—
— 2,842
— 1,123
— 4,788
279
—
—
30
— 4,192
4
1,580
— 1,397
735
—
7
—
84
610
—
—
—
—
—
—
36
32
—
—
6,180
—
—
—
—
—
811
332
768
1,332
1,603
284
87
2,847
1,608
3,704
382
326
—
1,995
1,758
957
31
236
— 2,731
332
—
—
768
6
1,338
— 1,603
284
—
87
—
— 2,847
— 1,644
— 3,736
382
—
—
326
— 6,180
6
2,001
— 1,758
957
—
9
—
40
236
4,574
17,382
14 21,970
8,168
19,559
21 27,748
—
—
454
297
—
6
454
303
—
—
371
179
—
33
371
212
(In Millions)
Assets
Cash equivalents:
Corporate debt
Financial institution
instruments1
Government debt2
Reverse repurchase
agreements
Short-term investments:
Corporate debt
Financial institution
instruments1
Government debt2
Trading assets:
Asset-backed securities
Corporate debt
Financial institution
instruments1
Government debt2
Other current assets:
Derivative assets
Loans receivable
Marketable equity securities
Other long-term investments:
Corporate debt
Financial institution
instruments1
Government debt2
Other long-term assets:
Derivative assets
Loans receivable
Total assets measured and
recorded at fair value
Liabilities
Other accrued liabilities:
Derivative liabilities
Other long-term liabilities:
Derivative liabilities
Total liabilities measured and
recorded at fair value
$
— $
751 $
6 $
757 $
— $
550 $
33 $
583
1 Level 1 investments consist of money market funds. Level 2 investments consist primarily of commercial paper, certificates of deposit, time
deposits, and notes and bonds issued by financial institutions.
2 Level 1 investments consist primarily of U.S. Treasury securities. Level 2 investments consist primarily of U.S. Agency notes and non-U.S.
government debt.
FINANCIAL STATEMENTS
Notes to Financial Statements
94
In the second quarter of 2017, we began assigning fair value hierarchy levels based on the underlying instrument type for our
fixed-income portfolio. We have reclassified prior period amounts to conform to the current period presentation.
FAIR VALUE OPTION FOR LOANS RECEIVABLE
The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual
principal balance as of December 30, 2017 and December 31, 2016.
ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS
Our non-marketable equity investments, marketable equity method investments, and non-financial assets—such as intangible
assets and property, plant and equipment—are recorded at fair value only if an impairment is recognized.
We classified non-marketable equity investments as Level 3. Impairments recognized on non-marketable equity investments held
as of December 30, 2017 were $537 million ($153 million held as of December 31, 2016 and $160 million held as of
December 26, 2015).
FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASIS
Financial instruments not recorded at fair value on a recurring basis include non-marketable cost method investments, grants
receivable, loans receivable, reverse repurchase agreements, and our short-term and long-term debt.
As of December 30, 2017, the carrying amount and fair value of our non-marketable cost method investments was $2.6 billion
and $3.6 billion, respectively ($3.1 billion and $3.9 billion as of December 31, 2016, respectively). These measures are classified as
Level 3 within the fair value hierarchy based on the nature of the fair value inputs.
As of December 30, 2017, the aggregate carrying value of grants receivable, loans receivable, and reverse repurchase agreements
was $935 million (the aggregate carrying amount as of December 31, 2016 was $876 million). The estimated fair value of these
financial instruments approximates their carrying value and is categorized as Level 2 within the fair value hierarchy based on the
nature of the fair value inputs.
For information related to the fair value of our short-term and long-term debt, see “Note 14: Borrowings.”
NOTE 16: OTHER COMPREHENSIVE INCOME (LOSS)
The changes in accumulated other comprehensive income (loss) by component and related tax effects for each period were as
follows:
(In Millions)
December 26, 2015
Other comprehensive income (loss) before
reclassifications
Amounts reclassified out of accumulated other
comprehensive income (loss)
Tax effects
Other comprehensive income (loss)
December 31, 2016
Other comprehensive income (loss) before
reclassifications
Amounts reclassified out of accumulated other
comprehensive income (loss)
Tax effects
Other comprehensive income (loss)
Unrealized
Holding
Gains
(Losses) on
Available-
for-Sale
Investments
Deferred
Tax Asset
Valuation
Allowance
Unrealized
Holding
Gains
(Losses) on
Derivatives
Actuarial
Valuation
and Other
Pension
Expenses
Foreign
Currency
Translation
Adjustment
Total
$
1,749 $
8 $
(266) $
(916) $
(515) $
60
1,170
(530)
(225)
415
2,164
2,760
(3,431)
235
(436)
—
—
(8)
(8)
—
—
—
—
—
(26)
(680)
38
(5)
7
170
146
(364)
(4)
—
—
(4)
(259)
(1,280)
(519)
460
(322)
(92)
46
106
605
275
3
3,643
(69)
(171)
365
103
(61)
317
507
—
510
(2,890)
3
756
862
95
December 30, 2017
$
1,728 $
— $
106 $
(963) $
(9) $
FINANCIAL STATEMENTS
Notes to Financial Statements
The amounts reclassified out of accumulated other comprehensive income (loss) into the consolidated statements of income for
each period were as follows:
Comprehensive Income Components
Location
Unrealized holding gains (losses)1 on
available-for-sale investments:
Gains (losses) on equity
investments, net
Unrealized holding gains (losses) on
derivatives:
Foreign currency contracts
Cost of sales
Research and development
Marketing, general and administrative
Gains (losses) on equity
investments, net
Interest and other, net
Amortization of pension and
postretirement benefit components:
Actuarial valuation and other pension
expenses
Currency translation adjustment
Interest and other, net
Total amounts reclassified out of
accumulated other comprehensive
income (loss)
Income Before Taxes Impact for Years Ended
(In Millions)
Dec 31,
2016
Dec 26,
2015
Dec 30,
2017
$
3,431 $
530 $
3,431
530
(65)
45
7
57
25
69
(103)
(103)
(507)
(65)
7
5
11
4
(38)
(170)
(170)
—
93
93
(290)
(177)
(46)
—
(9)
(522)
(77)
(77)
—
$
2,890 $
322 $
(506)
1 We determine the cost of the investment sold based on an average cost basis at the individual security level.
The amortization of pension and postretirement benefit components is included in the computation of net periodic benefit cost.
For more information, see “Note 18: Retirement Benefit Plans.”
We estimate that we will reclassify approximately $108 million (before taxes) of net derivative gains included in accumulated
other comprehensive income (loss) into earnings within the next 12 months.
During the second quarter of 2017, we reclassified $507 million (before taxes) of currency translation adjustment losses included
in accumulated other comprehensive income (loss) into earnings as a result of our divestiture of ISecG. For more information, see
“Note 10: Acquisitions and Divestitures.”
FINANCIAL STATEMENTS
Notes to Financial Statements
96
NOTE 17: DERIVATIVE FINANCIAL INSTRUMENTS
VOLUME OF DERIVATIVE ACTIVITY
Total gross notional amounts for outstanding derivatives (recorded at fair value) at the end of each period were as follows:
(In Millions)
Foreign currency contracts
Interest rate contracts
Other
Total
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
$
$
19,958 $
17,960 $
16,721
16,823
1,636
14,228
1,340
8,812
1,122
38,417 $
33,528 $
26,655
During the periods presented, we entered into $4.8 billion, $4.7 billion, and $4.4 billion, respectively, of interest rate swaps to
hedge against changes in the fair value attributable to the benchmark interest rates related to our outstanding senior notes. These
hedges were designated as fair value hedges. During 2015, we entered into $577 million of currency interest rate swaps to hedge
against the variability in the U.S.-dollar equivalent of coupon and principal payments associated with our non-U.S.-dollar-
denominated indebtedness. These hedges were designated as cash flow hedges.
During 2015, we discontinued cash flow hedge accounting treatment for $478 million of forward contracts related to our
anticipated equity funding of the UniSpreadtrum investment since we could no longer assert that funding is probable to occur
within the initially specified time frame. Hedge losses accumulated in other comprehensive income and subsequently released to
interest and other, net, related to these de-designated forward contracts were insignificant.
FAIR VALUE OF DERIVATIVE INSTRUMENTS IN THE CONSOLIDATED BALANCE SHEETS
(In Millions)
Derivatives designated as hedging instruments
Foreign currency contracts3
Interest rate contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Foreign currency contracts3
Interest rate contracts
Other
Total derivatives not designated as hedging instruments
December 30, 2017
December 31, 2016
Assets1
Liabilities2
Assets1
Liabilities2
$
283 $
32 $
1
284
52
18
9
79
254
286
447
24
—
471
21 $
3
24
374
15
9
398
252
187
439
114
30
—
144
583
Total derivatives
$
363 $
757 $
422 $
1 Derivative assets are recorded as other assets, current and non-current.
2 Derivative liabilities are recorded as other liabilities, current and non-current.
3 The majority of these instruments mature within 12 months.
FINANCIAL STATEMENTS
Notes to Financial Statements
97
AMOUNTS OFFSET IN THE CONSOLIDATED BALANCE SHEETS
The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with
various counterparties, and cash and non-cash collateral posted under such agreements at the end of each period were as
follows:
December 30, 2017
Gross Amounts Not Offset
in the Balance Sheet
Gross
Amounts
Recognized
Gross
Amounts
Offset in the
Balance
Sheet
Net
Amounts
Presented in
the Balance
Sheet
Financial
Instruments
Cash and
Non-Cash
Collateral
Received or
Pledged
Net Amount
(In Millions)
Assets:
Derivative assets subject to master
netting arrangements
$
350 $
— $
350 $
(206) $
(130) $
Reverse repurchase agreements
Total assets
Liabilities:
Derivative liabilities subject to
master netting arrangements
1,649
1,999
745
Total liabilities
$
745 $
—
—
—
— $
1,649
1,999
—
(206)
(1,649)
(1,779)
745
(206)
(504)
745 $
(206) $
(504) $
December 31, 2016
Gross Amounts Not Offset
in the Balance Sheet
14
—
14
35
35
Gross
Amounts
Recognized
Gross
Amounts
Offset in the
Balance
Sheet
Net
Amounts
Presented in
the Balance
Sheet
Financial
Instruments
Cash and
Non-Cash
Collateral
Received or
Pledged
Net Amount
(In Millions)
Assets:
Derivative assets subject to master
netting arrangements
$
433 $
— $
433 $
(368) $
(42) $
Reverse repurchase agreements
Total assets
Liabilities:
Derivative liabilities subject to
master netting arrangements
1,018
1,451
588
Total liabilities
$
588 $
—
—
—
— $
1,018
1,451
—
(368)
(1,018)
(1,060)
588
(368)
(201)
588 $
(368) $
(201) $
23
—
23
19
19
We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and
reverse repurchase agreements, when we deem it appropriate.
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
The before-tax net gains or losses attributed to the effective portion of cash flow hedges, recognized in other comprehensive
income (loss), were $605 million net gains in 2017 ($26 million net losses in 2016 and $298 million net losses in 2015).
Substantially all of our cash flow hedges are foreign currency contracts for all periods presented.
Hedge ineffectiveness and amounts excluded from effectiveness testing were insignificant during all periods presented.
For information on the unrealized holding gains (losses) on derivatives reclassified out of accumulated other comprehensive
income into the consolidated statements of income, see “Note 16: Other Comprehensive Income (Loss).”
FINANCIAL STATEMENTS
Notes to Financial Statements
98
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
The effects of derivative instruments designated as fair value hedges, recognized in interest and other, net for each period were as
follows:
Years Ended
(In Millions)
Interest rate contracts
Hedged items
Total
Gains (Losses)
Recognized in Statement of Income on
Derivatives
Dec 31,
2016
Dec 26,
2015
Dec 30,
2017
$
$
(68) $
68
— $
(171) $
171
— $
(13)
13
—
There was no ineffectiveness during all periods presented in the preceding table.
The amounts recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges for each
period were as follows:
Line Item in the Consolidated Balance Sheet in Which the
Hedged Item Is Included
Years Ended
(In Millions)
Carrying Amount of the
Hedged Item Asset/
(Liabilities)
Dec 30,
2017
Dec 31,
2016
Cumulative Amount of Fair
Value Hedging Adjustment
Included in the Carrying
Amount Assets/(Liabilities)
Dec 30,
2017
Dec 31,
2016
Long-Term Debt
$
(12,653) $
(8,879) $
252 $
184
As of December 30, 2017 and December 31, 2016, the total notional amount of pay variable/receive fixed-interest rate swaps was
$12.9 billion and $9.1 billion, respectively.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The effects of derivative instruments not designated as hedging instruments on the consolidated statements of income for each
period were as follows:
Years Ended
(In Millions)
Foreign currency contracts
Interest rate contracts
Other
Total
Location of Gains (Losses)
Recognized in Income on Derivatives
Dec 30,
2017
Dec 31,
2016
Dec 26,
2015
Interest and other, net
Interest and other, net
Various
$
$
(547) $
388 $
9
203
8
113
(335) $
509 $
296
(8)
(38)
250
NOTE 18: RETIREMENT BENEFIT PLANS
DEFINED CONTRIBUTION PLANS
We provide tax-qualified defined contribution plans for the benefit of eligible employees, former employees, and retirees in the
U.S. and certain other countries. The plans are designed to provide employees with an accumulation of funds for retirement on a
tax-deferred basis. For the benefit of eligible U.S. employees, we also provide an unfunded non-tax-qualified supplemental
deferred compensation plan for certain highly compensated employees.
We expensed $346 million for discretionary contributions to the U.S. qualified defined contribution and non-qualified deferred
compensation plans in 2017 ($326 million in 2016 and $337 million in 2015).
U.S. POSTRETIREMENT MEDICAL BENEFITS PLAN
Upon retirement, we provide benefits to eligible U.S. employees who were hired prior to 2014 under the U.S. Postretirement
Medical Benefits Plan. The benefits can be used to pay all or a portion of the cost to purchase eligible coverage in a medical plan.
FINANCIAL STATEMENTS
Notes to Financial Statements
99
As of December 30, 2017 and December 31, 2016, the projected benefit obligation was $567 million and $588 million,
respectively, which used the discount rate of 3.8% and 4.2%, respectively. The December 30, 2017 and December 31, 2016
corresponding fair value of plan assets was $563 million and $409 million, respectively.
The investment strategy for U.S. Postretirement Medical Benefits Plan assets is to invest primarily in liquid assets, due to the level
of expected future benefit payments. The assets are invested solely in a tax-aware global equity portfolio, which is actively
managed by an external investment manager. The tax-aware global equity portfolio is composed of a diversified mix of equities in
developed countries. For 2018, the expected long-term rate of return for the U.S. Postretirement Medical Benefits Plan assets is
5.9%. As of December 30, 2017, substantially all of the U.S. Postretirement Medical Benefits Plan assets were invested in
exchange-traded equity securities and were measured at fair value using Level 1 inputs.
The estimated benefit payments for this plan over the next 10 fiscal years are as follows:
(In Millions)
2018
2019
2020
2021
2022
2023-2027
Postretirement Medical Benefits
$
28 $
29 $
30 $
31 $
32 $
179
PENSION BENEFIT PLANS
We provide defined-benefit pension plans in certain countries, most significantly the U.S., Ireland, Germany, and Israel. The
majority of the plans’ benefits have been frozen.
BENEFIT OBLIGATION AND PLAN ASSETS FOR PENSION BENEFITS PLANS
The vested benefit obligation for a defined-benefit pension plan is the actuarial present value of the vested benefits to which the
employee is currently entitled based on the employee’s expected date of separation or retirement.
(In Millions)
Changes in projected benefit obligation:
Beginning projected benefit obligation
Service cost
Interest cost
Actuarial (gain) loss
Currency exchange rate changes
Plan curtailments
Plan settlements
Other
Ending projected benefit obligation1
Changes in fair value of plan assets:
Beginning fair value of plan assets
Actual return on plan assets
Employer contributions
Currency exchange rate changes
Plan settlements
Benefits paid to plan participants
Other
Ending fair value of plan assets2
Amounts recognized in the consolidated balance sheet3
Accumulated other comprehensive loss (income), before tax4
Accumulated benefit obligation5
Dec 30,
2017
Dec 31,
2016
$
3,640 $
3,130
84
117
24
281
(162)
(101)
(41)
130
106
575
(80)
17
(202)
(36)
3,842
3,640
1,696
1,638
136
471
124
(101)
(42)
3
2,287
1,555 $
1,257 $
3,423 $
$
$
$
81
416
(26)
(202)
(84)
(127)
1,696
1,944
1,603
2,976
100
1 The split between U.S. and non-U.S. in the projected benefit obligation was 38% and 62%, respectively, as of December 30, 2017 and
December 31, 2016.
FINANCIAL STATEMENTS
Notes to Financial Statements
2 The split between the U.S. and non-U.S. in the fair value of plan assets was 49% and 51%, respectively, as of December 30, 2017 and 46% and
54%, respectively, as of December 31, 2016.
3 Substantially all amounts recognized in the consolidated balance sheet are recorded in other long-term liabilities for all periods presented.
4 The split between U.S. and non-U.S. in the accumulated other comprehensive loss (income), before tax, was 38% and 62%, respectively, as of
December 30, 2017 and 34% and 66%, respectively, as of December 31, 2016. Substantially all amounts recognized in accumulated other
comprehensive loss (income) are attributable to net actuarial gain or loss.
5 All plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets for all periods presented.
We use the corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of
10% of the larger of the projected benefit obligation or the fair value of plan assets are amortized on a straight-line basis.
ASSUMPTIONS FOR PENSION BENEFIT PLANS
Weighted average actuarial assumptions used to determine benefit obligations
Discount rate
Rate of compensation increase
Weighted average actuarial assumptions used to determine costs
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
Dec 30,
2017
Dec 31,
2016
3.0%
3.3%
3.2%
3.6%
2017
2016
2015
3.2%
4.6%
3.6%
3.3%
5.5%
3.8%
3.1%
5.9%
3.9%
We establish the discount rate for each pension plan by analyzing current market long-term bond rates and matching the bond
maturity with the average duration of the pension liabilities.
We establish the long-term expected rate of return by developing a forward-looking, long-term return assumption for each
pension fund asset class, taking into account factors such as the expected real return for the specific asset class and inflation. A
single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-
term return assumption for each asset class.
FUNDING
Policy. Our practice is to fund the various pension plans in amounts sufficient to meet the minimum requirements of applicable
local laws and regulations. Additional funding may be provided as deemed appropriate. Funding for the U.S. Postretirement
Medical Benefits Plan is discretionary under applicable laws and regulations; additional funding may be provided as deemed
appropriate.
Funding Status. On a worldwide basis, our pension and postretirement benefit plans were 65% funded as of December 30, 2017.
The U.S. Intel Minimum Pension Plan, which accounts for 33% of the worldwide pension and postretirement benefit obligations,
was 77% funded. Funded status is not indicative of our ability to pay ongoing pension benefits or of our obligation to fund
retirement trusts. Required pension funding for U.S. retirement plans is determined in accordance with the Employee Retirement
Income Security Act (ERISA), which sets required minimum contributions. Cumulative company funding to the U.S. Intel Minimum
Pension Plan currently exceeds the minimum ERISA funding requirements.
NET PERIODIC BENEFIT COST
The net periodic benefit cost for pension benefits and U.S. postretirement medical benefits was $243 million in 2017,
($415 million in 2016 and $250 million in 2015). The service cost component of the corresponding net periodic benefit cost was
$104 million in 2017 ($156 million in 2016 and $176 million in 2015).
The increase in the net periodic pension benefit cost in 2016 compared to 2015 was primarily attributed to plan settlements and
remeasurement in conjunction with our 2016 Restructuring Program. For more information on the 2016 Restructuring Program,
see “Note 7: Restructuring and Other Charges.”
FINANCIAL STATEMENTS
Notes to Financial Statements
101
PENSION PLAN ASSETS
(In Millions)
Equity securities
Fixed income
Other investments
Assets measured by fair value hierarchy
Assets measured at net asset value
Cash and cash equivalents
Total pension plan assets at fair value
U.S. Plan Assets
December 30, 2017
Dec 31,
2016
Fair Value Measured at Reporting Date Using
Level 2
Level 3
Level 1
Total
Total
$
$
451 $
— $
22 $
473 $
45
19
326
—
94
—
465
19
515 $
326 $
116 $
957 $
1,208
122
$
2,287 $
328
304
—
632
1,044
20
1,696
The investment strategy for U.S. Intel Minimum Pension Plan assets is to maximize risk-adjusted returns, taking into consideration
the investment horizon and expected volatility to help ensure that sufficient assets are available to pay pension benefits as they
come due. The allocation to each asset class will fluctuate with market conditions, such as volatility and liquidity concerns, and will
typically be rebalanced when outside the target ranges, which were 45% fixed income, 30% hedge funds, and 25% equity
investments in 2017. For 2018, the expected long-term rate of return for the U.S. Intel Minimum Pension Plan assets is 5.1%.
Substantially all of the fixed-income investments in the U.S. plan assets are asset-backed securities, corporate debt, and
government debt. Government debt includes instruments such as non-U.S. government securities, U.S. agency securities, and U.S.
treasury securities.
The assets measured at net asset value are invested in common collective trust funds, limited partnerships, and limited liability
companies.
Non-U.S. Plan Assets
The investments of the non-U.S. plans are managed by insurance companies, pension funds, or third-party trustees, consistent
with regulations or market practice of the country where the assets are invested. The investment manager makes investment
decisions within the guidelines set by Intel or local regulations. Investments managed by qualified insurance companies or
pension funds under standard contracts follow local regulations, and we are not actively involved in their investment strategies.
For the assets that we have discretion to set investment guidelines, the assets are invested in developed country equity
investments and fixed-income investments, either through index funds or direct investment. In general, the investment strategy is
designed to accumulate a diversified portfolio among markets, asset classes, or individual securities to reduce market risk and to
help ensure that the pension assets are available to pay benefits as they come due. The target allocation of the non-U.S. plan
assets that we have control over is approximately 45% equity, 35% fixed-income, and 20% hedge fund investments. For 2018, the
average expected long-term rate of return for the non-U.S. plan assets is 4.2%.
Most of the equity investments in the non-U.S. plan assets are invested in a diversified mix of equities of developed countries,
including the U.S., and emerging markets throughout the world.
We have control over the investment strategy related to the majority of the assets measured at net asset value, which are invested
in hedge funds, bond index, and equity index funds.
ESTIMATED FUTURE BENEFIT PAYMENTS FOR PENSION BENEFIT PLANS
Estimated benefit payments over the next 10 fiscal years are as follows:
(In Millions)
Pension benefits
2018
2019
2020
2021
2022
2023-2027
$
125 $
117 $
115 $
121 $
124 $
673
FINANCIAL STATEMENTS
Notes to Financial Statements
102
NOTE 19: EMPLOYEE EQUITY INCENTIVE PLANS
Our equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees and align
stockholder and employee interests. Our plans include our 2006 Equity Incentive Plan (the 2006 Plan) and our 2006 Stock
Purchase Plan.
In May 2017, our stockholders approved an extension of the expiration date of the 2006 Plan to June 2020 and authorized an
additional 33 million shares for issuance under the plan. Under the 2006 Plan, 786 million shares of common stock have been
authorized for issuance as equity awards to employees and non-employee directors through June 2020. As of December 30,
2017, 215 million shares of common stock remained available for future grants.
Under the 2006 Plan, we grant RSUs and previously granted stock options. We grant RSUs with a service condition, as well as
RSUs with both a market condition and a service condition (market-based RSUs), which we call outperformance stock units
(OSUs), and which are granted to a group of senior officers, employees, and non-employee directors. For OSUs granted in 2017,
the number of shares of our common stock to be received at vesting will range from 0% to 200% of the target grant amount,
based on total stockholder return (TSR) of our common stock measured against the benchmark TSR of the S&P 500 IT Sector
Index over a three-year period. TSR is a measure of stock price appreciation plus any dividends paid in this performance period.
As of December 30, 2017, 9.2 million OSUs were outstanding. These OSUs generally vest three years and one month from the
grant date, and OSUs granted prior to 2017 accrue dividend equivalents. Other RSU awards and option awards generally vest over
four years from the grant date. Stock options generally expire seven years from the date of grant.
SHARE-BASED COMPENSATION
Share-based compensation recognized in 2017 was $1.4 billion ($1.4 billion in 2016 and $1.3 billion in 2015), which includes
$71 million of cash-settled awards in connection with the Mobileye acquisition.
The total share-based compensation cost capitalized as part of inventory as of December 30, 2017 was $49 million ($44 million
as of December 31, 2016 and $49 million as of December 26, 2015). During 2017, the tax benefit that we realized for the tax
deduction from share-based awards totaled $520 million ($616 million in 2016 and $533 million in 2015).
We estimate the fair value of RSUs with a service condition using the value of our common stock on the date of grant, reduced by
the present value of dividends expected to be paid on our shares of common stock prior to vesting. We estimate the fair value of
OSUs using a Monte Carlo simulation model on the date of grant.
We use the Black-Scholes option pricing model to estimate the fair value of rights to acquire shares of common stock granted
under the 2006 Stock Purchase Plan on the date of grant. We based the weighted average estimated value of RSU and OSU
grants, and rights granted under the 2006 Stock Purchase Plan, on the weighted average assumptions for each period as follows:
Dec 30,
2017
RSUs and OSUs
Dec 31,
2016
Dec 26,
2015
Dec 30,
2017
Stock Purchase Plan
Dec 31,
2016
Dec 26,
2015
Estimated values
Risk-free interest rate
Dividend yield
Volatility
Expected life (in years)
$
35.30
$
29.76
$
31.63
$
7.20
$
6.70
$
6.56
1.4%
2.9%
23%
n/a
0.9%
3.3%
23%
n/a
0.6%
2.9%
27%
n/a
1.0%
2.9%
19%
0.5
0.5%
3.2%
22%
0.5
0.1%
3.1%
25%
0.5
We base the expected volatility for rights granted under the 2006 Stock Purchase Plan on implied volatility. We base expected
volatility for OSUs on historical volatility.
FINANCIAL STATEMENTS
Notes to Financial Statements
103
RESTRICTED STOCK UNIT AWARDS
RSU activity in 2017 was as follows:
December 31, 2016
Granted
Assumed in acquisition
Vested
Forfeited
December 30, 2017
Expected to vest as of December 30, 2017
Number of
RSUs
(In Millions)
Weighted
Average
Grant-Date
Fair Value
106.8 $
45.2 $
1.1 $
(40.5) $
(12.2) $
100.4 $
96.5 $
28.99
35.30
34.90
27.52
30.08
32.36
32.36
The aggregate fair value of awards that vested in 2017 was $1.6 billion ($1.6 billion in 2016 and $1.5 billion in 2015), which
represents the market value of our common stock on the date that the RSUs vested. The grant-date fair value of awards that
vested in 2017 was $1.1 billion ($1.3 billion in 2016 and $1.1 billion in 2015). The number of RSUs vested includes shares of
common stock that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. RSUs that
are expected to vest are net of estimated future forfeitures.
As of December 30, 2017, unrecognized compensation costs related to RSUs granted under our equity incentive plans were
$2.0 billion. We expect to recognize those costs over a weighted average period of 1.3 years.
STOCK PURCHASE PLAN
The 2006 Stock Purchase Plan allows eligible employees to purchase shares of our common stock at 85% of the value of our
common stock on specific dates. Under the 2006 Stock Purchase Plan, 373 million shares of common stock are authorized for
issuance through August 2021. As of December 30, 2017, 150 million shares of common stock remained available for issuance.
Employees purchased 14.5 million shares of common stock in 2017 for $432 million under the 2006 Stock Purchase Plan
(16.5 million shares of common stock for $415 million in 2016 and 15.8 million shares of common stock for $421 million in
2015). As of December 30, 2017, unrecognized share-based compensation costs related to rights to acquire shares of common
stock under our 2006 Stock Purchase Plan totaled $13 million. We expect to recognize those costs over a period of approximately
two months.
NOTE 20: COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Leases
Portions of our real property and equipment are under operating leases that expire at various dates through 2058. Rental expense
was $264 million in 2017 ($282 million in 2016 and $253 million in 2015).
(In Millions)
2018
2019
2020
2021
2022
2023
and
thereafter
Total
Minimum rental commitments under all
non-cancelable leases1
$
215 $
186 $
162 $
136 $
105 $
441 $
1,245
1 Includes leases with initial term in excess of one year.
Other Commitments
Commitments for construction or purchase of property, plant and equipment totaled $12.1 billion as of December 30, 2017
($7.5 billion as of December 31, 2016), a substantial majority of which will be due within the next 12 months. Other purchase
obligations and commitments totaled approximately $2.7 billion as of December 30, 2017 (approximately $3.0 billion as of
December 31, 2016). Other purchase obligations and commitments include payments due under various types of licenses and
agreements to purchase goods or services, as well as payments due under non-contingent funding obligations. In addition, we
have various contractual commitments with IMFT. For further information on these contractual commitments, see “Note 9:
Investments.”
FINANCIAL STATEMENTS
Notes to Financial Statements
104
LEGAL PROCEEDINGS
We are a party to various legal proceedings, including those noted in this section. Although management at present believes that
the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position,
results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to
inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial
monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable
resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways,
precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse
impact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one or
more such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could include
substantial payments. Except as specifically described below, we have not concluded that settlement of any of the legal
proceedings noted in this section is appropriate at this time.
European Commission Competition Matter
In 2001, the European Commission (EC) commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that
we used unfair business practices to persuade customers to buy our microprocessors. We received numerous requests for
information and documents from the EC and we responded to each of those requests. The EC issued a Statement of Objections in
July 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July
2008. In May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the European
Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty)
by offering alleged “conditional rebates and payments” that required our customers to purchase all or most of their x86
microprocessors from us. The EC also found that we violated Article 82 by making alleged “payments to prevent sales of specific
rival products.” The EC imposed a fine in the amount of €1.1 billion ($1.4 billion as of May 2009), which we subsequently paid
during the third quarter of 2009, and ordered us to “immediately bring to an end the infringement referred to in” the EC decision.
The EC decision contained no specific direction on whether or how we should modify our business practices. Instead, the decision
stated that we should “cease and desist” from further conduct that, in the EC’s opinion, would violate applicable law. We took
steps, which are subject to the EC’s ongoing review, to comply with that decision pending appeal. We had discussions with the EC
to better understand the decision and to explain changes to our business practices.
We appealed the EC decision to the Court of First Instance (which has been renamed the General Court) in July 2009. The hearing
of our appeal took place in July 2012. In June 2014, the General Court rejected our appeal in its entirety. In August 2014, we filed
an appeal with the European Court of Justice. In November 2014, Intervener Association for Competitive Technologies filed
comments in support of Intel’s grounds of appeal. The EC and interveners filed briefs in November 2014, we filed a reply in
February 2015, and the EC filed a rejoinder in April 2015. The Court of Justice held oral argument in June 2016. In October 2016,
Advocate General Wahl, an advisor to the Court of Justice, issued a non-binding advisory opinion that favored Intel on a number
of grounds. The Court of Justice issued its decision in September 2017, setting aside the judgment of the General Court and
sending the case back to the General Court to examine whether the rebates at issue were capable of restricting competition. The
General Court has appointed a panel of five judges to consider our appeal of the EC’s 2009 decision in light of the Court of
Justice’s clarifications of the law. In November 2017, the parties filed initial “Observations” about the Court of Justice’s decision
and the appeal, and have been invited by the General Court to offer supplemental comments to each other’s “Observations” by
March 2018. Pending the final decision in this matter, the fine paid by Intel has been placed by the EC in commercial bank
accounts where it accrues interest.
Shareholder Derivative Litigation regarding In re High Tech Employee Antitrust Litigation
In March 2014, the Police Retirement System of St. Louis (PRSSL) filed a shareholder derivative action in the Superior Court of
California in Santa Clara County against Intel, certain current and former members of our Board of Directors, and former officers.
The complaint alleges that the defendants breached their duties to the company by participating in, or allowing, purported
antitrust violations that were alleged in a now-settled antitrust class action lawsuit captioned In re High Tech Employee Antitrust
Litigation claiming that Intel, Adobe Systems Incorporated, Apple Inc., Google Inc., Intuit Inc., Lucasfilm Ltd., and Pixar conspired to
suppress their employees’ compensation. In March 2014, a second plaintiff, Barbara Templeton, filed a substantially similar
derivative suit in the same court. In May 2014, a third shareholder, Robert Achermann, filed a substantially similar derivative action
in the same court. The court consolidated the three actions into one, which is captioned In re Intel Corporation Shareholder
Derivative Litigation. Plaintiffs filed a consolidated complaint in July 2014. In August 2015, the court granted our motion to
dismiss the consolidated complaint. The plaintiffs thereafter filed a motion for reconsideration and a motion for new trial, both of
which the court denied in October 2015. In November 2015, plaintiffs PRSSL and Templeton appealed the court’s decision. The
appeal is fully briefed, and we are waiting on a hearing date from the appellate court.
FINANCIAL STATEMENTS
Notes to Financial Statements
105
In June 2015, the International Brotherhood of Electrical Workers (IBEW) filed a shareholder derivative action in the Chancery
Court in Delaware against Intel, certain current and former members of our Board of Directors, and former officers. The lawsuit
makes allegations substantially similar to those in the California shareholder derivative litigation described above, but additionally
alleges breach of the duty of disclosure with respect to In re High Tech Employee Antitrust Litigation and that Intel’s 2013 and
2014 proxy statements misrepresented the effectiveness of the Board’s oversight of compliance issues at Intel and the Board’s
compliance with Intel’s Code of Conduct and Board of Director Guidelines on Significant Corporate Governance Issues. In October
2015, the court stayed the IBEW lawsuit for six months pending further developments in the California case. In March 2016, Intel
and IBEW entered into a stipulated dismissal pursuant to which IBEW dismissed its complaint but may re-file upon the withdrawal
or final resolution of the appeal in the PRSSL California shareholder derivative litigation.
In April 2016, John Esposito filed a shareholder derivative action in the Superior Court of California in Santa Clara County against
Intel, current members of our Board of Directors, and certain former officers and employees. Esposito made a demand on our
Board in 2013 to investigate whether our officers or directors should be sued for their participation in the events described in In re
High Tech Employee Antitrust Litigation. In November 2015, our Board decided not to take further action on Esposito’s demand
based on the recommendation of the Audit Committee of the Board after its investigation of relevant facts and circumstances.
Esposito seeks to set aside such decision, and alleges that the Board was not disinterested in making that decision and that the
investigation was inadequate. In November 2016, the court granted Intel’s motion to dismiss the case, without leave to amend. In
March 2017, plaintiff filed a motion for fees. The court denied plaintiff’s fee motion in May 2017, and entered final judgment in
this matter in June 2017. In August 2017, Esposito appealed the final judgment.
McAfee, Inc. Shareholder Litigation
On August 19, 2010, we announced that we had agreed to acquire all of the common stock of McAfee, Inc. (McAfee) for $48.00 per
share. Four McAfee shareholders filed putative class-action lawsuits in Santa Clara County, California Superior Court challenging
the proposed transaction. The cases were ordered consolidated in September 2010. Plaintiffs filed an amended complaint that
named former McAfee board members, McAfee, and Intel as defendants, and alleged that the McAfee board members breached
their fiduciary duties and that McAfee and Intel aided and abetted those breaches of duty. The complaint requested rescission of
the merger agreement, such other equitable relief as the court may deem proper, and an award of damages in an unspecified
amount. In June 2012, the plaintiffs’ damages expert asserted that the value of a McAfee share for the purposes of assessing
damages should be $62.08.
In January 2012, the court certified the action as a class action, appointed the Central Pension Laborers’ Fund to act as the class
representative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a petition with the California Court
of Appeal for a writ of mandate to reverse the class certification order; the petition was denied in June 2012. In March 2012, at
defendants’ request, the court held that plaintiffs were not entitled to a jury trial and ordered a bench trial. In April 2012, plaintiffs
filed a petition with the California Court of Appeal for a writ of mandate to reverse that order, which the court of appeal denied in
July 2012. In August 2012, defendants filed a motion for summary judgment. The trial court granted that motion in November
2012, and entered final judgment in the case in February 2013. In April 2013, plaintiffs appealed the final judgment. The California
Court of Appeal heard oral argument in October 2017, and in November 2017, affirmed the judgment as to McAfee’s nine outside
directors, reversed the judgment as to former McAfee director and chief executive officer David DeWalt, Intel, and McAfee, and
affirmed the trial court’s ruling that the plaintiffs are not entitled to a jury trial. No bench trial date has been set. Because the
resolution of pretrial motions may materially impact the scope and nature of the proceeding, and because of uncertainties
regarding theories that may be asserted at trial following the appellate court’s remand of only certain claims in the proceeding
and the extent of Intel’s responsibility, if any, with respect to such claims, we are unable to make a reasonable estimate of the
potential loss or range of losses, if any, arising from this matter. We dispute the class-action claims and intend to continue to
defend the lawsuit vigorously.
Litigation related to Security Vulnerabilities
In June 2017, a Google research team notified us and other companies that it had identified security vulnerabilities (now
commonly referred to as “Spectre” and “Meltdown”) that affect many types of microprocessors, including our products. As is
standard when findings like these are presented, we worked together with other companies in the industry to verify the research
and develop and validate software and firmware updates for impacted technologies. On January 3, 2018, information on the
security vulnerabilities was publicly reported, before software and firmware updates to address the vulnerabilities were made
widely available. Numerous lawsuits have been filed against Intel and, in certain cases, our executives and directors, in U.S. federal
and state courts and in certain courts in other countries relating to the Spectre and Meltdown security vulnerabilities.
FINANCIAL STATEMENTS
Notes to Financial Statements
106
As of February 15, 2018, 30 customer class action lawsuits and two securities class action lawsuits have been filed. The customer
class action plaintiffs, who purport to represent various classes of end users of our products, generally claim to have been harmed
by Intel’s actions and/or omissions in connection with the security vulnerabilities and assert a variety of common law and
statutory claims seeking monetary damages and equitable relief. The securities class action plaintiffs, who purport to represent
classes of acquirers of Intel stock between July 27, 2017 and January 4, 2018, generally allege that Intel and certain officers
violated securities laws by making statements about Intel’s products and internal controls that were revealed to be false or
misleading by the disclosure of the security vulnerabilities. Additional lawsuits and claims may be asserted on behalf of customers
and shareholders seeking monetary damages or other related relief. We dispute the claims described above and intend to defend
the lawsuits vigorously. Given the procedural posture and the nature of these cases, including that the proceedings are in the early
stages, that alleged damages have not been specified, that uncertainty exists as to the likelihood of a class or classes being
certified or the ultimate size of any class or classes if certified, and that there are significant factual and legal issues to be resolved,
we are unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from these matters.
In addition to these lawsuits, in January 2018, Joseph Tola, Joanne Bicknese, and Michael Kellogg each filed a shareholder
derivative action in the Superior Court of the State of California in San Mateo County against certain members of our Board of
Directors and certain officers. The complaints allege that the defendants breached their duties to Intel in connection with the
disclosure of the security vulnerabilities and the failure to take action in relation to alleged insider trading. The complaints seek to
recover damages from the defendants on behalf of Intel.
FINANCIAL STATEMENTS
Notes to Financial Statements
107
INTEL CORPORATION
FINANCIAL INFORMATION BY QUARTER (UNAUDITED)
2017 for Quarter Ended
(In Millions, Except Per Share Amounts)
Net revenue
Gross margin
Net income (loss)1
Earnings per share—Basic
Earnings per share—Diluted
Dividends per share of common stock:
Declared
Paid
Market price range common stock2:
High
Low
December 30 September 30
July 1
April 1
$
$
$
$
$
$
$
$
$
17,053 $
10,767 $
(687) $
(0.15) $
(0.15) $
16,149 $
10,057 $
4,516 $
0.96 $
0.94 $
14,763 $
14,796
9,098 $
2,808 $
0.60 $
0.58 $
9,147
2,964
0.63
0.61
— $
0.2725 $
0.5450 $
0.2725 $
— $
0.2725 $
0.5325
0.2600
47.56 $
39.04 $
38.08 $
33.46 $
37.43 $
33.54 $
37.98
35.04
2016 for Quarter Ended
(In Millions, Except Per Share Amounts)
December 31
October 1
July 2
April 2
15,778 $
13,533 $
13,702
Net revenue
Gross margin
Net income
Basic earnings per share of common stock
Diluted earnings per share of common stock
Dividends per share of common stock:
Declared
Paid
Market price range common stock1:
High
Low
$
$
$
$
$
$
$
$
$
16,374 $
10,105 $
3,562 $
0.75 $
0.73 $
— $
0.26 $
9,983 $
3,378 $
0.71 $
0.69 $
0.52 $
0.26 $
7,973 $
1,330 $
0.28 $
0.27 $
— $
0.26 $
38.10 $
33.61 $
37.75 $
32.68 $
32.99 $
29.63 $
8,130
2,046
0.43
0.42
0.52
0.26
35.44
28.22
1 In Q4 2017, we recognized a $5.4 billion higher income tax expense as a result of one-time impacts from Tax Reform.
2 All stock prices are closing prices per the Nasdaq Global Select Market.
SUPPLEMENTAL DETAILS
108
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Based on management’s evaluation (with the participation of our CEO and Chief Financial Officer (CFO)), as of the end of the
period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide
reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in U.S. Securities and Exchange Commission
(SEC) rules and forms, and is accumulated and communicated to management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the quarter ended December 30, 2017 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.
Management assessed our internal control over financial reporting as of December 30, 2017. Management based its assessment
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and
operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control
environment.
Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the
end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. We reviewed the results of
management’s assessment with the Audit Committee of our Board of Directors.
Our independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of the
company’s internal control over financial reporting, as stated in the firm’s attestation report, which is included within the
Consolidated Financial Statements.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control
over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and
operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a
control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been
detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may
become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
SUPPLEMENTAL DETAILS
109
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1.
2.
3.
Financial Statements: See “Index to Consolidated Financial Statements” within the Consolidated Financial Statements.
Financial Statement Schedule: See “Schedule II—Valuation and Qualifying Accounts” in this section of this Form 10-K.
Exhibits: The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of
this Form 10-K.
Certain of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the
agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
• may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the
agreements, which disclosures are not necessarily reflected in the agreements;
• may apply standards of materiality that differ from those of a reasonable investor; and
• were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed
circumstances.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these
representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
SUPPLEMENTAL DETAILS
110
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Years Ended
(In Millions)
Valuation allowance for deferred tax assets
December 30, 2017
December 31, 2016
December 26, 2015
Balance at
Beginning of
Year
Additions
Charged
to Expenses/
Other Accounts
Net
(Deductions)
Recoveries
Balance at
End of Year
$
$
$
953 $
701 $
595 $
237 $
261 $
190 $
(19) $
(9) $
(84) $
1,171
953
701
SUPPLEMENTAL DETAILS
111
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
Form
File Number
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
2.1†
2.2†
3.1
3.2
4.2.1
4.2.2
4.2.3
4.2.4
4.2.5
4.2.6
4.2.7
4.2.8
4.2.9
Agreement and Plan of Merger among Intel
Corporation, 615 Corporation and Altera Corporation,
dated as of May 31, 2015
Purchase Agreement, dated as of March 12, 2017, by
and among Intel Corporation, Cyclops Holdings, Inc.
and Mobileye N.V.
Intel Corporation Third Restated Certificate of
Incorporation of Intel Corporation dated May 17,
2006
Intel Corporation Bylaws, as amended and restated
on January 21, 2016
Indenture dated as of March 29, 2006 between Intel
Corporation and Wells Fargo Bank, National
Association (as successor to Citibank N.A.) (the
“Open-Ended Indenture”)
First Supplemental Indenture to Open-Ended
Indenture, dated as of December 3, 2007
Indenture for the Registrant’s 3.25% Junior
Subordinated Convertible Debentures due 2039
between Intel Corporation and Wells Fargo Bank,
National Association, dated as of July 27, 2009
Second Supplemental Indenture to Open-Ended
Indenture for the Registrant’s 1.95% Senior Notes
due 2016, 3.30% Senior Notes due 2021, and 4.80%
Senior Notes due 2041, dated as of September 19,
2011
Third Supplemental Indenture to Open-Ended
Indenture for the Registrant’s 1.35% Senior Notes
due 2017, 2.70% Senior Notes due 2022, 4.00%
Senior Notes due 2032, and 4.25% Senior Notes due
2042, dated as of December 11, 2012
Fourth Supplemental Indenture to Open-Ended
Indenture for the Registrant’s 4.25% Senior Notes
due 2042, dated as of December 14, 2012
Fifth Supplemental Indenture to Open-Ended
Indenture, dated as of July 29, 2015, between Intel
Corporation and Wells Fargo Bank, National
Association, as successor trustee
Seventh Supplemental Indenture to Open-Ended
Indenture, dated as of December 14, 2015, among
Intel Corporation, Wells Fargo Bank, National
Association, as successor trustee, and Elavon
Financial Services Limited, UK Branch, as paying agent
Eighth Supplemental Indenture to Open-Ended
Indenture, dated as of May 19, 2016, between Intel
Corporation and Wells Fargo Bank, National
Association, as successor trustee
8-K
000-06217
2.1
6/1/2015
8-K
000-06217
2.1
3/13/2017
8-K
000-06217
3.1
5/22/2006
8-K
000-06217
3.2
1/26/2016
S-3ASR
333-132865
4.4
3/30/2006
10-K
000-06217
4.2.4
2/20/2008
10-Q
000-06217
4.1
11/2/2009
8-K
000-06217
4.01
9/19/2011
8-K
000-06217
4.01
12/11/2012
8-K
000-06217
4.01
12/14/2012
8-K
000-06217
4.1
7/29/2015
8-K
000-06217
4.1
12/14/2015
8-K
000-06217
4.1
5/19/2016
SUPPLEMENTAL DETAILS
112
Exhibit Description
Form
File Number
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Exhibit
Number
4.2.10
4.2.11
4.2.12
4.2.13
4.2.14
8-K
000-06217
4.1
5/11/2017
8-K
000-06217
4.1
6/16/2017
8-K
000-06217
4.1
8/14/2017
8-K
000-06217
99.2
12/28/2015
Ninth Supplemental Indenture to Open-Ended
Indenture, dated as of May 11, 2017, between Intel
Corporation and Wells Fargo Bank, National
Association, as successor trustee
Tenth Supplemental Indenture to Open-Ended
Indenture, dated as of June 16, 2017, between Intel
Corporation and Wells Fargo Bank, National
Association, as successor trustee
Eleventh Supplemental Indenture to Open-Ended
Indenture, dated as of August 14, 2017, among Intel
Corporation, Wells Fargo Bank, National Association,
as successor trustee, and Elavon Financial Services
DAC, UK Branch, as paying agent
Twelfth Supplemental Indenture to Open-Ended
Indenture, dated as of December 8, 2017, between
Intel Corporation and Wells Fargo Bank, National
Association, as successor trustee
Guarantee dated December 28, 2015 by Intel
Corporation in favor of U.S. Bank, National
Association, as Trustee for the holders of Altera’s
1.750% Senior Notes due 2017, 2.500% Senior Notes
due 2018 and 4.100% Senior Notes due 2023
Certain instruments defining the rights of holders of
long-term debt of Intel Corporation are omitted
pursuant to Item 601(b)(4)(iii) of Regulation S-K. Intel
Corporation hereby agrees to furnish to the Securities
and Exchange Commission, upon request, copies of
such instruments.
10.1††
Intel Corporation 2006 Equity Incentive Plan, as
amended and restated, effective May 18, 2017
10-Q
000-06217
10.1
7/27/2017
10.1.2††
Form of Notice of Grant—Restricted Stock Units
10-Q
000-06217
10.3
8/3/2009
10.1.3††
10.1.4††
10.1.5††
10.1.6††
10.1.7††
Intel Corporation 2006 Equity Incentive Plan
Standard Terms and Conditions Relating to Restricted
Stock Units Granted on or after April 22, 2014 (under
the Non-Management Committee Member Restricted
Stock Unit Program)
Intel Corporation Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs
granted on or after January 23, 2015 under the
Executive RSU program)
Intel Corporation Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs
granted to executives with annual vesting over 3
years)
Intel Corporation Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs
granted to executives with quarterly vesting over 2
years)
Intel Corporation Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs
granted on or after January 23, 2015 under the
Executive OSU program)
10-Q
000-06217
10.3
4/27/2015
10-K
000-06217
10.1.27
2/17/2017
10-Q
000-06217
10.4
4/27/2015
X
X
X
SUPPLEMENTAL DETAILS
113
Exhibit
Number
10.1.8††
10.1.9††
10.1.10††
10.1.11††
10.2††
10.3††
10.4††
10.5††
10.6††
10.7††
10.8
10.9†††
10.10††
10.11††
10.12††
Exhibit Description
Intel Corporation Restricted Stock Unit Agreement
under the 2006 Equity Incentive Plan (for RSUs
granted on or after February 1, 2017 under the
Executive OSU program)
Intel Corporation Non-Employee Director Restricted
Stock Unit Agreement under the 2006 Equity
Incentive Plan (for RSUs granted on or after
January 23, 2015 under the Director RSU program)
Intel Corporation Non-Employee Director Restricted
Stock Unit Agreement under the 2006 Equity
Incentive Plan (for RSUs granted on or after
January 23, 2015 under the Director OSU program)
Intel Corporation Non-Employee Director Restricted
Stock Unit Agreement under the 2006 Equity
Incentive Plan (for RSUs granted on or after
February 1, 2017 under the Director OSU program)
Intel Corporation 2006 Stock Purchase Plan, as
amended and restated, effective January 1, 2017
Intel Corporation 2014 Annual Performance Bonus
Plan (amended and restated, effective January 1,
2014)
Form of Indemnification Agreement with Directors
and Executive Officers
Form of Indemnification Agreement with Directors
and Executive Officers (for Directors and Executive
Officers who joined Intel after July 1, 2016)
Intel Corporation Sheltered Employee Retirement
Plan Plus, as amended and restated, effective
January 1, 2009
Intel Corporation 2006 Deferral Plan for Outside
Directors, effective November 15, 2006
Settlement Agreement Between Advanced Micro
Devices, Inc. and Intel Corporation, dated
November 11, 2009
Patent Cross License Agreement between NVIDIA
Corporation and Intel Corporation, dated January 10,
2011
Offer Letter by and between Intel Corporation and
Dr. Venkata S.M. “Murthy” Renduchintala dated
November 17, 2015
Offer Letter by and between Intel Corporation and
Robert H. Swan dated September 15, 2016
Confidential Retirement Agreement and General
Release of Claims between Intel Corporation and
Diane M. Bryant dated November 29, 2017
10.13††
Retention Letter between Intel Corporation and Navin
Shenoy dated December 12, 2017
12.1
21.1
23.1
Statement Setting Forth the Computation of Ratios of
Earnings to Fixed Charges
Intel Corporation Subsidiaries
Consent of Ernst & Young LLP, Independent
Registered Public Accounting Firm
SUPPLEMENTAL DETAILS
Incorporated by Reference
Form
10-Q
File Number
Exhibit
Filing Date
000-06217
10.1
4/27/2017
Filed or
Furnished
Herewith
10-Q
000-06217
10.1
4/27/2015
10-Q
000-06217
10.2
4/27/2015
10-Q
000-06217
10.2
4/27/2017
10-K
000-06217
10.7.5
2/17/2017
10-K
000-06217
10.9.2
2/14/2014
10-K
000-06217
10.15
2/22/2005
10-Q
000-06217
10.2
10/31/2016
S-8
333-172024
99.1
2/2/2011
10-K
000-06217
10.41
2/26/2007
8-K
000-06217
10.1
11/12/2009
8-K
000-06217
10.1
1/10/2011
10-K
000-06217
10.14
2/12/2016
10-Q
000-06217
10.1
10/31/2016
X
X
X
X
X
114
Exhibit Description
Form
File Number
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Exhibit
Number
31.1
31.2
32.1
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended (the Exchange Act)
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) of the Exchange Act
Certification of the Chief Executive Officer and the
Chief Financial Officer pursuant to Rule 13a-14(b) of
the Exchange Act and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
99.1
Supplement to Present Required Information in
Searchable Format
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
XBRL Taxonomy Extension Calculation Linkbase
Document
XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Document
X
X
X
X
X
X
X
X
X
X
†
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Intel agrees to furnish supplementally a copy of
any such schedule or exhibit to the SEC upon request.
†† Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
††† Portions of this exhibit have been omitted pursuant to an order granting confidential treatment.
SUPPLEMENTAL DETAILS
115
FORM 10-K CROSS-REFERENCE INDEX
Item Number
Part I
Item 1.
Item
Business:
General development of business
Financial information about segments
Narrative description of business
Financial information about geographic areas
Available information
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition
and Results of Operations:
Results of operations
Liquidity
Capital resources
Off balance sheet arrangements
Contractual obligations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Pages 3-6
Pages 19-33, 75-76
Pages 3-15, 19-33, 43-45, 74-76
Pages 11, 48, 76, 77
Page 56
Pages 46-53
Not applicable
Pages 11, 55
Pages 105-107
Not applicable
Pages 7, 41, 56
Page 42
Pages 15-35
Pages 35-37
Pages 35-37
(a)
Pages 38-39
Pages 39-40
Pages 57-108
Not applicable
Page 109
Not applicable
Page 12, (b)
(c)
(d)
(e)
(f)
Pages 110-115
Not applicable
Page 117
(a) As of December 30, 2017, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K.
(b)
(c)
(d)
(e)
(f)
Incorporated by reference to “Proposal 1: Election of Directors,” “Corporate Governance,” “Code of Conduct,” and “Other Matters-Section
16(a) Beneficial Ownership Reporting Compliance” in the 2018 Proxy Statement. The information under the heading “Executive Officers of
the Registrant” within Fundamentals of Our Business is also incorporated by reference in this section.
Incorporated by reference to “Director Compensation,” “Compensation Discussion and Analysis,” “Report of the Compensation
Committee,” and “Executive Compensation” in the 2018 Proxy Statement.
Incorporated by reference to “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan
Information” in the 2018 Proxy Statement.
Incorporated by reference to “Corporate Governance” and “Certain Relationships and Related Transactions” in the 2018 Proxy Statement.
Incorporated by reference to “Report of the Audit Committee” and “Proposal 2: Ratification of Selection of Independent Registered Public
Accounting Firm” in the 2018 Proxy Statement.
SUPPLEMENTAL DETAILS
116
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTEL CORPORATION
Registrant
By:
/S/ ROBERT H. SWAN
Robert H. Swan
Executive Vice President, Chief Financial Officer and
Principal Financial Officer
February 16, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ BRIAN M. KRZANICH
/s/ ROBERT H. SWAN
Brian M. Krzanich
Chief Executive Officer, Director and Principal Executive
Officer
February 16, 2018
Robert H. Swan
Executive Vice President, Chief Financial Officer and Principal
Financial Officer
February 16, 2018
/s/ KEVIN T. MCBRIDE
Kevin T. McBride
Vice President of Finance, Corporate Controller and Principal
Accounting Officer
February 16, 2018
/s/ CHARLENE BARSHEFSKY
Charlene Barshefsky
Director
February 16, 2018
/s/ ANEEL BHUSRI
Aneel Bhusri
Director
February 16, 2018
/s/ ANDY D. BRYANT
Andy D. Bryant
Chairman of the Board and Director
February 16, 2018
/s/ REED E. HUNDT
Reed E. Hundt
Director
February 16, 2018
/s/ OMAR ISHRAK
Omar Ishrak
Director
February 16, 2018
/s/ DR. TSU-JAE KING LIU
Dr. Tsu-Jae King Liu
Director
February 16, 2018
/s/ DAVID S. POTTRUCK
David S. Pottruck
Director
February 16, 2018
/s/ GREGORY D. SMITH
Gregory D. Smith
Director
February 16, 2018
/s/ ANDREW WILSON
Andrew Wilson
Director
February 16, 2018
/s/ FRANK D. YEARY
Frank D. Yeary
Director
February 16, 2018
/s/ DAVID B. YOFFIE
David B. Yoffie
Director
February 16, 2018
SUPPLEMENTAL DETAILS
117
EXECUTIVE OFFICERS
Andy D. Bryant
Chairman of the Board
Brian Krzanich
Chief Executive Officer
Dr. Venkata S.M. “Murthy” Renduchintala
Executive Vice President
Group President, Client and Internet of Things
Businesses and Systems Architecture Group
Chief Engineering Officer
Navin Shenoy
Executive Vice President
General Manager, Data Center Group
Robert H. Swan
Executive Vice President
Chief Financial Officer
For additional listing of Intel senior management,
please visit: www.intel.com/newsroom/bios
CORPORATE DIRECTORY**
BOARD OF DIRECTORS
Ambassador Charlene Barshefsky5†
Senior International Partner
Wilmer Cutler Pickering Hale and Dorr LLP
Aneel Bhusri3† 4†
Co-Founder and Chief Executive Officer
Workday, Inc.
Andy D. Bryant4
Chairman of the Board
Reed E. Hundt1 2
Principal
REH Advisors, LLC
Omar Ishrak2
Chairman and Chief Executive Officer
Medtronic plc
Brian M. Krzanich4
Chief Executive Officer
Risa Lavizzo-Mourey
Professor
University of Pennsylvania
Tsu-Jae King Liu1 5
Professor and Vice Provost
Academic and Space Planning
University of California, Berkeley
David S. Pottruck2† 4
Chairman and Chief Executive Officer
Red Eagle Ventures, Inc.
Gregory D. Smith1† 5
Chief Financial Officer
Executive Vice President,
Enterprise Performance and Strategy
The Boeing Company
Andrew Wilson
Chief Executive Officer
Electronic Arts, Inc.
Frank D. Yeary1 3†
Executive Chairman
CamberView Partners, LLC
David B. Yoffie2 3
Professor
Harvard Business School
1 Member of Audit Committee
2 Member of Compensation Committee
3 Member of Corporate Governance and Nominating Committee
4 Member of Executive Committee
5 Member of Finance Committee
† Committee Chair or Co-Chair
** As of March 14, 2018
INVESTOR INFORMATION
Intel on Nasdaq
Intel’s common stock trades on the Nasdaq Global Select Market* under the symbol INTC.
Investor materials
Intel’s Investor Relations website contains background on our company and our products, financial information, investor
presentations, frequently asked questions, and our online annual report, as well as other useful information such as news releases
and information on corporate governance practices and corporate responsibility. For investor information, including additional
copies of our annual report/10-K, 10-Qs, or other financial literature, visit our website at www.intc.com or call Intel at
(408) 765-1480 (U.S.); (44) 1793 403 000 (Europe); (852) 2844 4555 (Hong Kong); (81) 3 5223 9100 (Japan).
Direct stock purchase plan
Intel’s Direct Stock Purchase and Dividend Reinvestment Plan allows stockholders to reinvest dividends and purchase Intel
common stock on a weekly basis. For more information, contact Intel’s transfer agent, Computershare Trust Company, N.A., by
phone at (800) 298-0146 (U.S. and Canada) or (781) 575-2879 (worldwide), or by e-mail though Computershare’s website at
www.computershare.com/contactus.
Transfer agent and registrar
Computershare Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233
U.S. Stockholders may call (800) 298-0146 (U.S. and Canada) or (781) 575-2879 (worldwide), or send e-mail through
Computershare’s website at www.computershare.com/contactus with any questions regarding the transfer of ownership of Intel
stock.
Independent registered public accounting firm
Ernst & Young LLP, San Jose, California, U.S.
About Intel
You know us for our processors. But we do so much more. Intel invents at the boundaries of technology to make amazing
experiences possible for business and society, and for every person on Earth.
Harnessing the capability of the cloud, the ubiquity of the Internet of Things, the latest advances in memory and programmable
solutions, and the promise of always-on 5G connectivity, Intel is disrupting industries and solving global challenges. Leading on
policy, diversity, inclusion, education, and sustainability, we create value for our stockholders, customers, and society.
Corporate governance and corporate responsibility
Intel is committed to the highest standards of business ethics and corporate governance. The Intel Code of Conduct guides the
actions of our employees, officers, non-employee directors, wholly owned subsidiaries, and suppliers, ensuring consistent and
uncompromising integrity as we build trusted relationship around the world. For more information about our corporate
governance practices, read our latest Proxy Statement or visit www.intel.com/governance.
As a global technology and business leader, we are committed to doing the right things, the right way. We set ambitious goals and
make strategic investments to drive improvements in environmental sustainability, supply chain responsibility, diversity and
inclusion, and social impact that benefit the environment and society. We believe that our integrated approach to corporate
responsibility creates value for Intel and our stockholders by helping us mitigate risks, reduce costs, build brand value, and
identify new market opportunities. Intel’s annual Corporate Responsibility Report outlines our strategic priorities and performance
on a range of environmental, social, and governance factors. The report and supporting materials are available at www.intel.com/
responsibility.
Intel, Intel Core, the Intel logo, Intel. Experience What’s Inside, and the Intel. Experience What’s Inside logo are trademarks of Intel
Corporation in the U.S. and/or other countries. © 2018 Intel Corporation. All rights reserved.
* Other names and brands may be claimed as the property of others.
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www.intel.comNews and information about Intel® products and technologies, customer support, careers, worldwide locations, corporate responsibility and sustainability, and more. www.intc.comStock information, earnings and conference webcasts, annual reports, and corporate governance and historical financial information. TMIntel Corporation | 2017 Annual Report