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US Semiconductor Industry

US Semiconductor Industry. Vincent Gee - Andy Kong - Mark Wong. Agenda. Technology overview Industry Overview Industry information Industry trends and outlook Company Analysis Intel (INTC) Advanced Micro Devices (AMD) Applied materials (AMAT). Technology Overview.

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US Semiconductor Industry

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  1. US Semiconductor Industry Vincent Gee - Andy Kong - Mark Wong

  2. Agenda • Technology overview • Industry Overview • Industry information • Industry trends and outlook • Company Analysis • Intel (INTC) • Advanced Micro Devices (AMD) • Applied materials (AMAT)

  3. Technology Overview

  4. What is a Semiconductor? • A semiconductor is a substance, usually a solid chemical element or compound, that can conduct electricity under some conditions but not others, making it a good medium for the control of electrical current. • The most common semiconductor materials are silicon and germanium.

  5. How is a Semiconductor Made?

  6. What are Semiconductors Used For? • Integrated Circuits • 89.7% of market • CPU and PC memory (DRAM, SRAM, Flash Memory) • Discrete Devices • Transistors, diodes, resistors • Optoelectrics • LED, Optical coupler, laser diode

  7. What are Semiconductors Used For? • Worldwide semiconductor product breakdown

  8. Industry Overview

  9. Industry Characteristics • Short life cycles • Continuous innovation • Moore’s law: The number of transistors in an integrated circuit doubles every 18 months

  10. Growth of Computation Power

  11. Industry Characteristics • High Research and Development Costs • R&D is vital to maintaining competitive advantage • R&D enables firms to release competitive products

  12. Industry Characteristics • The sector is highly cyclical with peaks (2000) closely followed by troughs (2001). • While there are numerous strong competitors in this sector, over 64% of the sector remains relatively fragmented. • Intel leads the semiconductor sector, generating $28 billion in revenues, giving the company a 17% sector share.

  13. Industry Characteristics • Where are Semiconductors Used?

  14. Annual Sales

  15. 2004 Recap • Market Value • The global semiconductors industry sector grew by 28% in 2004 to reach a value of $213 billion. • Market Value Forecast • In 2008 the global semiconductors industry sector is forecast to have a value of $314 billion, an increase of 87.1% since 2003.

  16. 2004 Recap • Market Segmentation I • By far the leading source of revenue for the semiconductors industry sector is the IC segment, which generates 89.7% of the sector's value. • Market Segmentation II • The largest market globally for the semiconductors industry sector is the Asia-Pacific region, which generates 56.8% of the sector's value. • Market Share • The leading company in the semiconductors industry sector is Intel, which generates 16.7% of the sector's value.

  17. Industry Leaders

  18. Industry Stock Performance • Chart: Weekly semiconductors vs SP500

  19. Industry Outlook • Opportunities • Expansion into Asia • Multi-core processors • Network products (wired and wireless) • Mobile products • Laptops • Personal Digital Assistants (PDAs) • Cellphones

  20. Industry Outlook • Increasing Foreign Consumption (sales)

  21. Estimated Future Growth • PC industry • Projected 14% growth • Technological advancement • Telecommunication • Projected 14 % growth • Increase use of wireless telecom products • Consumer products • Projected 30% growth • Increase use of digital technology

  22. Estimated Future Growth

  23. Company Analysis

  24. Intel Corporation Presented by: Mark Wong

  25. History • Incorporated in California in 1968 • Initially supplied DRAM and EPROMS • Success of memory chip sales funded the microprocessor development • Processor Timeline

  26. Company Overview • Mission statement: “ Do a great job for our customers, employees and stockholders by being the preeminent building block supplier to the worldwide digital economy. ”

  27. Recent Developments • March 2005: Intel Corporation Raises Low End of Q1 2005 Revenue Guidance Above Analysts' Estimates • February 2005: Intel Corporation Desktop Processors Get 64-Bit Support

  28. Recent Developments • January 2005: Intel Corporation Announces New Centrino Mobile Technology • January 2005: Intel Corporation Restructures Into Five Units

  29. Recent Developments • November 2004: Intel Corporation Board Elects Paul Otellini Intel Chief Executive Officer; Craig Barrett to Become Intel Chairman • November 2004: Intel Corporation Doubles Cash Dividend and Authorizes Repurchase of 500 Million Shares of Intel Common Stock

  30. Recent Developments • September 2004: Intel Corporation Invests in Five Companies Developing Technologies for the Digital Home • March 2004: Intel Corporation May Cut China Sales Due To Rule

  31. Management Andrew Grove (Chairman) • Founder (1968) Craig Barret (CEO) • Joined Intel in 1974. Voted into BOD in 1992. Paul Otellini (President and COO) • Joined Intel in 1974, became president in 2002. Andy Bryant (Executive VP, CFO) • Joined Intel in 1981. Became CFO in 1994.

  32. Business Segments and Products • Primary lines of busines: • Intel Architecture Business • Intel Communications Group

  33. Business Segments and Products • Intel Architecture Business • Microprocessors • Desktop Platform Pentium 4 • Mobile Platform Pentium M • Enterprise Platform Xeon • Chipsets • Intel chipsets are compatible with variety of industry-accepted specifications • Motherboard products

  34. Business Segments and Products • Intel Communications Group • Flash memory • Wired and wireless connectivity products • Processors for handheld computing devices • Cellular baseband chipsets

  35. Major Customers • Distributors • Original Equipment Manufacturers of computer systems • Retail

  36. Competitors • Intel Architecture Business • Advanced Micro Devices (Desktop, mobile platform) • IBM (Desktop, mobile platform) • ATI, Broadcom, SIS, Via (Chipsets) • Nvidia, ATI (Chipsets/Motherboards) • Transmeta (Mobile platform) • Sun Microsystems (Enterprise platform)

  37. Competitors • Intel Communications Group • Samsung, TI (Application processors) • Spanshion (falsh memory) • Qualacom (Cellular baseband chips)

  38. Strategy • Strategy • Utilize core competencies to develop advanced products • Exercise control over value chain • Utilize “Intel inside” marketing campaign • Expand into faster growing complementary businesses • Invest in companies globally to further strategic objectives (Intel Capital program) • Objectives: • Extend silicon leadership and manufacturing capability • Deliver architectural innovation for all platforms • Pursue worldwide opportunities

  39. Financial Overview

  40. Financial Overview

  41. Financial Statement Analysis

  42. Segment Performance

  43. Options

  44. Options

  45. Fundamental Information

  46. Management Effectiveness

  47. Stock Buyback

  48. Price History – 52 Weeks

  49. Price History vs. SOX – 52 Weeks

  50. Price History – 10 Years

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