We sell our products primarily to OEMs, ODMs, and cloud service providers. 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 other 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 4:3: Operating Segments" within the Consolidated Financial Statements.
Our products are sold through distribution channels 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. Because our customers generally order from us on a purchase order basis, they can typically cancel, change, or delay product purchase commitments with little or no notice to us and without penalty. 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.
In accordance with contract terms, revenue for product sales is recognized at the time of product shipment from our facilities or delivery to the customer location, as determined by the agreed-uponagreed upon shipping terms. Our standard terms and conditions of sale typically provide that payment is due at a later date, usually 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 tocan exchange certain products based on the number of qualified purchases made by the distributor.
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.
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. In 2021, continued strong COVID-driven notebook demand in the first half of the year contributed to a flatter trend than we historically observe.
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 our products. Our key messaging focuses on increased performance, improved energy efficiency, and other capabilities such as connectivity and communications.
CRITICAL ACCOUNTING ESTIMATESWe 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.
The methods, assumptions,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 estimatesthe 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 equity securities had a carrying amount of $4.1 billion as of December 25, 2021 ($3.3 billion as of December 26, 2020) and includes our investment in Beijing Unisoc Technology Ltd. of $1.1 billion ($658 million as of December 26, 2020).
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 applying our accounting policies may require us to apply judgments regarding mattersthese hedging programs. In addition, we have sourcing plans in place that are inherently uncertain. We consider an accounting policydesigned to be a critical estimate if: (1) we must make assumptions that were uncertain whenmitigate the judgment was made, and (2) changes in the estimate assumptions, or selectionrisk of a different estimate methodology, could have a significant impact onpotential supplier concentration for our financial position andkey commodities.
Risk Factors
When any one or more of 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:
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• | Inventories—the transition of manufacturing costs to inventory, excluding factory excess capacity costs. Inventory reflected at the lower of cost or net realizable value considering future demand and market conditions;
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• | 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;
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• | Non-marketable equity investments—the valuation estimates and assessment of impairment and observable price adjustments; and
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• | Loss contingencies—the estimation of when a loss is probable and reasonably estimable.
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RISK FACTORS
The following risks could materially and adversely affectmaterialize from time to time, our business, reputation, financial condition, cash flows, and results of operations can be materially and adversely affected, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations couldcan 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 in the MD&A and our Consolidated Financial Statements and the related notes.Supplemental Details sections.
CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS.Changes in product demand can adversely affect our financial results.
Demand for our products is variable and hard to predict.Our products are used in different market segments, and demand for our products varies within or among the market segments served by our PC-centric and data-centric businesses.them. It is difficult to forecast these changes and their impact. For example, we expect the PC TAM to grow over time driven by factors such as a larger installed base, new platforms, shorter replacement cycles, and adoption in new markets; however, the PC industry has been highly cyclical in the first half of 2019, customers of our DCG business worked through inventorypast, and absorbed computing capacity purchased in 2018, leadingthese growth expectations may not materialize or we may fail to a year over year decline in DCG platform revenue in the first half, followed by growth in DCG platform demand and revenue in the second half of 2019.capitalize on them. Changes in the demand for our products, particularly our CCG and DCG platform products, can reduce our revenue, lower our gross margin, or require us to write down the value of our assets.
Important factors that lead to variation in the demand for our products include:
▪business conditions, including downturns in the market segments in which we operate, or in the global or regional economies;
▪consumer confidence, or income levels, and the levels of customer capital spending, which maycan be impacted by changes in market conditions, including changes in government borrowing taxation, or spending, policies;taxation, interest rates, the credit market;market, current or expected inflation, employment, and energy or other commodity prices;
▪geopolitical conditions, including trade policies;
▪our ability to timely introduce competitive products;
▪competitive and pricing pressures, including new product introductions and other actions taken by competitors;
▪the level of our customers’customers' inventories and computing capacity;
▪customer order patterns includingand order cancellations, which can be affected byincluding as a result of maturing product cycles for our products, customers’customers' products, and related products such as operating system upgrade cycles; and disruptions affecting customers;customers, such as the ongoing industry substrate and other factors;component shortages that negatively impacted demand across several of our businesses in 2021;
▪market acceptance and industry support of our new and maturing products, including the introduction and availability of software and other products used together with our products; and
▪customer product needs and emerging technology trends, including changes in the levels and nature of customer and end-user computing workloads.
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Due to the complexity of our manufacturing operations, we are not always able 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. To the extent 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. To the extent 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. As we make substantial investments in increasing our manufacturing capacity as part of our IDM 2.0 strategy, these underutilization risks may be heightened. Conversely, to the extent productat times demand increases or we fail to forecast accurately andor produce the mix of products demanded,demanded. To the extent we may beare unable to add capacity or increase production fast enough, we are at times required to make production decisions and/or are unable to fully meet market demand, which can result in a loss of revenue opportunities or market share, legal claims, and/or damage to customer relationships. For example,
Our IDM 2.0 investments in capacity and our process technology roadmap will require capital expenditures above our historical levels, and if demand for our IFS business grows rapidly, we have been experiencinganticipate that we would need to accelerate our planned investments to meet that demand. To the extent we do not generate expected cash flows, we may be required to increase our use of external funding sources to fund our investments and operations, which may not be available on favorable terms or at all. There is legislation under consideration in the US and EU to provide government funding for semiconductor manufacturing expansions in those regions, but there can be no assurance that such funding will be enacted, and there is uncertainty as to the amounts and timing of funding we may receive and as to any restrictions on recipients. To the extent such funding is below our expectations, our anticipated cash requirements would increase. Our construction projects to expand capacity require available sources of labor, materials, and equipment. Increasing demand for such sources, including from other foundries; supply constraints, labor shortages, and have been prioritizing production ofother adverse market conditions; issues with permits or approvals; and other construction issues arise from time to time and can result in significant delays and increased costs for our server and high-performance PC products, which during 2019 contributed to loss of share in the value end of the PC market, where we were short of supply while demand remained healthy.projects.
We face significant competition.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 and end-user needs, expectations, and preferences; and frequent product introductions and improvements. IfWhen we do not anticipate andor respond to these developments, our competitive position can weaken, and our products or technologies can become uncompetitive or obsolete. Our competitive environment has intensified, and we expect it to continue to do so in the future.
Our products primarily compete based on performance, energy efficiency, integration, ease-of-use, innovative design, features, workload optimization, price, quality, reliability, security, software ecosystem and developer support, time-to-market, reliable product roadmap execution, brand recognition, customer support and customization, and availability. The importance of these factors varies by product—forproduct and market segment. For example, performance is a key competitive factor forour competitors have introduced data center platform products, and failure to introduce newclient platform products with performance advantages can harmimprovements and additional processor core counts that have contributed to an increasingly competitive environment. In our competitive positionIOTG business, for example, interoperability, connectivity, safety, security, industrial use conditions, and market segment share in our DCG business. For our memory products, price, density, and non-volatilitylong-life support are among the most importantkey competitive factors. We will not realize our strategic goal to becomeTo the leading end-to-end provider for the new data world ifextent our products do not meet our customers’customers' requirements across these factors in an increasingly competitive landscape.landscape, our business and results of operation can be harmed.
We face intense competition across our product portfolio from companies offering platform products, such as AMD and Qualcomm; accelerator products such as GPUs, including those offered by NVIDIA; other accelerator products such as ASICs, application-specific standard products, and FPGAs; memory and storage products; connectivity and networking products; and other semiconductor products. Some of these competitors have developed or utilize competing computing architectures and platforms, for specific market segments or applications, such as the ARM*ARM architecture, and these architectures and platforms can produce beneficial network effects for competitors when an ecosystem of customers and application developers for such architectures and platforms grows at scale. For example, ARM-based products are being used in PCs and servers, which could lead to further development and growth of the ARM ecosystem. We also compete with internally developed semiconductors from OEMs, cloud service providers, and others, includingsome of whom are customers. Some of these customers vertically integrate their own semiconductor designs with their software assets and/or customize their designs for specific computing workloads. For example, in 2020, Apple introduced PC products utilizing its own internally developed ARM-based semiconductor designs in place of our client CPUs, and we face increasing competition from Apple's products and ecosystem.
Most of our competitors rely on third-party foundries, such as Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC) or Samsung Electronics Co., Ltd., and subcontractors for manufacture and assembly and test of their semiconductor components and products. Manufacturing process improvements introduced by TSMC have contributed, and may continue to contribute, to increasingly competitive offerings by our competitors. While we have set out a process technology roadmap to attain future process performance-per-watt parity and leadership relative to TSMC, our plans are subject to a number of risks and we could fail to realize our goals, including due to changes in competitor technology roadmaps, changes affecting our projections regarding our technology or competing technology, and the risks described in the section "We are vulnerable to product and manufacturing-related risks." As an IDM, we have higher capital expenditures and R&D spending than many of our “fabless”"fabless" competitors. We also face new sources of competition as a result of changes in industry participants through, for example, acquisitions or business collaborations, as well as new entrants, including in China, which could have a significant impact on our competitive position. For example, we could face increased competition as a result of China's programs to promote a domestic semiconductor industry and supply chains.
Introduction of competitive new products and technologies, aggressive pricing, and other actions taken by competitors can harm demand for our products, exert downward pricing pressure on our products, and adversely affect our business. For example, our DCG revenue and platform ASPs were negatively impacted by the competitive environment during 2021. Additionally, a number of business combinations and strategic partnerships in the semiconductor industry have occurred over the last several years, and more could occur in the future. For example, in 2020, NVIDIA announced an agreement to acquire ARM Holdings plc, and AMD announced an agreement to acquire Xilinx, Inc. Consolidation could also lead to fewer customers, partners, or suppliers, any of which could negatively affect our financial results.
To compete successfully, we must maintain a successful R&D effort, develop new products and production processes, and improve our existing products and processes, all ahead of competitors. We are focusing our R&D efforts across six engineering pillars: process technology, architecture, memory, interconnect, security, and software. These include ambitious initiatives, such as our unified oneAPI portfolio of developer tools, and we cannot guarantee that all of these efforts will deliver the benefits we anticipate. For example, to the extent we do not timely introduce new manufacturing process technologies that improve transistor density with sufficient manufacturing yields and operational efficiency, relative to competing foundry processes, we can face cost and product performance disadvantages. Similarly, to the extent our R&D efforts do not timely produce semiconductor designs for our platform products with improvements in areas like performance, performance per watt, die utilization, and core counts, and with new features such as optimizations for AI and other workloads, our competitive position can be harmed.
We do not expect all of our R&D investments to be successful. Some of our efforts to develop and market new products fail, and the products and technologies we invest in and develop are not always well received by customers, who may adopt competing technologies. We make significant investments in R&D, and our investments at times do not contribute to our future operating results for several years, if at all, and such contributions at times do not meet our expectations or even cover the costs of such investments.
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.
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Our investments in new businesses, products, and technologies are inherently risky and do not always succeedsucceed. . In recent years, in connection with our strategic transformation to a data-centric company, weWe have entered new areas and introduced adjacentnew products in programmable solutions, AI, and autonomous driving. We alsoservices as we seek to capitalize on the opportunities presented by ubiquitous computing, cloud to edge infrastructure, pervasive connectivity, and AI. In recent years, we have expanded our adjacent product offerings in client computing, the data center, the Internet of Things, and memory, with offeringsareas such as modems,discrete GPUs, mobility solutions, AI accelerators, IPU products, silicon photonics solutions, and Intel® Optane™ Optane technology products, andproducts. As part of our IDM 2.0 strategy, we have made investmentsannounced plans to become a major provider of foundry capacity to manufacture semiconductors for others, establishing IFS. IFS faces competition from well-established competitors such as TSMC and Samsung, and to succeed, we will need to compete effectively across factors such as availability and time-to-market of manufacturing technology; advances in discrete graphicsmanufacturing processes in areas such as performance, performance per watt, and networking infrastructure products. These effortsdensity; manufacturing capacity; price; ease of use; quality; yields; customer satisfaction; and ecosystem support. Our "big bets" are inherently risky and are not always successful. In AprilFor example, in 2019, we announced that we would be exitingexited the 5G smartphone modem business, one of our prior big bets, based on our determination that there was no clear path to profitability for the business, and in November 2019, we completed the sale of the majority of our smartphone modem business.
These new and developing areas and products represent a significant portion of our expanded TAM,revenue growth opportunity, and they also introduce new sources of competition, including, in certain of these market segments,some cases, incumbent competitors with established technologies, ecosystems, and customer bases, lower prices or costs, and greater brand recognition. These developing products and market segments require significant investment, do not always grow as significantly as projected or at all, or sometimes utilizeadopt competing technologies, that are different from the ones that we develop and manufacture, and we may not realize an adequate return on our investments. For example, AI and machine learning are increasingly driving innovations in technology, but if theywe fail to deliver the benefits anticipated,develop leading products for these workloads, or if our customers use competing technologies, for these workloads, we may not realize a return on our investments in these areas. Similarly, while we see significant opportunity in networking infrastructure and the distribution of computing to the network edge, we expect intense competition for this opportunity and may not succeed in our efforts. 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, time-to-market,segments and energy efficiency of our products, as well as expand our software capabilities to provide customers with comprehensive computing solutions. Some of these new businesses face challenging market conditions. For example, market pricing for NAND memory products has been, and may continue to be, highly volatile, and NAND pricing pressure led to an operating loss forimprove our NSG business in 2019.offerings. 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 or realize an adequate return on our investments, which could lead to impairment of assets and restructuring charges.charges, as well as opportunity costs.
Changes in the mix of products sold can materially impact our financial results.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. Our adjacent products also typically have significantly lower margins than our higher-priced platform products.products, and at times are not profitable. To the extent demand shifts from our higher-priced to lower-priced platform products in any of our market segments, or our adjacent products represent an increasinglya greater share of our mix of products sold, our gross margin percentage may decrease.
WE OPERATE GLOBALLY AND ARE SUBJECT TO SIGNIFICANT RISKS IN MANY JURISDICTIONS.
Global or regional conditions can 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 are concentrated in one or more geographic areas. Moreover, sales outside the U.S. accounted for approximately 78% of our revenue for the fiscal year ended December 28, 2019, with revenue from billings to China, including Hong Kong, contributing approximately 28% of our total revenue. As a result, our operations and our financial results, including our ability to manufacture, assemble and test, design, develop, or sell products, and the demand for our products, are at times adversely affected by a number of global and regional factors outside of our control.
Adverse changes in global or regional economic conditions, including recession or slowing growth, changes or uncertainty in fiscal, monetary, or trade policy, higher interest rates, tighter credit, inflation, lower capital expenditures by businesses including on IT infrastructure, increases in unemployment, and lower consumer confidence and spending, periodically occur and can significantly harm demand for our products and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. An economic downturn or increased uncertainty may also lead to increased credit and collectability risks, higher borrowing costs or limits on our access to capital markets, reduced liquidity, adverse impacts on our suppliers, failures of counterparties and other financial institutions, and declines in the value of our financial instruments.
International trade disputes at times result in increased tariffs, trade barriers, and other protectionist measures that can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders. Increasing protectionism and economic nationalism may lead to further changes in trade policy, domestic sourcing initiatives, or other formal and informal measures that could make it more difficult to sell our products in, or restrict our access to, some markets.
Escalating trade tensions between the U.S. and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of our products, and have affected customer ordering patterns. The U.S. has imposed restrictions on the export of U.S.-regulated products and technology to certain Chinese technology companies, including certain of our customers. These restrictions have reduced our sales, and continuing or future restrictions could adversely affect our financial results, result in reputational harm to us due to our relationship with such companies, or lead such companies to develop or adopt technologies that compete with our products. It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions. For example, U.S. legislation has expanded the power of the U.S. Department of Commerce to restrict the export of “emerging and foundational technologies” yet to be identified, which could impact our current or future products.
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Trade disputes and protectionist measures, or continued uncertainty about such matters, could result in declining consumer confidence and slowing economic growth or recession, and could cause our customers to reduce, cancel, or alter the timing of their purchases with us. Sustained trade tensions could lead to long-term changes in global trade and technology supply chains, which could adversely affect our business and growth prospects.
We can be adversely affected by other global and regional factors that periodically occur, including:
geopolitical and security issues, such as armed conflict and civil or military unrest, political instability, human rights concerns, and terrorist activity, including, for example, geopolitical tensions and conflict affecting Israel, where our Mobileye business headquarters and certain of our fabrication facilities are located;
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;
formal or informal imposition of new or revised export, import, or doing-business regulations, including trade sanctions, tariffs, and changes in the ability to obtain export licenses, which could be changed without notice;
government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from a particular country;
adverse changes relating to government grants, tax credits, or other government incentives;
differing employment practices and labor issues;
ineffective legal protection of our IP rights in certain countries;
local business and cultural factors that differ from our current standards and practices;
continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including as a result of the United Kingdom's vote to withdraw from the European Union;
fluctuations in the market values of our domestic and international investments, which can be negatively affected by liquidity, credit deterioration or losses, interest rate changes, financial results, political risk, sovereign risk, or other factors; and
uncertainty regarding LIBOR—certain of our interest rate derivatives and investments are based on LIBOR, and a portion of our indebtedness bears interest at variable interest rates, primarily based on LIBOR: LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform, which may cause LIBOR to disappear entirely after 2021 or to perform differently than in the past, and while we expect that reasonable alternatives to LIBOR will be implemented prior to the 2021 target date, we cannot predict the consequences and timing of these developments, and they could include an increase in our interest expense and/or a reduction in our interest income.
We are subjectvulnerable to lawsproduct and regulations worldwide that 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 can 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 or autonomous driving technology may limit global adoption, impede our strategy, and negatively impact our long-term expectations for our investments in these areas. Expanding privacy legislation and compliance costs of privacy-related and data protection measures could adversely affect our customers and their products and services, particularly in cloud, Internet of Things, and AI applications, which could in turn reduce demand for our products used for those workloads.
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, or agents will not violate such laws or our policies. Violations of these laws and regulations can result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. The technology industry is subject to intense media, political, and regulatory scrutiny, which can increase our exposure to government investigations, legal actions, and penalties.
We are affected by fluctuations in currency exchange rates.We are 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 can 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 can 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 may not be effective to offset any, or more than a portion, of the adverse impact of currency exchange rate movements; therefore, changes in exchange rates can harm our results of operations and financial condition.
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Catastrophic events can have a material adverse effect on our operations and financial results.Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters; industrial accidents; public health issues; cybersecurity incidents; interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing equipment failures; or other catastrophic events. For example, we have at times experienced disruptions in our manufacturing processes as a result of power outages, improperly functioning equipment, and disruptions in supply of raw materials or components, including due to cybersecurity incidents affecting our suppliers. Our headquarters and many of our operations and facilities are in locations that are prone to earthquakes and other natural disasters. Global climate change can result in certain natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities located in semi-arid regions. Catastrophic 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. Furthermore, even if our operations are unaffected or recover quickly, if our customers cannot timely resume their own operations due to a catastrophic event, they may reduce or cancel their orders, which may adversely affect our results of operations.
We maintain a program of insurance coverage for a variety of property, casualty, and othermanufacturing-related 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.
Damage to our reputation can damage our business. Our reputation is a critical factor in our relationships with customers, employees, governments, suppliers, and other stakeholders. Our failure to address, or the appearance of our failure to address, issues that give rise to reputational risk, including those described throughout this Risk Factors section, could significantly harm our reputation and our brands. Our reputation is also impacted by how we respond to corporate crises. Corporate crises can arise from catastrophic events as well as from incidents involving unethical behavior or misconduct; product quality, security, or safety issues; allegations of legal noncompliance; internal control failures; corporate governance issues; data breaches; workplace safety incidents; environmental incidents; the use of our products for illegal or objectionable applications; marketing practices; media statements; the conduct of our suppliers or representatives; and other issues or incidents that, whether actual or perceived, result in adverse publicity. To the extent we fail to respond quickly and effectively to address such crises, the ensuing negative public reaction could significantly harm our reputation and our brands and could lead to increases in litigation claims and asserted damages or subject us to regulatory actions or restrictions.
Damage to our reputation could reduce demand for our products and adversely affect our business and operating environment. It could reduce investor confidence in us, adversely affecting our stock price. It may also limit our ability to be seen as an employer of choice when competing for highly skilled employees. Moreover, repairing our reputation and brands may be difficult, time-consuming, and expensive.
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. technologies.Production of integrated circuits is a complex process. Realizing the economics of Moore’s Law is a strategic priority, and weWe are continually engaged in the development of next-generation process technologies at increasingly advanced nodes. nodes as we seek to realize the benefits of Moore's Law. Forecasting our progress and schedule for developing advanced nodes is challenging, and at times we encounter unexpected delays due to the complexity of interactions among steps in the manufacturing process, challenges in using new materials or new production equipment, and other issues. Diagnosing defects in our manufacturing processes often takes a long time, as manufacturing throughput times can delay our receipt of data about defects and the effectiveness of fixes, and defects can be more serious and difficult to resolve than initially understood.
We are not always successful or efficient in developing or implementing new process nodes and productionmanufacturing processes. For example, weWe experienced significant delays in implementing our 10nm process technology. Althoughtechnology, and in 2020, we began shipping products based onencountered a defect mode in the development of our 10nmIntel 4 process technology (formerly 7nm) that resulted in volume in 2019,delays relative to our prior expectations. These delays in transitioning to this node occurred while third-party foundries developed new, competitive process technologies. Competitorshave allowed competitors using third-party foundries are ablesuch as TSMC to benefit from theadvancements in manufacturing processes introduced ahead of us by foundries, including improvements such process technologies made in performance, energy efficiency, and other features, which can helphave helped increase the competitiveness of their products. Because of these prior delays in our process technologies, we may experience greater adverse competitive impacts in the event of delays in the development of future manufacturing process technologies and products.
Our efforts to innovate involve significant expense and carry inherent risks, including difficulties in designing and developing next-generation process and packaging technologies, and investments in manufacturing assets and facilities that are made years in advance of the process nodetechnology introduction. We cannot guarantee that we will realize the expected benefits of next-generation process technologies, including the expected cost, performance, power, and density advantages, or that we will achieve an adequate return on our capital and R&D investments, particularly as development of new nodes has grown increasingly expensive. In such circumstances, we may be required to write down the value of some of our manufacturing assets and facilities, increasing our expenses.
Risks inherent in the development of next-generation process technologies include production timing delays, lower-than-anticipated manufacturing yields, longer manufacturing throughput times, failure to achieve expected performance, power, and area improvements, and product defects and errata. Production timing delays have at times caused us to miss customer product design windows, which can result in lost revenue opportunities and damage to our customer relationships. Furthermore, when the introduction of next-generation process nodes is delayed, including additionaladding cores or other competitive features into our products can result in larger die size products, manufacturing supply constraints, and increased product costs. Lower manufacturing yields and longer manufacturing throughput times, compared to previous process nodes, can increase our product costs and adversely affect our gross margins, and can contribute to manufacturing supply constraints. In addition,A new process node typically has higher costs compared to a mature node due to factors that include higher depreciation costs and lower yields, and costs and yields at times do not improve at the same rate as on prior nodes. As the die size of our products has increased and our manufacturing process nodes have shrunk, our products and manufacturing processes have grown increasingly complex and more susceptible to product defects and errata, which canat times also contribute to production timing delays and lower yields.
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From time to time, disruptions in the production process result from errors, defects in materials, delays in obtaining or revising operating permits and licenses, interruptions in our supply of materials, resources, or resources,production equipment, adverse changes in equipment productivity, and disruptions at our fabrication and assembly and test facilities due to accidents, maintenance issues, power interruptions, equipment malfunctions, or unsafe working conditions—all of which could affect the timing of production ramps and yields.
Production issues periodically lead to increased costs and affect our ability to meet product demand, which can adversely impact our business and the results of operations. In addition, to the extent we face delays in the timing of our product introductions we couldcan cause us to become less competitive and lose revenue opportunities, and our 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 We have a highly complex global supply chain composed of thousands of suppliers. These suppliers provide direct materials for our production processes; supply tools, equipment, and IP for our factories; deliver logistics and packaging services; and supply software, lab and office equipment, and other goods and services used in our business. We also rely on suppliers to provide certain components for our products and to manufacture and assemble and test some of our components and products. From time to time we are negatively impacted by supply chain issues, including the following:
▪suppliers extending lead times, experiencing capacity constraints, limiting or canceling supply, allocating supply to other customers including competitors, delaying or canceling deliveries, or increasing prices;
▪supplier quality issues;
▪cybersecurity events, IP or other litigation, manmade or natural disasters, operational failures, or other events that disrupt suppliers;
▪long lead times to qualify alternate or additional suppliers, or the unavailability of qualified alternate suppliers; and
▪increased regulation or stakeholder expectations regarding responsible sourcing practices, or supplier conduct that does not meet such standards, which can cause our compliance costs to increase or result in publicity that negatively affects our reputation.
These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand, and damage our customer relationships. They may keep us from successfully implementing our business strategy and can materially harm our business, competitive position, results of operation, and financial condition. From time to time, our customers experience disruptions or shortages in their own supply chains that constrain their demand for our products. During 2021, the semiconductor industry experienced widespread shortages of substrates and other components and available foundry manufacturing capacity, and we anticipate that such shortages will continue in 2022. These shortages have limited our ability to supply customer demand in certain of our businesses, such as for our PSG products, and have adversely affected customer demand for our products, including in our CCG and DCG businesses, as some customers have been unable to procure sufficient quantities of third-party components used together with our products to produce finished systems. It is difficult to predict the future impact of these ongoing shortages.
To obtain future supply of certain materials and equipmentcomponents, particularly substrates, and third-party foundry manufacturing capacity, we have increasingly entered into arrangements with some of our suppliers that involve long-term purchase commitments and/or large prepayments. These arrangements could still prove inadequate to meet our requirements, or our suppliers may fail to deliver committed volumes on time or at all, or their financial condition may deteriorate. If future customer demand over the horizon of these arrangements falls below our expectations, we could have excess or obsolete inventory, unneeded capacity, and increased costs, and our prepayments may not be fully utilized, and in some cases may not be fully recoverable.
We utilize third-party foundries and component suppliers to manufacture or supply certain components and products for areas such asnetworking, communications, graphics, programmable semiconductor solutions, and memory. As part of our IDM 2.0 strategy, we expect to increase our use of third-party foundries for manufacturing, which will include modular tiles manufactured on advanced foundry process technologies for use in productionour core computing offerings. Delays in the development of foundries’ future manufacturing processes could delay the introduction of products or components we design for such processes, and other aspects of our business. insufficient foundry capacity could prevent us from meeting customer demand. We typically have less control over delivery schedules, design and manufacturing co-optimization, manufacturing yields, quality, product quantities, and costs for components and products that are manufactured by third parties.
Where possible, we seek to have several sources of supply. However, for certain components, services, materials, and equipment, including certain photolithography tools, we rely on a single or a limited number of suppliers, or upon suppliers in a single location. In addition,For example, ASML is currently the sole supplier of EUV photolithography tools that we will be deploying in our Intel 4 and other future manufacturing process nodes. These tools are highly complex to develop and produce, and increasingly costly, and from time to time there are increases in lead times or delays in their development and availability, which could delay the development or ramp of our future process nodes. As a further example, a limited number of third-party foundries offer leading-edge manufacturing processes, and these providers are geographically concentrated in Asia. Supplier consolidation or business failures can also reduce the pool of qualified suppliers. Sole- or limited-source suppliers can impact the nature, quality, availability, and pricing of the products and services available to us. The inabilityus and intensify the other risks described in this risk factor.
Our disaggregated design strategy introduces additional production risks. Our disaggregated design strategy poses increased logistical risks and challenges, particularly where we decide to manufacture different product components on different process technologies, including third-party foundries' process technologies. To combine components in a single package, they need to be manufactured on a timely basis and in sufficient quantities, while the manufacturing processes we utilize may have differing yields, throughput times, and capacity constraints. We may be required to safely store some components pending the manufacture of suppliers to deliver necessary production materialsothers. Delays or equipment can disruptquality issues with one component could limit our production processes and make it more difficult for us to implement our business strategy. Production can 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 can 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 betweenmanufacture the entire completed product. In addition, the packaging technologies used to combine these components can increase 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, assemble and test, and supply certain components or products. These have included components and products related to networking, communications, programmable semiconductor solutions, and memory,costs and may include theseintroduce additional complexity and other components and products in the future.quality issues. To the extent any of these third partieswe are unable to performmanage these services on arisks, our ability to timely or cost-effective basis, in sufficient volumes, or at all, wesupply competitive products can encounter supply delays or disruptions or incur additionalbe harmed and our costs that could adversely affect our business and financial results. For example, while we have supply agreements providing for the supply of Intelincrease.® 3D XPoint™ memory from IMFT for a period following the close of Micron’s purchase of our interest in IMFT, we will need to fund and develop internal manufacturing options to continue 3D XPoint memory supply in the longer term.
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. From time to time, we identify product defects, errata (deviations from published specifications), and other product issues, which can 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 attaingain through acquisitions, can also contain defects. Product issues also sometimes result from the interaction between our products and third-party products and software. We also 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 transportation, and autonomous driving, healthcare, communications, and financial services, and other industrial, critical infrastructure, 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▪providing consideration to customers, including reimbursement 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, andand/or result in delay or loss of revenue. Mitigation techniques designed to address product issues, including software and firmware updates, are not always available on a timely basis basis—or at all,all—and do not always operate as intended or effectively resolve such issues for all applications,applications. We and third parties, such as hardware and software vendors, make prioritization decisions about which product issues to address, which can delay, limit, or prevent development or deployment of a mitigation and harm our reputation and result in adverse performance effects. Any productcosts. Product defects, errata, or other product issues couldand/or mitigation techniques can result in product failures, adverse performance and power effects, reboots, system instability or unavailability, loss of functionality, data loss or corruption, unpredictable system behavior, decisions by customers and end users to limit or change the applications in which they use our products or product features, and other issues. Product issues can damage our reputation, negatively affect product demand, delay product releases or deployment, result in legal liability. Product defectsliability, or errata could cause customers to purchasemake our products from competitors. Any of these occurrencesless competitive, which could harm our business and financial results. Subsequent events or new information can develop that changes our assessment of the impact of a product issue. In addition, although we maintainour liability insurance our coverage has certain exclusions 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.
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We are subject to risks associated with environmental, health, and safety regulations. 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 can 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.
Our failure to manage the use, transportation, emissions, discharge, storage, recycling, or disposal of hazardous materials can 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 sometimes require us to acquire additional pollution abatement or remediation equipment, modify product designs, or incur other expenses. Regulations in response to climate change could result in increased manufacturing costs associated with air pollution requirements, and increased compliance and energy costs. Many new materials that we are evaluating for use in our operations are 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.
WE ARE SUBJECT TO CYBERSECURITY AND PRIVACY RISKS.
We face risks related to cybersecurity threats and incidents. 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, state-sponsored organizations, insider threats including employees and third-party service providers, or intruders into our physical facilities, at times attempt to gain unauthorized access and corrupt the processes used to design and manufacture our hardware products and our associated software and services. 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; interrupt our systems and services or those of our customers or others; or demand ransom to return control of such systems and services. Such attempts are increasing in number and in technical sophistication, and if successful, expose us and the affected parties to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations, including our manufacturing operations. Our IT infrastructure also includes products and services provided by third parties, and these providers can experience breaches of their systems and products that impact the security of our systems and our proprietary or confidential information.
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, as well as reputational harm. 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 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 can be unaware of an incident or its magnitude and effects.
We face risks related to security vulnerabilities in our products.We or third parties regularly identify security vulnerabilities with respect to our processors and other products, as well as the operating systems and workloads that run on them and the components that interact with them. Components and IP we purchase or license from third parties for use in our products, as well as industry-standard specifications we implement in our products, are also regularly subject to security vulnerabilities. As we have become a more data-centric company, ourOur processors and other products are being used in additional and new critical application areas that create new or increased cybersecurity and privacy risks, including applications that gather and process large amounts of data, such as the cloud or Internet of Things, and critical infrastructure and automotive applications. The security vulnerabilities identified in our processors include a category known as side-channel exploits,vulnerabilities, such as the variants referred to as “Spectre”"Spectre" and “Meltdown.”"Meltdown." Additional categories and variants have been identified such as the "MDS" and "TAA" side channel variants, and are expected to continue to be identified. Publicity about these and other security vulnerabilities has resulted in, and is expected to continue to result in, increased attempts by third parties to identify additional vulnerabilities. Security and manageability features in our products cannot make our products absolutely secure, and these features themselves are subject to vulnerabilities and attempts by third parties to identify additional vulnerabilities. Vulnerabilities are not always mitigated before they become known. We, our customers, and the users of our products do not always promptly learn of or have the ability to fully assess the magnitude or effects of a vulnerability, including the extent, if any, to which a vulnerability has been exploited. Subsequent events or new information can develop that changes our assessment of the impact of a security vulnerability, including additional information learned as we develop and deploy mitigations or updates, become aware of additional variants, evaluate the competitiveness of existing and new products, and address future warranty or other claims or customer satisfaction considerations, as well as developments in the course of any litigation or regulatory inquiries or actions over these matters.
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Mitigation techniques designed to address security vulnerabilities, including software and firmware updates or other preventative measures, are not always available on a timely basis—or at all—and at times do not operate as intended or effectively resolve vulnerabilities for all applications. In addition, we are often required to rely on third parties, including hardware, software, and services vendors, as well as our customers and end users, to develop and/or deploy mitigation techniques, and the availability, effectiveness, and performance impact of mitigation techniques can depend solely or in part on the actions of these third parties in determining whether, when, and how to develop and deploy mitigations. We and such third parties may make prioritization decisions about which vulnerabilities to address, which can delay, limit, or limitprevent development or deployment of a mitigation and harm our reputation. Security vulnerabilities and/or mitigation techniques can result in adverse performance or power effects, reboots, system instability or unavailability, loss of functionality, data loss or corruption, unpredictable system behavior, decisions by customers and end users to limit or change the applications in which they use our products or product features, and/or the misappropriation of data by third parties.
Security vulnerabilities and any limitations of, or adverse effects resulting from,of mitigation techniques can adversely affect our results of operations, financial condition, customer relationships, prospects, and reputation in a number of ways, any of which may be material. For example, whether or not theyvulnerabilities involve attempted or successful exploits, they may result in our incurring significant costs related to developing and deploying updates and mitigations, writing down inventory value, defending against product claims and litigation, responding to regulatory inquiries or actions, paying damages, addressing customer satisfaction considerations, providing product replacements or modifications, or taking other remedial steps with respect to third parties. Adverse publicity about security vulnerabilities or mitigations could damage our reputation with customers or users and reduce demand for our products and services. These effects may be greater to the extent that competing products are not susceptible to the same vulnerabilities or if vulnerabilities can be more effectively mitigated in competing products. Moreover, third parties can release information regarding potential vulnerabilities of our products before mitigations are available, which, in turn, could lead to attempted or successful exploits, adversely affect our ability to introduce mitigations, or otherwise harm our business and reputation.
We are subject to risks associated with environmental, health, and safety regulations. 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 can 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. In addition, failure to comply by our suppliers of these materials can require us to suspend or alter our production processes.
Our failure to manage the use, transportation, emissions, discharge, storage, recycling, or disposal of hazardous materials can lead to increased costs or future liabilities. Environmental regulations, such as air quality and wastewater requirements, may impede our ability to expand or modify our manufacturing capability in the future. Environmental laws and regulations sometimes require us to acquire additional pollution abatement or remediation equipment, modify product designs, or incur other expenses. Regulations in response to climate change could result in increased manufacturing costs associated with air pollution requirements. For example, informationsemiconductor manufacturing uses perfluorocarbons, which have historically made up a large portion of our direct greenhouse gas emissions. New or increased regulations limiting the use of such compounds, or other greenhouse gas emissions, could require us to install additional abatement equipment, purchase carbon offsets, and/or alter our production processes. In addition, new or increased climate change regulation could increase our energy costs, for example as a result of carbon pricing impacts on electrical utilities. As we expand our manufacturing capacity as part of our IDM 2.0 strategy, the impacts of future regulation could be magnified. Many new materials that we are evaluating for use in our operations are 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.
The COVID-19 pandemic could materially adversely affect our financial condition and results of operations.
The COVID-19 pandemic has previously adversely affected significant portions of our business and could have a material adverse effect on our financial condition and results of operations. Authorities have imposed, and businesses and individuals have implemented, numerous measures to try to contain the virus or treat its impact, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, shutdowns, and vaccine requirements. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective suppliers and partners. We have experienced, and could in the future experience, reduced workforce availability at some of our sites, construction delays, and reduced capacity at some of our suppliers. We have significant manufacturing operations in the US, Ireland, Israel, China, Malaysia, and Vietnam, and each of these countries is taking measures in response to the pandemic. Restrictions on our manufacturing or support operations or workforce, similar limitations for our suppliers, and transportation restrictions or disruptions can limit our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations. Our customers have experienced, and may in the future experience, disruptions in their operations and supply chains, which can result in delayed, reduced, or cancelled orders, or collection risks, and which may adversely affect our results of operations.
The pandemic has caused us to modify our business practices, including with respect to employee travel; employee work locations; cancellation of physical participation in meetings, events, and conferences; and social distancing measures. As a US federal government contractor, we are subject to a federal executive order requiring our US employees to be vaccinated unless they qualify for medical or religious exemptions. The order has been challenged in court and its ultimate status, and the impact on our business, is uncertain. However, this requirement or other future vaccine mandates could adversely affect our workforce retention and hiring. Similarly, this requirement would apply to our suppliers working at our US sites, and to the extent such suppliers refuse to comply or decline to work with us based on the “Spectre”requirement or other future vaccine mandates, our business may be adversely affected, including higher costs or delays for our construction projects. We may take further actions as required by government authorities or others, or that we determine are in the best interests of our employees, customers, suppliers, and “Meltdown” side-channel variants was prematurely reported publicly before mitigation techniquespartners. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development, validation, and qualification, customer support, and other activities, which could have a material adverse effect on our operations. There is no certainty that such measures will be sufficient to address all vulnerabilities were made widely available,mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
The pandemic has significantly increased economic and demand uncertainty, and has led to volatility in capital markets and credit markets. Risks related to adverse changes in global economic conditions are described in our risk factor titled "Global or regional conditions can harm our financial results," and include the risk that demand for our products will be significantly harmed. Given the continued and substantial economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on demand for our products. For example, the increased demand for notebook products as a result of work- and learn-from-home dynamics may not continue as the pandemic progresses.
The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and severity of the pandemic; the actions taken to contain the virus or treat its impact; other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption; and how quickly and to what extent normal economic and operating conditions can resume. Additional impacts and risks may arise that we are not aware of or able to respond to effectively. We are similarly unable to predict the extent of the impact of the pandemic on our customers, suppliers, and other partners, but a material effect on these parties could also materially adversely affect us. The impact of COVID-19 can also exacerbate other risks discussed in this Risk Factors section and throughout this report.
We operate globally and are subject to significant risks in many jurisdictions.
Global or regional conditions can 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 are concentrated in one or more geographic areas. Moreover, sales outside the US accounted for 82% of our revenue for the fiscal year ended December 25, 2021, with revenue from billings to China contributing 27% of our total revenue. As a result, our operations and our financial results, including our ability to manufacture, assemble and test, design, develop, or sell products, and the demand for our products, are at times adversely affected by a number of global and regional factors outside of our control.
Adverse changes in global or regional economic conditions periodically occur, including recession or slowing growth, changes or uncertainty in fiscal, monetary, or trade policy, higher interest rates, tighter credit, inflation, lower capital expenditures by businesses including on IT infrastructure, increases in unemployment, and lower consumer confidence and spending. Adverse changes in economic conditions, including those related to the COVID-19 pandemic, can significantly harm demand for our products and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. An economic downturn or increased uncertainty may also lead to increased credit and collectability risks, higher borrowing costs or reduced availability of capital and credit markets, reduced liquidity, adverse impacts on our suppliers, failures of counterparties including financial institutions and insurers, asset impairments, and declines in the value of our financial instruments.
We can be adversely affected by other global and regional factors that periodically occur, including:
▪geopolitical and security issues, such as armed conflict and civil or military unrest, political instability, human rights concerns, and terrorist activity, including, for example, geopolitical tensions and conflict affecting Israel, where our Mobileye business headquarters and certain of our fabrication facilities are located;
▪natural disasters, public health issues (including the mitigation techniques didCOVID-19 pandemic), 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;
▪formal or informal imposition of new or revised export, import, or doing-business regulations, including trade sanctions, tariffs, and changes in the ability to obtain export licenses, which could be changed without notice;
▪government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from a particular country;
▪adverse changes relating to government grants, tax credits, or other government incentives, including more favorable incentives provided to competitors;
▪differing employment practices and labor issues;
▪ineffective legal protection of our IP rights in certain countries;
▪local business and cultural factors that differ from our current standards and practices;
▪continuing uncertainty regarding social, political, immigration, and tax and trade policies in the US and abroad; and
▪fluctuations in the market values of our domestic and international investments, which can be negatively affected by liquidity, credit deterioration or losses, interest rate changes, financial results, political risk, sovereign risk, or other factors.
We are also subject to risks related to the cessation of US dollar LIBOR. Certain of our derivatives and floating-rate investments reference US dollar LIBOR, and a portion of our indebtedness bears interest at variable interest rates, primarily based on US dollar LIBOR. No new US dollar LIBOR-based activity should be conducted after 2021, and US dollar LIBOR will be unavailable for use in our existing contracts and financial instruments beyond June 30, 2023. While reasonable alternatives to LIBOR have been introduced into markets, our transition from LIBOR to alternative reference rates could result in an increase in our interest expense and/or a reduction in our interest income.
We are subject to risks related to trade policies and regulations. Trade policies and disputes at times result in increased tariffs, trade barriers, and other protectionist measures, which can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders. Increasing protectionism and economic nationalism may lead to further changes in trade policies and regulations, domestic sourcing initiatives, or other formal and informal measures that could make it more difficult to sell our products in, or restrict our access to, some markets.
In particular, trade tensions between the US and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of our products, and have affected customer ordering patterns. The US has imposed restrictions on the export of US-regulated products and technology to certain Chinese technology companies, including certain of our customers. These restrictions have reduced our sales, and continuing or future restrictions could adversely affect our financial performance, result in reputational harm to us, or lead such companies to develop or adopt technologies that compete with our products. It is difficult to predict what further trade-related actions governments may take, which may include trade restrictions and additional or increased tariffs and export controls imposed on short notice, and we may be unable to quickly and effectively react to or mitigate such actions.
Trade disputes and protectionist measures, or continued uncertainty about such matters, could result in declining consumer confidence and slowing economic growth or recession, and could cause our customers to reduce, cancel, or alter the timing of their purchases with us. Sustained geopolitical tensions could lead to long-term changes in global trade and technology supply chains, and decoupling of global trade networks, which could have a material adverse effect on our business and growth prospects.
Laws and regulations can have a negative impact on our business. We are subject to laws and regulations worldwide that differ among jurisdictions, affecting our operations in areas including, but not operatelimited to: IP ownership and infringement; tax; import and export requirements; anti-corruption; foreign exchange controls and cash repatriation restrictions; data privacy and localization requirements; competition; advertising; employment; product regulations; environment, health, and safety requirements; and consumer laws. Compliance with such requirements can 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 or autonomous driving technology and MaaS may limit global adoption, impede our strategy, or negatively impact our long-term expectations for our investments in these areas. Expanding privacy legislation and compliance costs of privacy-related and data protection measures could adversely affect our customers and their products and services, particularly in cloud, Internet of Things, and AI applications, which could in turn reduce demand for our products used for those workloads.
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, or agents will not violate such laws or our policies. Violations of these laws and regulations can result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. The technology industry is subject to intense media, political, and regulatory scrutiny, which can increase our exposure to government investigations, legal actions, and penalties.
We are affected by fluctuations in currency exchange rates.We are exposed to adverse as intended.well as beneficial movements in currency exchange rates. Although most of our sales occur in US dollars, expenses may be paid in local currencies. An increase in the value of the dollar can increase the real cost to our customers of our products in those markets outside the US where we sell in dollars, and a weakened dollar can 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 may not be effective to offset any, or more than a portion, of the adverse impact of currency exchange rate movements; therefore, changes in exchange rates can harm our results of operations and financial condition.
Catastrophic events can have a material adverse effect on our operations and financial results.Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters; industrial accidents; public health issues (including the COVID-19 pandemic); cybersecurity incidents; interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing equipment failures; or other catastrophic events. For example, we have at times experienced disruptions in our manufacturing processes as a result of power outages, improperly functioning equipment, and disruptions in supply of raw materials or components, including due to cybersecurity incidents affecting our suppliers. Our headquarters and many of our operations and facilities are in locations that are prone to earthquakes and other natural disasters. Global climate change can result in certain natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities, including facilities located in water-sensitive regions such as Arizona and Israel. In addition, to the extent we are unable to successfully manage and conserve water resources, our reputation could be harmed. In recent years, the west coast of the US has experienced significant wildfires, including in Oregon, where we have major manufacturing facilities. The long-term effects of climate change on the global economy and the technology industry in particular are unclear, but could be severe.
Catastrophic 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, some of our systems are not fully redundant and we cannot be sure that our plans will fully protect us from such disruptions. Furthermore, even if our operations are unaffected or recover quickly, if our customers or suppliers cannot timely resume their own operations due to a catastrophic event, we may experience reduced or cancelled orders or disruptions to our supply chain that may adversely affect our results of operations.
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.
Damage to our reputation can damage our business. Our reputation is a critical factor in our relationships with customers, employees, governments, suppliers, and other stakeholders. Our failure to address, or the appearance of our failure to address, issues that give rise to reputational risk, including those described throughout this Risk Factors section, could significantly harm our reputation and our brands. Our reputation can be impacted by catastrophic events (including our response to the COVID-19 pandemic); incidents involving unethical behavior or misconduct; product quality, security, or safety issues; allegations of legal noncompliance; internal control failures; corporate governance issues; data breaches; workplace safety incidents; environmental incidents; our response to climate change, including our greenhouse gas emission levels; the use of our products for illegal or objectionable applications, including AI and machine learning applications that present ethical, regulatory, or other issues; marketing practices; media statements; the conduct of our suppliers or representatives; and other issues, incidents, or statements that, whether actual or perceived, result in adverse publicity. To the extent we fail to respond quickly and effectively to address corporate crises, the ensuing negative public reaction could significantly harm our reputation and our brands and could lead to increases in litigation claims and asserted damages or subject us to regulatory actions or restrictions.
Damage to our reputation could reduce demand for our products and adversely affect our business and operating environment. It could reduce investor confidence in us, adversely affecting our stock price. It may also limit our ability to be seen as an employer of choice when competing for highly skilled employees. Moreover, repairing our reputation and brands may be difficult, time-consuming, and expensive.
We are subject to cybersecurity and privacy risks.
We face risks related to cybersecurity threats and incidents. We regularly face attempts by others to gain unauthorized access through the Internet, or to introduce malicious software, to our IT systems. Individuals or organizations, including malicious hackers, state-sponsored organizations, insider threats including employees and third-party service providers, or intruders into our physical facilities, at times attempt to gain unauthorized access and/or corrupt the processes used to design and manufacture our hardware products and our associated software and services. Due to the widespread use of our products, we are a frequent target of computer hackers and organizations that intend to sabotage, compromise, 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 suppliers, customers, partners, or end users; steal proprietary information related to our business, products, employees, suppliers, and customers; interrupt our systems and services or those of our suppliers, customers, or others; or demand ransom to return control of such systems and services. Such attempts are increasing in number and in technical sophistication, and if successful, expose us and the affected parties to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations, including our manufacturing operations. Our IT infrastructure also includes products and services provided by third parties, and these providers can experience breaches of their systems and products, or provide inadequate updates or support, which can impact the security of our systems and our proprietary or confidential information.
From time to time, we encounter intrusions or unauthorized access to our network, products, services, or infrastructure, as well as those of third parties who provide products and services to us. For example, in the fourth quarter of 2020, our Habana Labs subsidiary’s network was breached, resulting in unauthorized third-party access of certain confidential information, in connection with a suspected unsuccessful ransomware attack. The breach was confined to our subsidiary's network and has not had a material impact on Habana Labs’ business. We are also subject to risks associated with attacks involving our supply chain, such as the compromise of IT infrastructure management software provided by SolarWinds Corporation, reported in the fourth quarter of 2020. During 2021, we have observed an increase in ransomware attacks in our supply chain. In December 2021, a vulnerability named “Log4Shell” was reported for the widely used Java logging library, Apache Log4j 2. We have reviewed the use of this library within our software product portfolio and in our IT environment and have taken steps to mitigate the vulnerability. To date, cybersecurity incidents have not resulted in a material adverse impact to our business or operations, but there can be no guarantee we will not experience such an impact. 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, as well as reputational harm. In addition, these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures. As a result of the COVID-19 pandemic, remote work and remote access to our systems has increased significantly, which also increases our cybersecurity attack surface. We have also seen an increase in cyberattack volume, frequency, and sophistication driven by the global enablement of remote workforces. We seek to detect and investigate unauthorized attempts and attacks against our network, products, and services, and to prevent their recurrence where practicable through changes or updates to our internal processes and tools and changes or updates to our products and services; however, we remain potentially vulnerable to additional known or unknown threats. In some instances, we, our suppliers, our customers, and the users of our products and services can be unaware of an incident or its magnitude and effects. There is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational harm.
Theft, loss, or misuse of personal data about our employees, customers, or other third parties 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, including data stored with vendors or other third parties, could result in significantly increased business and security costs or costs related to defending legal claims. We anticipate that our collection of such personal data will increase as we enter into the MaaS market in our Mobileye business, and it may increase as we enter into other new or adjacent businesses. 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, and noncompliance could expose us to significant monetary penalties, damage to our reputation, suspension of online services or sites in certain countries, and even criminal sanctions. Even our inadvertent failure to comply with federal, state, or international privacy-related or data-protection laws and regulations could result in audits, regulatory inquiries, or proceedings against us by governmental entities or other third parties.
WE ARE SUBJECT TOWe are subject to IP RISKS AND RISKS ASSOCIATED WITH LITIGATION AND REGULATORY PROCEEDINGS.risks and risks associated with litigation and regulatory proceedings.
We cannot always enforce or protect our IP or enforce 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 and 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. We are not always able to obtain protection for our IP or enforce or protect our IP rights. Enforcement is costly and time-consuming and can divert management attention. 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. From time to time, governments adopt regulations—and governments or courts render decisions—requiring compulsory licensing of IP rights, or governments require products to meet standards that favor local companies. Our inability to enforce our IP rights under any of these circumstances can harm our competitive position and business. In some cases, our IP rights can offer inadequate protection for our innovations. 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. This risk is heightened as competitors for technical talent increasingly seek to hire our employees.
Our licenses with other companies and participation in industry initiatives at times allow competitors to use some of our patent rights. Technology companies often bilaterally license patents between each other to settle disputes or as part of business agreements. Some of our competitors have in the past had, and may in the future have, licenses to some of our patents, and under current case law, some of the licenses can exhaust our patent rights as to licensed product sales under some circumstances. Our participation in industry standards organizations or with other industry initiatives at times requires us to offer to license our patents to companies that adopt industry-standard specifications. Depending on the rules of the organization, government regulations, or court decisions, we sometimes have to grant licenses to some of our patents for little or no cost, and as a result, we may be unable to enforce certain patents against others, and the value of our IP rights may be impaired.
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Third parties assert claims based on IP rights against us and our products, which could harm our business. We face claims based on IP rights from individuals, companies, non-practicing entities, academic and companies,research institutions, and other parties, 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. Some of these claimants are funded by investment firms and have substantial resources, which can increase our defense costs. Additionally, large patent portfolio owners sometimes 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 have seen an increase in patent assertions and lawsuits initiated by well-funded non-practicing entities, including entities funded by investment firms and other third parties. In some instances, these entities have filed multi-jurisdiction litigation seeking large monetary damages and/or injunctions against us. These lawsuits can increase our cost of doing business and could disrupt our operations if they succeed in blocking the trade of our products. For example, in the multi-jurisdiction litigation brought against us by VLSI, a jury in one of the pending US federal court cases returned a verdict in February 2021 awarding approximately $2.2 billion in damages to VLSI, as discussed in Note 19: Commitments and Contingencies within the Consolidated Financial Statements. The patent litigation environment has also become more challenging due to the emergence of venues adopting procedural and substantive rules that make them more favorable for patent asserters, including the availability of injunctive relief for non-practicing entities, and the US Patent and Trademark Office’s reduction of inter partes patent review under the America Invents Act. As a result, we believe we are facing a more hostile IP litigation environment.
We are typically engaged in a number of disputes involving IP rights. Claims that our products, technologies, or processes infringe the IP rights of others, regardless of their merits, cause us to incur large costs to respond to, defend, and resolve the claims, and they 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, or 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. IP rights claims against our customers could also limit demand for our products or disrupt our customers’customers' businesses, which could in turn adversely affect our results of operations.
As a result of IP rights claims, we could:
▪pay monetary damages, including payments to satisfy indemnification obligations, royalties, fines, or royalties;penalties;
▪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 or license agreements, which agreements may not be available on commercially reasonable terms.terms and may be costly.
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.
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 are designed to include third-party technology or implement industry standards, andwhich may require licenses from third parties. Based on past experience and industry practice,In addition, from time to time, third parties notify us that they believe we believeare using their IP. There is no assurance that necessary licenses to such licenses generallythird-party IP can be obtained on commercially reasonable terms. However, there is no assuranceterms or at all, or that the necessaryour existing licenses canto third-party IP will continue to be obtainedavailable on acceptablecommercially reasonable 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. To the extent our products include software that contains or is derived from open-source software, we may be required to make the software’ssoftware's source code publicly available and/or license the software under open-source licensing terms.
We are subject to risks associated with litigation and regulatory proceedings.matters. From time to time, we face legal claims or regulatory matters involving stockholder, consumer, competition, commercial, IP, labor and employment, compliance, and other issues on a global basis. As described in "Note 20:19: 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, excessive verdicts, or other events could occur, including monetary damages, fines, penalties, 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 can result in a material adverse impact on our business, financial condition, and results of operations. In addition, regardlessRegardless of the outcome, litigation and regulatory proceedings can be costly, time-consuming, disruptive to our operations, harmful to our reputation, and distracting to management.
WE MUST ATTRACT, RETAIN, AND MOTIVATE KEY EMPLOYEES.We must attract, retain, and motivate key employees.
Hiring and retaining qualified executives, scientists, engineers, technical staff, and sales representatives are critical to our business, andbusiness. The competition for highly skilled employees in our industry is increasingly intense. Competitors for technical talent increasingly seek to hire our employees, and the increased availability of work-from-home arrangements, accelerated by the COVID-19 pandemic, has both intensified and expanded competition. In addition, changes in immigration policies may further limit the pool of available talent and impair our ability to recruit and hire technical and professional talent. We have intensified our efforts to recruit and retain talent. These efforts have increased our expenses, and they may not be successful in attracting, retaining, and motivating the workforce necessary to deliver on our strategy. Changes in the interpretation and application of employment-related laws applicable to our workforce practices may also result in increased operating costsexpenses and less flexibility in how we meet our changing workforce needs. To help attract, retain, and motivate qualified employees, we use share-based awards, such as RSUs, and performance-based cash incentive awards. Sustained declines in our stock price, or lower stock price performance relative to competitors, can reduce the retention value of our share-based awards. Our employee hiring and retention also depend on our ability to build and maintain a diverse and inclusive workplace culture and be viewed as an employer of choice. IfTo the extent our share-based or other compensation programs and workplace culture cease to beare not viewed as competitive, our ability to attract, retain, and motivate employees wouldcan be weakened, which could harm our results of operations. Furthermore, changes
Changes in our management team can also disrupt our business,business. For example, we appointed a new CEO effective in February 2021 and a new CFO in January 2022 and made several other changes to our senior leadership during the past year. The failure to successfully transition and assimilate key employees could adversely affect our results of operations. To the extent we do not effectively hire, onboard, retain, and motivate key employees, our business can be harmed.
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WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR STRATEGIC TRANSACTIONS.We are subject to risks associated with our strategic transactions.
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. Strategic transactions are an important component of our financial capital allocation strategy. We routinely evaluate opportunities and enter into agreements for possible acquisitions, divestitures, and other strategic transactions. These transactions involve numerous risks, including:
▪our inability to identify opportunities in a timely manner or on terms acceptable to us;
▪failure of the transaction to advance our business strategy and failure of its anticipated benefits to materialize;
▪disruption of our ongoing operations and diversion of our management’smanagement's attention;
▪failure to complete a transaction in a timely manner, if at all, due to our inability to obtain required government or other approvals at all or without materially burdensome conditions, IP disputes or other litigation, difficulty in obtaining financing on terms acceptable to us, or other unforeseen factors;
▪our failure to realize a satisfactory return on our investment, potentially resulting in an impairment of goodwill and other assets, and restructuring charges;
▪our inability to effectively enter new market segments through our strategic transactions or retain customers and partners of acquired businesses;
▪our inability to retain key personnel of acquired businesses or our difficulty in integrating employees, business systems, and technology;
▪controls, processes, and procedures of acquired businesses that do not adequately ensure compliance with laws and regulations, and our failure to identify compliance issues or liabilities;
▪our failure to identify, or our underestimation of, commitments, liabilities, and other risks associated with acquired businesses or assets; and
▪the potential for our acquisitions to result in dilutive issuances of our equity securities or significant additional debt.
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. Moreover, our resources are limited and our decision to pursue a transaction has opportunity costs; accordingly, if we pursue a particular transaction, we at times need to forgo the prospect of entering into other transactions that could help us achieve our financial or strategic objectives.
Where an existing investment does not meetstrategically align to our criteria for success,key priorities, we routinely evaluate opportunities for possible divestitures and other options. We may not realize the anticipated benefits of divestitures due to risks that include unfavorable prices and terms; changes in market conditions;conditions or geopolitical conditions affecting the regions or industries in which we or counterparties operate; failure to receive regulatory or governmental approvals; limitations or restrictions due to regulatory or governmental approvals, litigation, contractual terms, or other conditions; delays in closing; lack of support by third parties; actions by competitors; adverse effects on our business relationships, operating results, or business due to the announcement and pendency of such transactions; and continued financial obligations, or unanticipated liabilities, or transition costs associated with such transactions. In some cases, we are not able to divest investments on acceptable terms or at all.
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.
We invest in public and private companies and do not always realize a return on our investments. We make investments in public and private companies around the world to further our strategic and financial objectives and to support certain key business initiatives. Companies in which we invest range fromThese companies can include early-stage companies still defining their strategic direction to mature companies with established revenue streams and business models.direction. Many of the instruments in which we invest are non-marketable and illiquid at the time of our initial investment, and we are not always able to achieve a return in a timely fashion, if at all. Our ability to realize a return on our investment in a private company, if any, is typically dependent on the company participating in a liquidity event, such as a public offering or acquisition. To the extent our investments are in marketable equity securities, as is typically the case for our public company investments, fluctuations in the fair value of those securities are recognized as gains or losses in our income statement, and consequently, declines in the fair value of these investments can reduce our net income. To the extent any of the companies in which we invest are not successful, which can include failures to achieve business objectives as well asat times includes bankruptcy, we could recognize an impairment and/or lose all or part of our investment.
WE ARE SUBJECT TO SALES-RELATED RISKS.There are risks associated with our previously-announced proposed IPO of Mobileye. We announced that we intend to take Mobileye public in the US via an IPO of newly issued Mobileye stock, and that we expect to retain majority ownership of Mobileye following the completion of the IPO. The IPO may not be completed in our expected timeframe, or at all, due to factors that include adverse changes in economic or market conditions or in our business; delays in regulatory, stock exchange, or other approvals; loss of Mobileye key employees, and changes in our business strategy. If we do not complete the IPO, our ability to retain and attract Mobileye employees could be adversely affected, and we will have incurred expenses that we will be unable to recover, and for which we will not receive any benefit. If completed, the IPO may not produce any increase for our stockholders in the market value of their holdings in our company. In addition, the market price of our common stock could be more volatile after the IPO.
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 and ODMs. 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. At times, we 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 is limited. In addition, our distributors' expertise in the determination and stocking of acceptable inventory levels for some of our products is not always 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 sell products that compete with our products, and we sometimes need to provide financial and other incentives to focus them on the sale of our products. From time to time, they 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.
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From time to time, our products are resold by third parties in an unauthorized “gray"gray market.”" Gray market products can distort demand and pricing dynamics in our distribution channel and certain geographies, which couldat times adversely affectaffects our revenue opportunities. Gray market activity is difficult to monitor and can make forecasting demand more challenging. Gray market products also sometimes include parts that have been altered or damaged, and our reputation may be harmed when these products fail or are found to be substandard.
We receive a significant portion of our revenue from a limited number of customers. Collectively, our three largest customers accounted for approximately 41%43% of our net revenue in 20192021 and 39% of our net revenue in 2018.2020. We expect a small number of customers will continue to account for a significant portion of our revenue in the foreseeable future.
Industry trends, such as the increasing shift of data center workloads to the public cloud, have increased the significance and purchasing power of certain customers, particularly cloud service providers, toin some of our data-centricdata center-focused businesses. The cloud and cloud applications represent a new and increasingly demanding computing environment. The further consolidation of computing workloads in the cloud, and consolidation among cloud service providers, can heighten the competitive importance of factors such as collaboration and customization with cloud service provider customers to optimize products for their environments; optimization for cloud services and applications; product performance; energy efficiency; feature differentiation; product quality, reliability, and factors affecting server uptime; and product security and security features. ToOur competitive position can be eroded to the extent we do not execute effectively across these factors,factors. We are operating in an increasingly competitive environment, including in serving cloud service provider customers, and the competitive environment adversely affected our competitive position and market segment share may be adversely affected. results in DCG in 2021.
Some cloud service provider customers have also internally developed, and may continue to develop, their own semiconductors, including designs customized for their specific computing workloads. In addition, cloud services can be marketed to end users based on service levels or features rather than hardware specifications, or they can abstract hardware under layers of software, which can make it more difficult to differentiate our products to customers and end users. The shift of data center workloads to the cloud has also adversely affected, and may continue to affect, sales to enterprise and government market segment customers when end users have elected to migrate workloads. To the extent we differentiate our products through customization to meet cloud customer specifications, order changes, delays, or cancellations may result in non-recoverable costs.
If oneThe loss of oura key customers stops purchasing from us, materially reduces its demand for our products,customer, a substantial reduction in sales to them, or delays itschanges in the timing of their orders for our products, we may experiencecan lead to a reduction in our revenue, which couldincrease the volatility of our results, and 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 4:3: Operating Segments" within the Consolidated Financial Statements.
We face risks related to transactions with government entities.We receive proceeds from U.S.US federal, state, local, and foreign government entities associated with grants, incentives, and sales of our products and services. Government demand and payment are often affected by public sector budgetary cycles and funding authorizations, including, with respect to U.S.US government contracts, congressional approval of appropriations. Government contracts are subject to procurement laws and regulations relating to the award, administration, and performance of those contracts, as well as oversight and penalties for violations. For example, U.S.certain agreements with the US government contracts are subject to special rules on accounting, IP rights, expenses, reviews, information handling, and security, and/or employees, and failure to comply with these rules could result in civil and criminal penalties and sanctions, including termination of contracts, fines, and suspension or debarment from future business with the U.S.US government.
CHANGES IN OUR EFFECTIVE TAX RATE MAY REDUCE OUR NET INCOME.Changes in our effective tax rate may reduce our net income.
A number of factors can increase our effective tax rates,rate, which could reduce our net income, including:
▪changes in the volume and mix of profits earned and location of assets across jurisdictions with varying tax rates;
▪the resolution of issues arising from tax audits, including payment of interest and penalties;
▪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.US federal, state, or foreign tax laws or their interpretation, including changes in the U.S.US to the taxation of manufacturing enterprises and of non-U.S.non-US income and expenses and changes resulting from the adoption by countries of OECD recommendations or other legislative actions;
▪changes in accounting standards; and
▪our decision to repatriate non-U.S.non-US earnings for which we have not previously provided for local country withholding taxes incurred upon repatriation.
WE HAVE FLUCTUATIONS IN THE AMOUNT AND FREQUENCY OF OUR STOCK REPURCHASES.We have fluctuations in the amount and frequency of our stock repurchases.
We are not obligated to make repurchases under our stock repurchase program, and theprogram. The amount, timing, and execution of our repurchases fluctuate based on our priorities for the use offactors that include prioritizing cash for other purposes—purposes, such as investing in our business, including operational spending, capital spending, and acquisitions, and returning cash to our stockholders as dividend payments. Changes in cash flows, tax laws and other laws, andOur stock repurchase program may be suspended or terminated at any time. Moreover, we cannot guarantee that repurchases will enhance long-term stockholder value. We expect our future stock repurchases to be significantly below our levels from the market price of our common stock can also limit or alter the amount and frequency of our stock repurchases.last few years.
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OTHER KEY INFORMATION | Other Key Information | 6063 |
PROPERTIES
As of December 28, 2019,25, 2021, our major facilities consisted of: | | | (Square Feet in Millions) | | United States | | Other Countries | | Total | (Square Feet in Millions) | | United
States | | Other
Countries | | Total |
| Owned facilities | | 31.3 |
| | 22.3 |
| | 53.6 |
| Owned facilities | | 31 | | | 24 | | | 55 | |
| Leased facilities | | 0.8 |
| | 5.4 |
| | 6.2 |
| Leased facilities | | 1 | | | 5 | | | 6 | |
| Total facilities | | 32.1 |
| | 27.7 |
| | 59.8 |
| Total facilities | | 32 | | | 29 | | | 61 | |
Our principal executive offices are located in the U.S.US. For more information on our wafer fabrication and our assembly and test facilities, see "Manufacturing Capital" within Fundamentals of Our Business.
The facilities described above are suitable for our present purposes, and the productive capacity in our facilities is being utilized or being prepared for utilization as we continue to make investments to expand our manufacturing capacity. See "Manufacturing Capital" within Fundamentals of Our Business for a discussion of our investments in capacity expansion to meet customer expectations.
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 7:6: Other Financial Statement Details" within the Consolidated Financial Statements.Statements and Supplemental Details.
MARKET FOR OUR COMMON STOCKMarket for Our Common Stock
The principal U.S.US market on which Intel’sIntel's common stock (symbol INTC) is traded is the Nasdaq Global Select Market. For dividend information, see "Financial Information by Quarter (Unaudited)" within Financial Statements and Supplemental Details.
As of January 17, 2020,21, 2022, there were approximately 110,978102,962 registered holders of record of Intel’sIntel'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.
Stock Performance Graph
The graph and table that follow compare the cumulative TSR of Intel's common stock with the cumulative total return of the S&P 100 Index*, the S&P 500 Index*, the S&P 500 IT Index*, and the SOX Index*1 for the five years ended December 28, 2019.25, 2021. The cumulative returns shown on the graph are based on Intel's fiscal year.
Comparison of Five-Year Cumulative Return for
Intel, S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and SOX Index
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| Years Ended | | Dec 27,
2014 | | Dec 26,
2015 | | Dec 31,
2016 | | Dec 30,
2017 | | Dec 29,
2018 | | Dec 28,
2019 |
| Intel Corporation | | $ | 100 |
| | $ | 96 |
| | $ | 103 |
| | $ | 135 |
| | $ | 140 |
| | $ | 184 |
|
| S&P 100 Index | | $ | 100 |
| | $ | 102 |
| | $ | 113 |
| | $ | 137 |
| | $ | 131 |
| | $ | 175 |
|
| S&P 500 Index | | $ | 100 |
| | $ | 101 |
| | $ | 112 |
| | $ | 136 |
| | $ | 129 |
| | $ | 172 |
|
| S&P 500 IT Index | | $ | 100 |
| | $ | 104 |
| | $ | 118 |
| | $ | 163 |
| | $ | 161 |
| | $ | 246 |
|
| SOX Index | | $ | 100 |
| | $ | 99 |
| | $ | 135 |
| | $ | 190 |
| | $ | 177 |
| | $ | 293 |
|
| |
1
| The graph and table assume that $100 was invested on the last day of trading for the fiscal year ended December 27, 2014 in Intel's common stock, the S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and PHLX Semiconductor Sector Index (SOX), and that all dividends were reinvested. |
ISSUER PURCHASES OF EQUITY SECURITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended | | Dec 31, 2016 | | Dec 30, 2017 | | Dec 29, 2018 | | Dec 28, 2019 | | Dec 26, 2020 | | Dec 25, 2021 |
| Intel Corporation | | $ | 100 | | | $ | 131 | | | $ | 136 | | | $ | 179 | | | $ | 144 | | | $ | 161 | |
| | | | | | | | | | | | |
| S&P 100 Index | | $ | 100 | | | $ | 122 | | | $ | 116 | | | $ | 156 | | | $ | 186 | | | $ | 242 | |
| S&P 500 Index | | $ | 100 | | | $ | 122 | | | $ | 115 | | | $ | 154 | | | $ | 179 | | | $ | 231 | |
| S&P 500 IT Index | | $ | 100 | | | $ | 139 | | | $ | 137 | | | $ | 209 | | | $ | 297 | | | $ | 401 | |
| SOX Index | | $ | 100 | | | $ | 141 | | | $ | 131 | | | $ | 217 | | | $ | 326 | | | $ | 472 | |
1 The graph and table assume that $100 was invested on the last day of trading for the fiscal year ended December 31, 2016 in Intel's common stock, the S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and PHLX Semiconductor Sector Index (SOX), and that all dividends were reinvested.
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 28, 2019,25, 2021, we were authorized to repurchase up to $110.0 billion, of which $23.8$7.2 billion remained available. This amount includes an increase of $20.0 billion in the authorization limit approved by our Board of Directors in October 2019.
Common stock repurchase activity under our publicly announced stock repurchase program during each quarter of 2019 was as follows: |
| | | | | | | | | | | |
| Period | | Total Number of Shares Purchased (In Millions) | | Average Price Paid Per Share | | Dollar Value of Shares That May Yet Be Purchased Under the Program (In Millions) |
| December 30, 2018 - March 30, 2019 | | 49.5 |
| | $ | 49.49 |
| | $ | 14,883 |
|
| March 31, 2019 - June 29, 2019 | | 67.2 |
| | $ | 46.78 |
| | $ | 11,739 |
|
| June 30, 2019 - September 28, 2019 | | 92.0 |
| | $ | 48.78 |
| | $ | 7,249 |
|
| September 29, 2019 - December 28, 2019 | | 63.0 |
| | $ | 55.32 |
| | $ | 23,768 |
|
| Total | | 271.7 |
| | | | |
Common stock repurchase activity under our stock repurchase program during Q4 20192021 was as follows:
|
| | | | | | | | | | | |
| Period | | Total Number
of Shares
Purchased
(In Millions) | | Average Price
Paid Per Share | | Dollar Value of
Shares That May
Yet Be Purchased
Under the
Program
(In Millions) |
| September 29, 2019 - October 26, 2019 | | 24.0 |
| | $ | 51.37 |
| | $ | 26,021 |
|
| October 27, 2019 - November 23, 2019 | | 16.2 |
| | $ | 57.67 |
| | $ | 25,088 |
|
| November 24, 2019 - December 28, 2019 | | 22.8 |
| | $ | 57.79 |
| | $ | 23,768 |
|
| Total | | 63.0 |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of
Shares Purchased
(In Millions) | | Average Price
Paid Per Share | | Dollar Value of Shares That May Yet Be Purchased Under the Program (In Millions) |
| December 27, 2020 - March 27, 2021 | | 39.5 | | | $ | 61.12 | | | $ | 7,243 | |
| Total | | 39.5 | | | | | |
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,program and accordingly are not included in the common stock repurchase totals inexcluded from the preceding table.
|
| | | | | | | |
OTHER KEY INFORMATION | Other Key Information | 6265 |
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information About Our Executive Officers | | | | | | | | | | | | | | |
Name Current Title | | Age | | Experience |
| | | | |
| | | | |
EXECUTIVE OFFICERS (as of January 23, 2020)
| | AGE | | OFFICE(S) |
Gregory M. Bryant | | 51 | | Executive Vice President; General Manager, Client Computing Group |
George S. Davis | | 62 | | Chief Financial Officer |
Dr. Venkata S.M. Renduchintala | | 54 | | Executive Vice President; Group President, Technology, Systems Architecture and Client Group; Chief Engineering Officer |
Steven R. Rodgers | | 54 | | Executive Vice President; General Counsel |
Navin Shenoy | | 46 | | Executive Vice President; General Manager, Data Platforms Group |
Robert H. Swan | | 59 | | Chief Executive Officer |
Gregory M. Bryant is our Executive Vice President and General Manager of the Client Computing Group, leading strategy and product development for client computing end-user solutions, including notebooks, desktops, and client adjacencies. Mr. Bryant served as Senior Vice President and General Manager of CCG from June 2017 to September 2019. From January 2015 to June 2017, he served as Corporate Vice President and General Manager of the Connected Home and Commercial Client Group within CCG. Prior to that, he was Vice President and General Manager for the Asia Pacific and Japan region from 2012 to 2015. From 2010 to 2012, he was a Vice President in the Sales and Marketing Group, and from 2007 to 2010, he was a Vice President in the Digital Enterprise Group. Mr. Bryant joined Intel in 1992 and has also held engineering, operations, and director roles in Intel’s information technology organization.
George S. Davis joined Intel in April 2019 as our Executive Vice President and Chief Financial Officer. He oversees Intel’s global finance and information technology organizations. Prior to joining Intel, Mr. Davis was Executive Vice President and Chief Financial Officer of Qualcomm, a global provider of wireless technologies, from March 2013 to April 2019, where he led the finance, information technology, and investor relations organizations. Before that, Mr. Davis was Chief Financial Officer of Applied Materials, Inc. from November 2006 to March 2013. He held several other leadership positions at Applied Materials from November 1999 to November 2006. Prior to joining Applied Materials, Mr. Davis served for 19 years with Atlantic Richfield Company in a number of finance and other corporate positions.
Dr. Venkata S.M. (“Murthy”) Renduchintala serves as our Executive Vice President; Group President of our Technology, Systems Architecture and Client Group and Chief Engineering Officer. In this role, Dr. Renduchintala oversees Intel's major technology, engineering, and manufacturing functions, including semiconductor process technology, manufacturing and operations, systems and product architecture, IP development, design and SoC engineering, software and security, and Intel Labs. Dr. Renduchintala joined Intel in November 2015 as Executive Vice President and President, Client and Internet of Things Businesses and System Architecture Group, which evolved into the Technology, Systems Architecture and Client Group in 2018, and he was named Executive Vice President; Group President and Chief Engineering Officer in April 2017. From 2004 to 2015, Dr. Renduchintala held various senior positions at Qualcomm, 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. Dr. Renduchintala also serves on the board of directors of Accenture plc.
Steven R. Rodgershas been our Executive Vice President and General Counsel since January 2017 and oversees our legal, government, and China groups. He previously led our legal and government groups as Senior Vice President and General Counsel from January 2015 to January 2017 and as Corporate Vice President and General Counsel from June 2014 to January 2015. Mr. Rodgers joined Intel in 2000 and has held a number of roles in our legal department, including as Corporate Vice President and Deputy General Counsel from January 2014 until his appointment as Intel's fifth General Counsel in June 2014. Prior to joining Intel, Mr. Rodgers was a litigation partner at the firm of Brown & Bain, P.A.
|
| | | |
OTHER KEY INFORMATION | | 63 | |
| | | | |
| Patrick P. Gelsinger | | 60 | | Mr. Gelsinger has been our Chief Executive Officer and a member of our Board of Directors since February 2021. He joined Intel from VMware, Inc., a provider of cloud computing and virtualization software and services, where he served as Chief Executive Officer from September 2012 to February 2021. Prior to joining VMware, Mr. Gelsinger served as President and Chief Operating Officer, EMC Information Infrastructure Products at EMC Corp., a data storage, information security and cloud computing company, from September 2009 to August 2012. Mr. Gelsinger’s career began at Intel, where he spent 30 years before joining EMC Corp. During his initial tenure at Intel, Mr. Gelsinger served in a number of roles, including Senior Vice President and Co-General Manager of the Digital Enterprise Group from 2005 to September 2009, Senior Vice President, Chief Technology Officer from 2002 to 2005, and leader of Desktop Products Group prior to that. |
| Chief Executive Officer | | | |
| | | |
| | | |
| | | | |
| Sandra L. Rivera | | 57 | | Ms. Rivera has served as our Executive Vice President and General Manager of the Data Center and AI Group since July 2021. In this role, she leads strategy and product development for our data center products, including Intel Xeon and FPGA products, and leads our overall AI strategy and product roadmap. Before her current role, Ms. Rivera served as our Chief People Officer from June 2019 to July 2021. Prior to that, she oversaw strategy and product development for network infrastructure solutions as the General Manager of our Network Platforms Group from January 2015 to June 2019, most recently as Senior Vice President and General Manager. Ms. Rivera joined Intel in 2000 and has served in a variety of marketing and business development positions. Before joining Intel, she held management positions with Dialogic Corporation and Catalyst Telecom, Inc. and was co-founder and president of The CTI Authority, Inc. She is a member of the board of directors of Equinix, Inc. |
| Executive Vice President and General Manager, Data Center and AI Group | | | |
| | | |
| | | |
| | | | |
| Steven R. Rodgers | | 56 | | Mr. Rodgers has been our Executive Vice President and General Counsel since January 2017 and oversees our legal, government, and trade groups. He previously led our legal and government groups as Senior Vice President and General Counsel from January 2015 to January 2017 and as Corporate Vice President and General Counsel from June 2014 to January 2015. Mr. Rodgers joined Intel in 2000 and has held a number of roles in our legal department, including Corporate Vice President and Deputy General Counsel from January 2014 until his appointment as Intel's fifth General Counsel in June 2014. Prior to joining Intel, he was a litigation partner at the firm of Brown & Bain, P.A. |
| Executive Vice President and General Counsel | | | |
| | | |
| | | |
| | | | |
| David Zinsner | | 53 | | Mr. Zinsner joined Intel in January 2022 as our Executive Vice President and Chief Financial Officer, overseeing our global finance organization. He joined Intel from Micron Technology, Inc., a manufacturer of memory and storage products, where he most recently served as Executive Vice President and Chief Financial Officer. From February 2018 to October 2021, he served as Senior Vice President and Chief Financial Officer of Micron. Previously, from April 2017 to February 2018, he served as the President and Chief Operating Officer of Affirmed Networks, Inc. From January 2009 to April 2017, he served as Senior Vice President of Finance and Chief Financial Officer of Analog Devices, Inc. From July 2005 to January 2009, Mr. Zinsner served as Senior Vice President and Chief Financial Officer of Intersil Corporation. |
| Executive Vice President and Chief Financial Officer | | | |
| | | |
| | | |
Navin Shenoyis our Executive Vice President and General Manager of our Data Platforms Group. In this role, he oversees our DCG, IOTG, and PSG segments and leads strategy and product development for most of our data-centric offerings, including server, network, storage, AI, Internet of Things, and FPGA products, across a range of use cases that include cloud computing, virtualization of network infrastructure, and AI adoption. Mr. Shenoy has served in this role since May 2017, and his organization was renamed to the Data Platforms Group, from the Data Center Group, in November 2019. From May 2016 to May 2017, Mr. Shenoy was Senior Vice President and General Manager of CCG. 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 was appointed our seventh Chief Executive Officer and a member of our Board of Directors on January 30, 2019. Mr. Swan served as our Executive Vice President, Chief Financial Officer since joining Intel in October 2016 until January 2019, and he served as our interim Chief Executive Officer from June 2018 until January 2019. Prior to joining Intel, Mr. Swan served as an Operating Partner at General Atlantic LLC, a private equity firm, from September 2015 to September 2016. 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.
AVAILABILITY OF COMPANY INFORMATION
Intel was incorporated in California in 1968 and reincorporated in Delaware in 1989. 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, information about upcoming webcasts, analyst presentations, financial information, corporate governance practices, and corporate responsibility information. We post our filings at www.intc.com/secwww.intc.com 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.cfmwww.intc.com, 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.information and issue press releases, and to receive information about upcoming events.
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.
Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the Exchange Act requires an issuer to disclose certain information in its periodic reports if it or any of its affiliates knowingly engaged in certain activities, transactions, or dealings with individuals or entities subject to specific US economic sanctions during the reporting period, even when the activities, transactions, or dealings are conducted in compliance with applicable law. On March 2, 2021, the US Secretary of State designated the Federal Security Service of the Russian Federation (FSB) as a party subject to one such sanction. From time to time, our local subsidiary is required to engage with the FSB as a licensing authority and file documents in order to conduct business within the Russian Federation. All such dealings are explicitly authorized by General License 1B issued by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), and there are no gross revenues or net profits directly associated with any such dealings by us with the FSB. We plan to continue these activities as required to conduct business in the Russian Federation to the extent permitted by applicable law.
On April 15, 2021, the US Department of the Treasury designated Pozitiv Teknolodzhiz, AO (Positive Technologies), a Russian IT security firm, as a party subject to one of the sanctions specified in Section 13(r). Prior to the designation, we communicated with Positive Technologies regarding its IT security research and coordinated disclosure of security vulnerabilities identified by the firm. Based on a license issued by OFAC, we resumed such communications. There are no gross revenues or net profits directly associated with any such activities. We plan to continue these communications in accordance with the terms and conditions of the OFAC license.
|
| | | | | | | |
OTHER KEY INFORMATION | Other Key Information | 6467 |
FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
We have defined certain terms and abbreviations used throughout our Form 10-K in "Key Terms" within the Financial Statements and Supplemental Details.this section. |
| | | | | | | | | | |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTSIndex to Consolidated Financial Statements | Page |
| Reports of Independent Registered Public Accounting Firm | (PCAOB ID: 42) | | |
| | | |
| | | |
| Consolidated Statements of Income | |
| Consolidated Statements of Comprehensive Income | |
| Consolidated Balance Sheets | |
| Consolidated Statements of Cash Flows | |
Consolidated Statements of Stockholders’Stockholders' Equity | |
| | | |
| Notes to Consolidated Financial Statements | |
| | | |
| Basis | |
| Note 1: Basis of Presentation | |
| Note 2: Accounting Policies | |
| | | |
| Performance and Operations | |
Note 3: Recent Accounting StandardsOperating Segments | |
Performance and Operations | |
Note 4: Operating SegmentsEarnings Per Share | |
Note 5: Earnings Per ShareContract Liabilities | |
Note 6: Contract Liabilities | |
Note 7: Other Financial Statement Details | |
Note 8:7: Restructuring and Other Charges | |
Note 9:8: Income Taxes | |
| Investments, Long-term Assets, and Debt | |
Note 10:9: Investments | |
Note 11:10: Acquisitions and Divestitures | |
Note 12:11: Goodwill | |
Note 13:12: Identified Intangible Assets | |
| | | |
Note 14:13: Borrowings | |
Note 15:14: Fair Value | |
| Risk Management and Other | |
Note 16:15: Other Comprehensive Income (Loss) | |
Note 17:16: Derivative Financial Instruments | |
Note 18:17: Retirement Benefit Plans | |
Note 19:18: Employee Equity Incentive Plans | |
Note 20:19: Commitments and Contingencies | |
| Key Terms | |
| | | |
INDEX TO SUPPLEMENTAL DETAILSIndex to Supplemental Details | |
Financial Information by Quarter | | | |
| Controls and Procedures | |
Controls and ProceduresExhibits | |
Exhibits | |
| Form 10-K Cross-Reference Index | |
|
| | | | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm | |
| |
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF INTEL CORPORATIONTo 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 28, 201925, 2021 and December 29, 2018,26, 2020, the related Consolidated Statements of Income, Comprehensive Income, Cash Flows and Stockholders' Equity for each of the three years in the period ended December 28, 2019,25, 2021, and the related notes (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 28, 201925, 2021 and December 29, 2018,26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2019,25, 2021, 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’sCompany's internal control over financial reporting as of December 28, 2019,25, 2021, 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 January 23, 202026, 2022 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | | | | |
| | Inventory Valuation |
| | |
AUDITOR'S REPORTS | | 66 |
|
| | |
| | Inventory Valuation |
| | |
| Description of the Matter | | The Company’sCompany's net inventory totaled $8.7$10.8 billion as of December 28, 2019,25, 2021, representing 6.4% of total assets. As explained in "Note 2: Accounting Policies" within the Consolidated Financial Statements, the Company computes inventory cost on a first-in, first-out basis, and applies judgment in determining saleability of products and the valuation of inventories. The Company assesses inventory at each reporting date in order to assert that it is recorded at net realizable value, giving consideration to, among other factors: whether the products have achieved the substantive engineering milestones to qualify for sale to customers; the determination of normal capacity levels in its manufacturing process to determine which manufacturing overhead costs can be included in the valuation of inventory; whether the product is valued at the lower of cost or net realizable value; and the estimation of excess and obsolete inventory or that which is not of saleable quality. |
| |
| Auditing management’smanagement's assessment of net realizable value for inventory was challenging because the determination of lower of cost or net realizable value and excess and obsolete inventory reserves is highly judgmental and considers a number of factors that are affected by market and economic conditions, such as customer forecasts, dynamic pricing environments, and industry supply and demand. Additionally, for certain new product launches there is limited historical data with which to evaluate forecasts. |
| | |
How We Addressed
the Matter in Our Audit
| | We evaluated and tested the design and operating effectiveness of the Company’sCompany's internal controls over the costing of inventory, the determination of whether inventory is of salablesaleable quality, the calculation of lower of cost or net realizable value reserves including related estimated costs and selling prices, and the determination of demand forecasts and related application against on hand inventory. |
| |
| Our audit procedures included, among others, testing the significant assumptions (e.g., estimated product costs and selling prices, and product demand forecasts) and the underlying data used in management’smanagement's inventory valuation assessment. We compared the significant assumptions used by management to current industry and economic trends. We assessed whether there were any potential sources of contrary information, including historical forecast accuracy or history of significant revisions to previously recorded inventory valuation adjustments, and performed sensitivity analyses over significant assumptions to evaluate the changes in inventory valuation that would result from changes in the assumptions. |
/s/ Ernst & Young LLP
We have served as the Company's auditor since 1968.
San Jose, California
January 23, 202026, 2022
|
| | | | | | | |
AUDITOR'S REPORTS | Auditor's Reports | 6770 |
|
| | | | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm | |
| |
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF INTEL CORPORATIONTo the Stockholders and the Board of Directors of Intel Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Intel Corporation’sCorporation's internal control over financial reporting as of December 28, 2019,25, 2021, 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 28, 2019,25, 2021, 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 20192021 Consolidated Financial Statements of the Company and our report dated January 23, 202026, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’sCompany'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‘scompany'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’scompany'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.
/s/ Ernst & Young LLP
San Jose, California
January 23, 2020
|
| | | | | | | |
AUDITOR'S REPORTS | Auditor's Reports | 6871 |
|
| | | | |
CONSOLIDATED STATEMENTS OF INCOMEConsolidated Statements of Income | |
| |
| | | Years Ended (In Millions, Except Per Share Amounts) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 | Years Ended (In Millions, Except Per Share Amounts) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Net revenue | | $ | 71,965 |
| | $ | 70,848 |
| | $ | 62,761 |
| Net revenue | | $ | 79,024 | | | $ | 77,867 | | | $ | 71,965 | |
| Cost of sales | | 29,825 |
| | 27,111 |
| | 23,663 |
| Cost of sales | | 35,209 | | | 34,255 | | | 29,825 | |
| Gross margin | | 42,140 |
| | 43,737 |
| | 39,098 |
| Gross margin | | 43,815 | | | 43,612 | | | 42,140 | |
| Research and development | | 13,362 |
| | 13,543 |
| | 13,035 |
| Research and development | | 15,190 | | | 13,556 | | | 13,362 | |
| Marketing, general and administrative | | 6,150 |
| | 6,750 |
| | 7,452 |
| Marketing, general and administrative | | 6,543 | | | 6,180 | | | 6,350 | |
| Restructuring and other charges | | 393 |
| | (72 | ) | | 384 |
| Restructuring and other charges | | 2,626 | | | 198 | | | 393 | |
| Amortization of acquisition-related intangibles | | 200 |
| | 200 |
| | 177 |
| |
| | Operating expenses | | 20,105 |
| | 20,421 |
| | 21,048 |
| Operating expenses | | 24,359 | | | 19,934 | | | 20,105 | |
| Operating income | | 22,035 |
| | 23,316 |
| | 18,050 |
| Operating income | | 19,456 | | | 23,678 | | | 22,035 | |
| Gains (losses) on equity investments, net | | 1,539 |
| | (125 | ) | | 2,651 |
| Gains (losses) on equity investments, net | | 2,729 | | | 1,904 | | | 1,539 | |
| Interest and other, net | | 484 |
| | 126 |
| | (349 | ) | Interest and other, net | | (482) | | | (504) | | | 484 | |
| Income before taxes | | 24,058 |
| | 23,317 |
| | 20,352 |
| Income before taxes | | 21,703 | | | 25,078 | | | 24,058 | |
| Provision for taxes | | 3,010 |
| | 2,264 |
| | 10,751 |
| Provision for taxes | | 1,835 | | | 4,179 | | | 3,010 | |
| Net income | | $ | 21,048 |
| | $ | 21,053 |
| | $ | 9,601 |
| Net income | | $ | 19,868 | | | $ | 20,899 | | | $ | 21,048 | |
| Earnings per share—Basic | | $ | 4.77 |
| | $ | 4.57 |
| | $ | 2.04 |
| |
| Earnings per share—Diluted | | $ | 4.71 |
| | $ | 4.48 |
| | $ | 1.99 |
| |
| Earnings per share—basic | | Earnings per share—basic | | $ | 4.89 | | | $ | 4.98 | | | $ | 4.77 | |
| Earnings per share—diluted | | Earnings per share—diluted | | $ | 4.86 | | | $ | 4.94 | | | $ | 4.71 | |
| | Weighted average shares of common stock outstanding: | | | | | | | Weighted average shares of common stock outstanding: | |
| Basic | | 4,417 |
| | 4,611 |
| | 4,701 |
| Basic | | 4,059 | | | 4,199 | | | 4,417 | |
| Diluted | | 4,473 |
| | 4,701 |
| | 4,835 |
| Diluted | | 4,090 | | | 4,232 | | | 4,473 | |
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Statements of Income | 72 |
| | | | | |
| Consolidated Statements of Comprehensive Income | |
| |
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Net income | | $ | 19,868 | | | $ | 20,899 | | | $ | 21,048 | |
| Changes in other comprehensive income, net of tax: | | | | | | |
| | | | | | |
| | | | | | |
| Net unrealized holding gains (losses) on derivatives | | (520) | | | 677 | | | 177 | |
| Actuarial valuation and other pension benefits (expenses), net | | 451 | | | (183) | | | (564) | |
| Translation adjustments and other | | (60) | | | 35 | | | 81 | |
| Other comprehensive income (loss) | | (129) | | | 529 | | | (306) | |
| Total comprehensive income | | $ | 19,739 | | | $ | 21,428 | | | $ | 20,742 | |
See accompanying notes.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Consolidated Statements of Comprehensive Income | 6973 |
| | | | | |
| Consolidated Balance Sheets | |
| |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
|
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Net income | | $ | 21,048 |
| | $ | 21,053 |
| | $ | 9,601 |
|
Changes in other comprehensive income, net of tax:
| | | | | | |
| Net unrealized holding gains (losses) on available-for-sale equity investments | | — |
| | — |
| | (434 | ) |
| Net unrealized holding gains (losses) on derivatives | | 177 |
| | (253 | ) | | 365 |
|
| Actuarial valuation and other pension benefits (expenses), net | | (564 | ) | | 210 |
| | 317 |
|
| Translation adjustments and other | | 81 |
| | (3 | ) | | 508 |
|
| Other comprehensive income (loss) | | (306 | ) | | (46 | ) | | 756 |
|
| Total comprehensive income | | $ | 20,742 |
| | $ | 21,007 |
| | $ | 10,357 |
|
| | | | | | | | | | | | | | |
| (In Millions, Except Par Value) | | Dec 25, 2021 | | Dec 26, 2020 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 4,827 | | | $ | 5,865 | |
| Short-term investments | | 2,103 | | | 2,292 | |
| Trading assets | | 21,483 | | | 15,738 | |
| Accounts receivable, net of allowance for doubtful accounts | | 9,457 | | | 6,782 | |
| Inventories | | 10,776 | | | 8,427 | |
| | | | |
| Assets held for sale | | 6,942 | | | 5,400 | |
| Other current assets | | 2,130 | | | 2,745 | |
| Total current assets | | 57,718 | | | 47,249 | |
| | | | |
| Property, plant and equipment, net | | 63,245 | | | 56,584 | |
| Equity investments | | 6,298 | | | 5,152 | |
| Other long-term investments | | 840 | | | 2,192 | |
| Goodwill | | 26,963 | | | 26,971 | |
| Identified intangible assets, net | | 7,270 | | | 9,026 | |
| Other long-term assets | | 6,072 | | | 5,917 | |
| Total assets | | $ | 168,406 | | | $ | 153,091 | |
| | | | |
| Liabilities and stockholders' equity | | | | |
| Current liabilities: | | | | |
| Short-term debt | | $ | 4,591 | | | $ | 2,504 | |
| Accounts payable | | 5,747 | | | 5,581 | |
| Accrued compensation and benefits | | 4,535 | | | 3,999 | |
| | | | |
| | | | |
| | | | |
| Other accrued liabilities | | 12,589 | | | 12,670 | |
| Total current liabilities | | 27,462 | | | 24,754 | |
| | | | |
| Debt | | 33,510 | | | 33,897 | |
| Contract liabilities | | 185 | | | 1,367 | |
| Income taxes payable | | 4,305 | | | 4,578 | |
| Deferred income taxes | | 2,667 | | | 3,843 | |
| Other long-term liabilities | | 4,886 | | | 3,614 | |
| Commitments and Contingencies (Note 19) | | 0 | | 0 |
| | | | |
| Stockholders' equity: | | | | |
| Preferred stock, $0.001 par value, 50 shares authorized; none issued | | — | | | — | |
| Common stock, $0.001 par value, 10,000 shares authorized; 4,070 shares issued and outstanding (4,062 issued and outstanding in 2020) and capital in excess of par value | | 28,006 | | | 25,556 | |
| Accumulated other comprehensive income (loss) | | (880) | | | (751) | |
| Retained earnings | | 68,265 | | | 56,233 | |
| Total stockholders' equity | | 95,391 | | | 81,038 | |
| Total liabilities and stockholders' equity | | $ | 168,406 | | | $ | 153,091 | |
See accompanying notes.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Consolidated Statements of Comprehensive IncomeBalance Sheets | 7074 |
|
| | | | |
CONSOLIDATED BALANCE SHEETSConsolidated Statements of Cash Flows | |
| |
|
| | | | | | | | |
| (In Millions, Except Par Value) | | Dec 28,
2019 | | Dec 29,
2018 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 4,194 |
| | $ | 3,019 |
|
| Short-term investments | | 1,082 |
| | 2,788 |
|
| Trading assets | | 7,847 |
| | 5,843 |
|
| Accounts receivable, net of allowance for doubtful accounts | | 7,659 |
| | 6,722 |
|
| Inventories | | 8,744 |
| | 7,253 |
|
| Other current assets | | 1,713 |
| | 3,162 |
|
| Total current assets | | 31,239 |
| | 28,787 |
|
| | | | | |
| Property, plant and equipment, net | | 55,386 |
| | 48,976 |
|
| Equity investments | | 3,967 |
| | 6,042 |
|
| Other long-term investments | | 3,276 |
| | 3,388 |
|
| Goodwill | | 26,276 |
| | 24,513 |
|
| Identified intangible assets, net | | 10,827 |
| | 11,836 |
|
| Other long-term assets | | 5,553 |
| | 4,421 |
|
| Total assets | | $ | 136,524 |
| | $ | 127,963 |
|
| | | | | |
| Liabilities, temporary equity, and stockholders’ equity | | | | |
| Current liabilities: | | | | |
| Short-term debt | | $ | 3,693 |
| | $ | 1,261 |
|
| Accounts payable | | 4,128 |
| | 3,824 |
|
| Accrued compensation and benefits | | 3,853 |
| | 3,622 |
|
| Other accrued liabilities | | 10,636 |
| | 7,919 |
|
| Total current liabilities | | 22,310 |
| | 16,626 |
|
| | | | | |
| Debt | | 25,308 |
| | 25,098 |
|
| Contract liabilities | | 1,368 |
| | 2,049 |
|
| Income taxes payable, non-current | | 4,919 |
| | 4,897 |
|
| Deferred income taxes | | 2,044 |
| | 1,665 |
|
| Other long-term liabilities | | 2,916 |
| | 2,646 |
|
| Commitments and Contingencies (Note 20) | |
| |
|
| Temporary equity | | 155 |
| | 419 |
|
| Stockholders’ equity: | | | | |
| Preferred stock, $0.001 par value, 50 shares authorized; none issued | | — |
| | — |
|
| Common stock, $0.001 par value, 10,000 shares authorized; 4,290 shares issued and outstanding (4,516 issued and outstanding in 2018) and capital in excess of par value | | 25,261 |
| | 25,365 |
|
| Accumulated other comprehensive income (loss) | | (1,280 | ) | | (974 | ) |
| Retained earnings | | 53,523 |
| | 50,172 |
|
| Total stockholders’ equity | | 77,504 |
| | 74,563 |
|
| Total liabilities, temporary equity, and stockholders’ equity | | $ | 136,524 |
| | $ | 127,963 |
|
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Cash and cash equivalents, beginning of period | | $ | 5,865 | | | $ | 4,194 | | | $ | 3,019 | |
| Cash flows provided by (used for) operating activities: | | | | | | |
| Net income | | 19,868 | | | 20,899 | | | 21,048 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation | | 9,953 | | | 10,482 | | | 9,204 | |
| Share-based compensation | | 2,036 | | | 1,854 | | | 1,705 | |
| | | | | | |
| Restructuring and other charges | | 2,626 | | | 198 | | | 393 | |
| Amortization of intangibles | | 1,839 | | | 1,757 | | | 1,622 | |
| (Gains) losses on equity investments, net | | (1,458) | | | (1,757) | | | (892) | |
| | | | | | |
| | | | | | |
| | | | | | |
| Changes in assets and liabilities: | | | | | | |
| Accounts receivable | | (2,674) | | | 883 | | | (935) | |
| Inventories | | (2,339) | | | (687) | | | (1,481) | |
| Accounts payable | | 1,190 | | | 405 | | | 696 | |
| Accrued compensation and benefits | | 515 | | | 348 | | | (260) | |
| Prepaid customer supply agreements | | (1,583) | | | (181) | | | (782) | |
| Income taxes | | (441) | | | 1,620 | | | 885 | |
| Other assets and liabilities | | 459 | | | (437) | | | 1,942 | |
| Total adjustments | | 10,123 | | | 14,485 | | | 12,097 | |
| Net cash provided by operating activities | | 29,991 | | | 35,384 | | | 33,145 | |
| Cash flows provided by (used for) investing activities: | | | | | | |
| Additions to property, plant and equipment | | (18,733) | | | (14,259) | | | (16,213) | |
| Additions to held for sale NAND property, plant and equipment | | (1,596) | | | (194) | | | — | |
| Acquisitions, net of cash acquired | | (209) | | | (837) | | | (1,958) | |
| Purchases of available-for-sale debt investments | | (5,051) | | | (6,862) | | | (2,268) | |
| | | | | | |
| Maturities and sales of available-for-sale debt investments | | 6,467 | | | 6,781 | | | 4,226 | |
| Purchases of trading assets | | (35,503) | | | (22,377) | | | (9,162) | |
| Maturities and sales of trading assets | | 28,832 | | | 15,377 | | | 7,178 | |
| | | | | | |
| | | | | | |
| Purchases of equity investments | | (613) | | | (720) | | | (522) | |
| Sales of equity investments | | 581 | | | 910 | | | 2,688 | |
| | | | | | |
| | | | | | |
| Other investing | | 658 | | | 1,385 | | | 1,626 | |
| Net cash used for investing activities | | (25,167) | | | (20,796) | | | (14,405) | |
| Cash flows provided by (used for) financing activities: | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Issuance of term debt, net of issuance costs | | 4,974 | | | 10,247 | | | 3,392 | |
| Repayment of term debt and debt conversions | | (2,500) | | | (4,525) | | | (2,627) | |
| Proceeds from sales of common stock through employee equity incentive plans | | 1,020 | | | 897 | | | 750 | |
| Repurchase of common stock | | (2,415) | | | (14,229) | | | (13,576) | |
| | | | | | |
| | | | | | |
| Payment of dividends to stockholders | | (5,644) | | | (5,568) | | | (5,576) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Other financing | | (1,297) | | | 261 | | | 72 | |
| Net cash provided by (used for) financing activities | | (5,862) | | | (12,917) | | | (17,565) | |
| | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (1,038) | | | 1,671 | | | 1,175 | |
| Cash and cash equivalents, end of period | | $ | 4,827 | | | $ | 5,865 | | | $ | 4,194 | |
| Supplemental disclosures: | | | | | | |
| Acquisition of property, plant and equipment included in accounts payable and accrued liabilities | | 1,619 | | | $ | 2,973 | | | $ | 1,761 | |
| | | | | | |
| | | | | | |
| Cash paid during the year for: | | | | | | |
| Interest, net of capitalized interest | | 545 | | | $ | 594 | | | $ | 469 | |
| Income taxes, net of refunds | | 2,263 | | | $ | 2,436 | | | $ | 2,110 | |
| | | | | | |
See accompanying notes.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Consolidated Balance SheetsStatements of Cash Flows | 7175 |
|
| | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWSConsolidated Statements of Stockholders' Equity | |
| |
|
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Cash and cash equivalents, beginning of period | | $ | 3,019 |
| | $ | 3,433 |
| | $ | 5,560 |
|
| Cash flows provided by (used for) operating activities: | | | | | | |
| Net income | | 21,048 |
| | 21,053 |
| | 9,601 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation | | 9,204 |
| | 7,520 |
| | 6,752 |
|
| Share-based compensation | | 1,705 |
| | 1,546 |
| | 1,358 |
|
| Amortization of intangibles | | 1,622 |
| | 1,565 |
| | 1,377 |
|
| (Gains) losses on equity investments, net | | (892 | ) | | 155 |
| | (2,583 | ) |
| (Gains) losses on divestitures | | (690 | ) | | (497 | ) | | (387 | ) |
| Changes in assets and liabilities: | | | | | | |
| Accounts receivable | | (935 | ) | | (1,714 | ) | | (781 | ) |
| Inventories | | (1,481 | ) | | (214 | ) | | (1,300 | ) |
| Accounts payable | | 696 |
| | 211 |
| | 191 |
|
| Accrued compensation and benefits | | 91 |
| | (260 | ) | | 311 |
|
| Customer deposits and prepaid supply agreements | | (782 | ) | | 1,367 |
| | 1,105 |
|
| Income taxes | | 885 |
| | (1,601 | ) | | 6,778 |
|
| Other assets and liabilities | | 2,674 |
| | 301 |
| | (312 | ) |
| Total adjustments | | 12,097 |
| | 8,379 |
| | 12,509 |
|
| Net cash provided by operating activities | | 33,145 |
| | 29,432 |
| | 22,110 |
|
| Cash flows provided by (used for) investing activities: | | | | | | |
| Additions to property, plant and equipment | | (16,213 | ) | | (15,181 | ) | | (11,778 | ) |
| Acquisitions, net of cash acquired | | (1,958 | ) | | (190 | ) | | (14,499 | ) |
| Purchases of available-for-sale debt investments | | (2,268 | ) | | (3,843 | ) | | (2,746 | ) |
| Sales of available-for-sale debt investments | | 238 |
| | 195 |
| | 1,833 |
|
| Maturities of available-for-sale debt investments | | 3,988 |
| | 2,968 |
| | 3,687 |
|
| Purchases of trading assets | | (9,162 | ) | | (9,503 | ) | | (13,700 | ) |
| Maturities and sales of trading assets | | 7,178 |
| | 12,111 |
| | 13,970 |
|
| Purchases of equity investments | | (522 | ) | | (874 | ) | | (1,619 | ) |
| Sales of equity investments | | 2,688 |
| | 2,802 |
| | 5,236 |
|
| Proceeds from divestitures | | 911 |
| | 548 |
| | 3,124 |
|
| Other investing | | 715 |
| | (272 | ) | | 730 |
|
| Net cash used for investing activities | | (14,405 | ) | | (11,239 | ) | | (15,762 | ) |
| Cash flows provided by (used for) financing activities: | | | | | | |
| Issuance of long-term debt, net of issuance costs | | 3,392 |
| | 423 |
| | 7,716 |
|
| Repayment of debt and debt conversion | | (2,627 | ) | | (3,026 | ) | | (8,080 | ) |
| Proceeds from sales of common stock through employee equity incentive plans | | 750 |
| | 555 |
| | 770 |
|
| Repurchase of common stock | | (13,576 | ) | | (10,730 | ) | | (3,615 | ) |
| Payment of dividends to stockholders | | (5,576 | ) | | (5,541 | ) | | (5,072 | ) |
| Other financing | | 72 |
| | (288 | ) | | (194 | ) |
| Net cash provided by (used for) financing activities | | (17,565 | ) | | (18,607 | ) | | (8,475 | ) |
| Net increase (decrease) in cash and cash equivalents | | 1,175 |
| | (414 | ) | | (2,127 | ) |
| Cash and cash equivalents, end of period | | $ | 4,194 |
| | $ | 3,019 |
| | $ | 3,433 |
|
| Supplemental disclosures: | |
| | | | |
| Acquisition of property, plant and equipment included in accounts payable and accrued liabilities | | $ | 1,761 |
| | $ | 2,340 |
| | $ | 1,417 |
|
| Cash paid during the year for: | | | | | | |
| Interest, net of capitalized interest | | $ | 469 |
| | $ | 448 |
| | $ | 624 |
|
| Income taxes, net of refunds | | $ | 2,110 |
| | $ | 3,813 |
| | $ | 3,824 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and Capital
in Excess of Par Value | | Accumulated
Other
Comprehensive
Income (Loss) | | Retained
Earnings | | Total |
| (In Millions, Except Per Share Amounts) | | Number of
Shares | | Amount | |
| | | | | | | | | | |
| | | | | | | | | | |
| Balance as of December 29, 2018 | | 4,516 | | | $ | 25,365 | | | $ | (974) | | | $ | 50,172 | | | $ | 74,563 | |
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — | | | — | | — | | 21,048 | | | 21,048 | |
| Other comprehensive income (loss) | | — | | | — | | (306) | | | — | | (306) | |
| Total comprehensive income | | | | | | | | | | 20,742 | |
| Employee equity incentive plans and other | | 55 | | | 892 | | | — | | — | | 892 | |
| Share-based compensation | | — | | | 1,705 | | | — | | — | | 1,705 | |
| Temporary equity reduction | | — | | | 265 | | | — | | — | | 265 | |
| Convertible debt | | — | | | (1,032) | | | — | | — | | (1,032) | |
| Repurchase of common stock | | (272) | | | (1,592) | | | — | | (11,973) | | | (13,565) | |
| Restricted stock unit withholdings | | (9) | | | (342) | | | — | | (146) | | | (488) | |
| Cash dividends declared ($1.26 per share of common stock) | | — | | | — | | — | | (5,578) | | | (5,578) | |
| Balance as of December 28, 2019 | | 4,290 | | | 25,261 | | | (1,280) | | | 53,523 | | | 77,504 | |
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — | | | — | | — | | 20,899 | | | 20,899 | |
| Other comprehensive income (loss) | | — | | | — | | 529 | | | — | | 529 | |
| Total comprehensive income | | | | | | | | | | 21,428 | |
| Employee equity incentive plans and other | | 55 | | | 1,018 | | | — | | — | | | 1,018 | |
| Share-based compensation | | — | | | 1,854 | | | — | | — | | 1,854 | |
| Temporary equity reduction | | — | | | 155 | | | — | | | — | | 155 | |
| Convertible debt | | — | | | (750) | | | — | | — | | (750) | |
| Repurchase of common stock | | (275) | | | (1,628) | | | — | | (12,481) | | | (14,109) | |
| Restricted stock unit withholdings | | (8) | | | (354) | | | — | | (140) | | | (494) | |
| Cash dividends declared ($1.32 per share of common stock) | | — | | | — | | — | | (5,568) | | | (5,568) | |
| Balance as of December 26, 2020 | | 4,062 | | | 25,556 | | | (751) | | | 56,233 | | | 81,038 | |
| Adjustment to opening balance for change in accounting principle | | | | | | | | 35 | | | 35 | |
| Opening balance as of December 27, 2020 | | 4,062 | | | 25,556 | | | (751) | | | 56,268 | | | 81,073 | |
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — | | | — | | — | | 19,868 | | | 19,868 | |
| Other comprehensive income (loss) | | — | | | — | | (129) | | | — | | (129) | |
| Total comprehensive income | | | | | | | | | | 19,739 | |
| Employee equity incentive plans and other | | 54 | | | 1,022 | | | — | | — | | | 1,022 | |
| Share-based compensation | | — | | | 2,036 | | | — | | — | | 2,036 | |
| Temporary equity reduction | | — | | | — | | | — | | — | | — | |
| Convertible debt | | — | | | — | | | — | | — | | — | |
| Repurchase of common stock | | (40) | | | (249) | | | — | | (2,166) | | | (2,415) | |
| Restricted stock unit withholdings | | (6) | | | (359) | | | — | | (61) | | | (420) | |
| Cash dividends declared ($1.39 per share of common stock) | | — | | | — | | — | | (5,644) | | | (5,644) | |
| Balance as of December 25, 2021 | | 4,070 | | | $ | 28,006 | | | $ | (880) | | | $ | 68,265 | | | $ | 95,391 | |
See accompanying notes.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Consolidated Statements of Cash FlowsStockholders' Equity | 7276 |
|
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
|
| | | | | | | | | | | | | | | | | | | |
| | | Common Stock and Capital
in Excess of Par Value | | Accumulated
Other
Comprehensive
Income (Loss) | | Retained
Earnings | | Total |
| (In Millions, Except Per Share Amounts) | | Number of
Shares | | Amount | |
| Balance as of December 31, 2016 | | 4,730 |
| | $ | 25,373 |
| | $ | 106 |
| | $ | 40,747 |
| | $ | 66,226 |
|
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — |
| | — |
| | — |
| | 9,601 |
| | 9,601 |
|
| Other comprehensive income (loss) | | — |
| | — |
| | 756 |
| | — |
| | 756 |
|
| Total comprehensive income | | | | | | | | | | 10,357 |
|
| Employee equity incentive plans and other ¹ | | 70 |
| | 1,172 |
| | — |
| | (1 | ) | | 1,171 |
|
| Share-based compensation | | — |
| | 1,296 |
| | — |
| | — |
| | 1,296 |
|
| Convertible debt | | — |
| | (894 | ) | | — |
| | — |
| | (894 | ) |
| Repurchase of common stock | | (101 | ) | | (552 | ) | | — |
| | (3,057 | ) | | (3,609 | ) |
| Restricted stock unit withholdings | | (12 | ) | | (321 | ) | | — |
| | (135 | ) | | (456 | ) |
| Cash dividends declared ($1.0775 per share of common stock) | | — |
| | — |
| | — |
| | (5,072 | ) | | (5,072 | ) |
| Balance as of December 30, 2017 | | 4,687 |
| | 26,074 |
| | 862 |
| | 42,083 |
| | 69,019 |
|
| Adjustment to opening balance for change in accounting principle | | — |
| | — |
| | (1,790 | ) | | 2,424 |
| | 634 |
|
| Opening balance as of December 31, 2017 | | 4,687 |
| | 26,074 |
| | (928 | ) | | 44,507 |
| | 69,653 |
|
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — |
| | — |
| | — |
| | 21,053 |
| | 21,053 |
|
| Other comprehensive income (loss) | | — |
| | — |
| | (46 | ) | | — |
| | (46 | ) |
| Total comprehensive income | | | | | | | | | | 21,007 |
|
| Employee equity incentive plans and other ¹ | | 56 |
| | 424 |
| | — |
| | — |
| | 424 |
|
| Share-based compensation | | — |
| | 1,548 |
| | — |
| | — |
| | 1,548 |
|
| Temporary equity reduction | | — |
| | 447 |
| | | | — |
| | 447 |
|
| Convertible debt | | — |
| | (1,591 | ) | | — |
| | — |
| | (1,591 | ) |
| Repurchase of common stock | | (217 | ) | | (1,208 | ) | | — |
| | (9,650 | ) | | (10,858 | ) |
| Restricted stock unit withholdings | | (10 | ) | | (329 | ) | | — |
| | (197 | ) | | (526 | ) |
| Cash dividends declared ($1.20 per share of common stock) | | — |
| | — |
| | — |
| | (5,541 | ) | | (5,541 | ) |
| Balance as of December 29, 2018 | | 4,516 |
| | 25,365 |
| | (974 | ) | | 50,172 |
| | 74,563 |
|
| Components of comprehensive income, net of tax: | | | | | | | | | | |
| Net income | | — |
| | — |
| | — |
| | 21,048 |
| | 21,048 |
|
| Other comprehensive income (loss) | | — |
| | — |
| | (306 | ) | | — |
| | (306 | ) |
| Total comprehensive income | | | | | | | | | | 20,742 |
|
| Employee equity incentive plans and other | | 55 |
| | 892 |
| | — |
| | — |
| | 892 |
|
| Share-based compensation | | — |
| | 1,705 |
| | — |
| | — |
| | 1,705 |
|
| Temporary equity reduction | | — |
| | 265 |
| | — |
| | — |
| | 265 |
|
| Convertible debt | | — |
| | (1,032 | ) | | — |
| | — |
| | (1,032 | ) |
| Repurchase of common stock | | (272 | ) | | (1,592 | ) | | — |
| | (11,973 | ) | | (13,565 | ) |
| Restricted stock unit withholdings | | (9 | ) | | (342 | ) | | — |
| | (146 | ) | | (488 | ) |
| Cash dividends declared ($1.26 per share of common stock) | | — |
| | — |
| | — |
| | (5,578 | ) | | (5,578 | ) |
| Balance as of December 28, 2019 | | 4,290 |
| | $ | 25,261 |
| | $ | (1,280 | ) | | $ | 53,523 |
| | $ | 77,504 |
|
| |
1
| Includes approximately $375 million of non-controlling interest activity due to our acquisition of Mobileye in 2017, which was eliminated in 2018 due to purchase of remaining shares. |
See accompanying notes.
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FINANCIAL STATEMENTS | Notes to Consolidated Financial Statements of Stockholders' Equity | 73 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE | | | | | |
| Note 1 : | BASIS OF PRESENTATIONBasis of Presentation |
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal years 2019, 2018,2021, 2020, and 20172019 were 52-week fiscal years.years; 2022is a 53-week fiscal year. Our Consolidated Financial Statements include the accounts of 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 ESTIMATESUse of Estimates
The preparation of Consolidated Financial Statements in conformity with U.S.US 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.
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NOTENote 2 : | ACCOUNTING POLICIESAccounting Policies |
REVENUE RECOGNITIONRevenue Recognition
We recognize net product revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. Substantially all of our revenue is derived from product sales. In accordance with contract terms, revenue for product sales is recognized at the time of product shipment from our facilities or delivery to the customer location, as determined by the agreed upon shipping terms. Prior to 2018, we deferred product revenue and related costs of sales on sales made to distributors that allowed for price protections or right of return until the distributor sold through the merchandise. We include shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.
We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Variable consideration is estimated and reflected as an adjustment to the transaction price. We determine variable consideration, which consists primarily of various sales price concessions, by estimating the most likely amount of consideration we expect to receive from the customer based on historical analysis of customer purchase volumes. Sales rebates earned by customers are offset against their receivable balances. Rebates earned by customers when they do not have outstanding receivable balances are recorded within other accrued liabilities. The impacts of distributor sales price reductions resulting from price protection agreements are also estimated based on historical analysis of such activity and are reflected as a reduction in net revenue.
We make payments to our customers through cooperative advertising programs for marketing activities for certainsome of our products. We generally record the payment as a reduction in revenue in the period that the revenue is earned, unless the payment is for a distinct service, which we record as expense when the marketing activities occur. 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. These cooperative advertising costs are recorded as a reduction of revenue beginning in the second half of 2017, as we no longer meet the criteria for recording these as expense.
INVENTORIESInventories
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 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 PRQ. We have identified PRQ as the point at which the costs incurred to manufacture our products are included in the valuation of inventory. A single PRQ has previously valued inventory up to $870 million in the quarter the PRQ milestone was achieved. Prior to PRQ, costs that do not meet the criteria for R&D are included in cost of sales in the period incurred. A single PRQ has previously ranged up to $870 million for our high-volume products.
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 years prior to those presented have ranged up to $1.1 billion taken in connection with the 2009 economic recession.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 74 |
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, variations in market pricing, and an assessment of selling price in relation to product cost. Lower of cost or net realizable value inventory reserves fluctuate as we ramp new process technologies, with costs improving over time due to scale and improved yields. Additionally, inventory valuation is impacted by cyclical changes in market conditions and the associated pricing environment.
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| Financial Statements | Notes to Consolidated Financial Statements | 77 |
The valuation of inventory also requires us to estimate obsolete and excess inventory, as well as inventory that is not of salablesaleable quality. We use the demand forecast to develop our short-term manufacturing plans to enable consistency between inventory valuations and build decisions. For certain new products, we have limited historical data when developing these demand forecasts. 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. When our demand forecast for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we are required to write off amounts considered to be excess inventory.
PROPERTY, PLANT AND EQUIPMENTProperty, 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.
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’assets' revised useful lives.
Assets are “grouped”categorized and evaluated for impairment at the lowest level of identifiable cash flows. 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 and fungibility 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.
FAIR VALUEFair 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 on a recurring basis, except for equity securities measured using the measurement alternative, equity method investments, cost method loans receivable,and grants receivable, and reverse repurchase agreements with original maturities greater than three months.receivable. We assess fair value hierarchy levels for our issued debt and fixed-income investment portfolio based on the underlying instrument type.
The three levels of inputs that may be used to measure fair value are:
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• | Level 1.▪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. |
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• | 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, overnight indexed swap curve, 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.
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• | 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.
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▪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, overnight indexed swap 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.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 75 |
DEBT INVESTMENTSDebt Investments
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.
Marketable debt investments 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 investment itself is used to economically hedge currency exchange rate risk from remeasurement. Investments designated as trading assets are reported at fair value. 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.
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| Financial Statements | Notes to Consolidated Financial Statements | 78 |
Marketable debt investments are considered available-for-sale investments 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. Available-for-sale debt investments with original maturities of approximately three months or less from the date of purchase are classified within cash and cash equivalents. Available-for-sale debt investments with original maturities at the date of purchase greater than approximately three months and remaining maturities of less than one year are classified as short-term investments. Available-for-sale debt investments with remaining maturities beyond one year are classified as other long-term investments. Available-for-sale debt investments are reported at fair value, with unrealized gains or losses, net of tax, recorded in accumulated other comprehensive income (loss). We determine the cost of the investment sold based on an average cost basis at the individual security level, and record the interest income and realized gains or losses on the sale of these investments in interest and other, net.
Our available-for-sale debt investments are subject to periodic impairment reviews. For these investments in an unrealized loss position, we considerdetermine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions. We recognize an allowance for credit losses, up to the amount of the unrealized loss when appropriate, and write down the amortized cost basis of the investment if it is more likely than not that we will be required or we intend to sell the investment before recovery of its amortized cost basis, or whether recovery of the entire amortized cost basis of the investment is unlikely because a credit loss exists. When we do not expect to recover the entire amortized cost basis of the investment, we separate other-than-temporary impairments into amounts representingbasis. Allowances for credit losses whichand write-downs are recognized in interest and other, net, and amountsunrealized losses not related to credit losses which are recognized in other comprehensive income (loss).
EQUITY INVESTMENTSEquity Investments
We regularly invest in equity securities of public and private companies to promote business and strategic objectives. Equity investments are measured and recorded as follows:
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• | ▪Marketable equity securities are equity securities with RDFV that are measured and recorded at fair value on a recurring basis with changes in fair value, whether realized or unrealized, recorded through the income statement. ▪Non-marketable equity securitiesare equity securities without RDFV that are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. ▪ are equity securities with RDFV that are measured and recorded at fair value on a recurring basis with changes in fair value, whether realized or unrealized, recorded through the income statement. Prior to 2018, these securities were classified as available-for-sale securities and measured and recorded at fair value with unrealized changes in fair value recorded through other comprehensive income. |
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• | Non-marketable equity securitiesare equity securities without RDFV that are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. Prior to fiscal 2018, these securities were accounted for using the cost method of accounting, measured at cost less other-than-temporary impairment.
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• | Equity method investments are equity securities in investees we do not control but over which we have the ability to exercise significant influence. Equity method investments are measured at cost minus impairment, if any, plus or minus our share of equity method investee income or loss. Our proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag. |
Realized and unrealized gains and losses resulting from changes in fair value or the sale of our equity investments are recorded in gains (losses) on equity investments, net. Prior to 2018, we recorded unrealized gains and losses through other comprehensive income (loss) and realized gains and losses on the sale, exchange, or impairment of these equity investments through gains (losses) on equity investments, net. The carrying value of our non-marketable equity securities is adjusted for qualifying observable price changes resulting from the issuance of similar or identical securities in an orderly transaction by the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and preferences of the securities. Recording upward and downward adjustments to the carrying value of our equity securities as a result of observable price changes requires quantitative assessments of the fair value of our securities using various valuation methodologies and involves the use of estimates.
Non-marketable equity securities and equity method investments (collectively referred to as non-marketable equity investments) are also subject to periodic impairment reviews. 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 the investee's financial condition and business outlook, industry and sector performance, market for technology, operational and financing cash flow activities, and other relevant events and factors affecting the investee. When indicators of impairment exist, we prepare 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 revenue and costs, and comparable market data of private and public companies, among others.
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FINANCIAL STATEMENTS▪ | Notes to Financial Statements | 76 |
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• | Non-marketable equity securities are tested for impairment using a qualitative model similar to the model used for goodwill and long-lived assets. Upon determining that an impairment may exist, the security's fair value is calculated and compared to its carrying value and an impairment is recognized immediately if the carrying value exceeds the fair value. Prior to 2018, non-marketable equity securities were tested for impairment using the other-than-temporary impairment model.
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• | Equity method investments are subject to periodic impairment reviews using the other-than-temporary impairment model, which considers the severity and duration of a decline in fair value below cost and our ability and intent to hold the investment for a sufficient period of time to allow for recovery. |
Impairments of equity investments are recorded in gains (losses) on equity investments, net.
DERIVATIVE FINANCIAL INSTRUMENTS | | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 79 |
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 other current assets and other long-term 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, including related collateral amounts, 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 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.-dollarUS-dollar equivalent of non-U.S.-dollar-denominatednon-US-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.spending.
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, and are recognized in earnings in interest and other, net.the same income statement line item used to present the earnings effect of the hedged item. If the cash flow hedge transactions become improbable, 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 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.
Non-designated hedges use foreign currency contracts to economically hedge the functional currency equivalent cash flows of recognized monetary assets and liabilities, non-U.S.-dollar-denominatednon-US-dollar-denominated debt instruments classified as trading assets, and non-U.S.-dollar-denominatednon-US-dollar-denominated loans receivablesreceivable recognized at fair value. We also use interest rate contracts to hedge interest rate risk related to our U.S.-dollar-denominatedUS-dollar-denominated fixed-rate debt instrumentsinvestments 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 RECEIVABLELoans 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.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 77 |
CREDIT RISKCredit 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’scounterparty'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.
We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. 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’scounterparty's obligations exceed our obligations with that counterparty. As of December 28, 2019,25, 2021, our total credit exposure to any single counterparty, excluding money market funds invested in U.S.US treasury and U.S.US agency securities and reverse repurchase agreements collateralized by treasury and agency securities, did not exceed $800 million.$2.6 billion. To further reduce credit risk, we enter into collateral security arrangements with certain of our derivative counterparties and obtain and secure available collateral from counterparties against obligations, including securities lending transactions when we deem it appropriate. Cash collateral exchanged under our collateral security arrangements are included in other current assets, other long-term assets, other accrued liabilities, or other long-term liabilities. For reverse repurchase agreements collateralized by other securities, we do not record the collateral as an asset or a liability unless the collateral is repledged.
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| Financial Statements | Notes to Consolidated Financial Statements | 80 |
A substantial majority of our trade receivables are derived from sales to OEMs and ODMs. We also have accounts receivable derived from sales to industrial and communications equipment manufacturers in the computing and communications industries. We believe the net accounts receivable balances from our three largest customers (39%(42% as of December 28, 2019)25, 2021) 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 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 COMBINATIONSBusiness 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 in determining the fair value of the following:
▪inventory; property, plant and equipment; pre-existing liabilities or legal claims; and contingent consideration, each as may be applicable;
▪intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, market segment growth rates, and 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; and
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.
GOODWILLGoodwill
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’sunit'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’sunit's fair value.
Our quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’sunit's fair value. Significant estimates include market segment growth rates, our assumed market segment share, estimated costs,gross margins, operating expenses, 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.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 78 |
IDENTIFIED INTANGIBLE ASSETSIdentified 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 thisthat 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 PLANSEmployee Equity Incentive Plans
We use the straight-line amortization method to recognize share-based compensation expense 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 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 | | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 81 |
For the majority of 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 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.
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’smanagement'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 recognize the tax impact of including certain foreign earnings in U.S.US taxable income as a period cost. We have recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S.non-US earnings or for outside basis differences in our subsidiaries, because we do not plan to indefinitely reinvest such earnings and basis differences. Remittances of non-U.S.non-US 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.non-US and U.S.US 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.non-US earnings, which could be subject to applicable non-U.S.non-US income and withholding taxes.
LOSS CONTINGENCIESLeases
Leases consist of real property and machinery and equipment. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our leased assets and corresponding liabilities. Payments on leases may be fixed or variable, and variable lease payments are based on output of the underlying leased assets.
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. We evaluate developments that could affect the amount of liability that has been previously accrued and reasonably possible losses disclosed, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being, and the estimated amount of, a loss related to such matters.
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NOTE 3 : | RECENT ACCOUNTING STANDARDS |
ACCOUNTING STANDARDS ADOPTED
Leases
Standard/Description: 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 Date and Adoption Considerations: Effective in the first quarter of 2019. The standard was adopted applying the modified retrospective approach at the beginning of the period of adoption. Our leased assets and corresponding liabilities exclude non-lease components.
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| | |
FINANCIAL STATEMENTSNote 3 : | Notes to Financial Statements | 79 |
Effect on Financial Statements or Other Significant Matters: Within the opening balances for the fiscal year beginning December 30, 2018, we recognized leased assets and corresponding liabilities in other long-term assets of $706 million, which includes $81 million of previously recognized prepaid land use rights, as well as corresponding accrued liabilities of $180 million and other long-term liabilities of $445 million.
Accounting Policy Updates and Disclosures: We determine if an arrangement is a lease at inception and classify it as finance or operating. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our leased assets and corresponding liabilities. Leases primarily consist of real property, and, to a lesser extent, certain machinery and equipment.
We recognized leased assets in other long-term assets of $628 million and corresponding accrued liabilities of $175 million, and other long-term liabilities of $375 million as of December 28, 2019. Our leases have remaining terms of 1 to 9 years, some of which may include options to extend the leases for up to 39 years. The weighted average remaining lease term was 4.7 years, and the weighted average discount rate was 3.4% as of December 28, 2019.
For the twelve months ended December 28, 2019, lease expense was $185 million. In accordance with the new leases standard, discounted and undiscounted lease payments under non-cancelable leases as of December 28, 2019, excluding non-lease components, were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 and Thereafter | | Total |
| Lease payments | | $ | 178 |
| | $ | 135 |
| | $ | 97 |
| | $ | 74 |
| | $ | 54 |
| | $ | 57 |
| | $ | 595 |
|
| Present value of lease payments | | | | | | | | | | | | | | $ | 549 |
|
Lease expense was $231 million in 2018 ($264 million in 2017). Prior to our adoption of the new leases standard, future minimum lease payments as of December 29, 2018, which were undiscounted and included lease and non-lease components, were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 and Thereafter | | Total |
| Minimum rental commitments under all non-cancelable leases | | $ | 229 |
| | $ | 181 |
| | $ | 133 |
| | $ | 101 |
| | $ | 70 |
| | $ | 121 |
| | $ | 835 |
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|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 80 |
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NOTE 4 : | OPERATING SEGMENTS |
We manage our business through the following operating segments:
DCG▪CCG
IOTG▪DCG
Mobileye▪IOTG
NSG▪Mobileye
PSG▪NSG
CCG▪PSG
All other
We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone 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 DCG, IOTG, and CCG 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.
We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package, based on Intel architecture. Platform products are used in various form factors across our CCG, DCG, and IOTG operating segments. Our non-platform, or adjacent, products can be combined with platform products to form comprehensive platform solutions to meet customer needs.
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 82 |
CCG and DCG are our reportable operating segments. IOTG, Mobileye, 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. Our Internet of Things portfolio, presented as Internet of Things, is comprised of the IOTG and Mobileye operating segments. For 2021, the results of our Intel Optane memory business are included in our DCG operating segment, and our NSG segment is comprised of our NAND memory business to align to the pending divestiture of our NAND memory business. Refer to "Note 10 : Acquisitions and Divestitures" within Notes to Consolidated Financial Statements for further information on the divestiture.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.
TheWe have an "all other" category that includes revenue, expenses, and expensescharges such as:
| |
• | results of operations from non-reportable segments not otherwise presented; ▪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. |
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• | historical results of operations from divested businesses;
|
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• | results of operations of start-up businesses that support our initiatives, including our foundry business;
|
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• | amounts included within restructuring and other charges;
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• | a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
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• | acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
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The CODM, who is our CEO, allocates resources to and assesses the performance of each operating segment using information about the operating segment's revenue and operating income (loss). 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. Because 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’ssegment'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, theThe accounting policies for segment reporting are the same as for Intel as a whole.
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| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8183 |
Net revenue and operating income (loss) for each period were as follows: |
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Net revenue: | | | | | | |
| Data Center Group | | | | | | |
| Platform | | $ | 21,441 |
| | $ | 21,155 |
| | $ | 17,439 |
|
| Adjacent | | 2,040 |
| | 1,836 |
| | 1,625 |
|
| | | 23,481 |
| | 22,991 |
| | 19,064 |
|
| Internet of Things | | | | | | |
| IOTG | | 3,821 |
| | 3,455 |
| | 3,169 |
|
| Mobileye | | 879 |
| | 698 |
| | 210 |
|
| | | 4,700 |
| | 4,153 |
| | 3,379 |
|
| | | | | | | |
| Non-Volatile Memory Solutions Group | | 4,362 |
| | 4,307 |
| | 3,520 |
|
| Programmable Solutions Group | | 1,987 |
| | 2,123 |
| | 1,902 |
|
| Client Computing Group | | | | | | |
| Platform | | 32,681 |
| | 33,234 |
| | 31,226 |
|
| Adjacent | | 4,465 |
| | 3,770 |
| | 2,777 |
|
| | | 37,146 |
| | 37,004 |
| | 34,003 |
|
| All other | | 289 |
| | 270 |
| | 893 |
|
| Total net revenue | | $ | 71,965 |
| | $ | 70,848 |
| | $ | 62,761 |
|
| | | | | | | |
| Operating income (loss): | | | | | | |
| Data Center Group | | $ | 10,227 |
| | $ | 11,476 |
| | $ | 8,395 |
|
| | | | | | | |
| Internet of Things | | | | | | |
| IOTG | | 1,097 |
| | 980 |
| | 650 |
|
| Mobileye | | 245 |
| | 143 |
| | (28 | ) |
| | | 1,342 |
| | 1,123 |
| | 622 |
|
| | | | | | | |
| Non-Volatile Memory Solutions Group | | (1,176 | ) | | (5 | ) | | (260 | ) |
| Programmable Solutions Group | | 318 |
| | 466 |
| | 458 |
|
| Client Computing Group | | 15,202 |
| | 14,222 |
| | 12,919 |
|
| All other | | (3,878 | ) | | (3,966 | ) | | (4,084 | ) |
| Total operating income | | $ | 22,035 |
| | $ | 23,316 |
| | $ | 18,050 |
|
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Net revenue: | | | | | | |
| Client Computing Group | | | | | | |
| Platform | | $ | 37,376 | | | $ | 35,642 | | | $ | 32,681 | |
| Adjacent | | 3,135 | | | 4,415 | | | 4,465 | |
| | 40,511 | | | 40,057 | | | 37,146 | |
| Data Center Group | | | | | | |
| Platform | | 22,703 | | | 23,056 | | | 21,441 | |
| Adjacent | | 3,118 | | | 3,047 | | | 2,040 | |
| | 25,821 | | | 26,103 | | | 23,481 | |
| Internet of Things | | | | | | |
| IOTG | | 3,998 | | | 3,007 | | | 3,821 | |
| Mobileye | | 1,386 | | | 967 | | | 879 | |
| | 5,384 | | | 3,974 | | | 4,700 | |
| | | | | | |
| Non-Volatile Memory Solutions Group | | 4,306 | | | 5,358 | | | 4,362 | |
| Programmable Solutions Group | | 1,934 | | | 1,853 | | | 1,987 | |
| All other | | 1,068 | | | 522 | | | 289 | |
| Total net revenue | | $ | 79,024 | | | $ | 77,867 | | | $ | 71,965 | |
| | | | | | |
| Operating income (loss): | | | | | | |
| Client Computing Group | | $ | 14,672 | | | $ | 15,129 | | | $ | 15,202 | |
| Data Center Group | | 6,997 | | | 10,571 | | | 10,227 | |
| | | | | | |
| Internet of Things | | | | | | |
| IOTG | | 1,045 | | | 497 | | | 1,097 | |
| Mobileye | | 460 | | | 241 | | | 245 | |
| | 1,505 | | | 738 | | | 1,342 | |
| | | | | | |
| Non-Volatile Memory Solutions Group | | 1,369 | | | 361 | | | (1,176) | |
| Programmable Solutions Group | | 297 | | | 260 | | | 318 | |
| All other | | (5,384) | | | (3,381) | | | (3,878) | |
| Total operating income | | $ | 19,456 | | | $ | 23,678 | | | $ | 22,035 | |
Disaggregated net revenue for each period was as follows:
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Platform revenue | | | | | | |
| CCG notebook platform | | $ | 25,475 | | | $ | 24,903 | | | $ | 20,779 | |
| CCG desktop platform | | 11,835 | | | 10,692 | | | 11,822 | |
CCG other platform1 | | 66 | | | 47 | | | 80 | |
| DCG platform | | 22,703 | | | 23,056 | | | 21,441 | |
| IOTG platform | | 3,658 | | | 2,705 | | | 3,440 | |
| | 63,737 | | | 61,403 | | | 57,562 | |
| | | | | | |
Adjacent revenue2 | | 15,287 | | | 16,464 | | | 14,403 | |
| Total revenue | | $ | 79,024 | | | $ | 77,867 | | | $ | 71,965 | |
|
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Platform revenue | | | | | | |
| DCG platform | | $ | 21,441 |
| | $ | 21,155 |
| | $ | 17,439 |
|
| IOTG platform | | 3,440 |
| | 3,065 |
| | 2,645 |
|
| CCG desktop platform | | 11,822 |
| | 12,220 |
| | 11,647 |
|
| CCG notebook platform | | 20,779 |
| | 20,930 |
| | 19,414 |
|
Other platform1 | | 80 |
| | 84 |
| | 165 |
|
| | | 57,562 |
| | 57,454 |
| | 51,310 |
|
| | | | | | | |
Adjacent revenue2 | | 14,403 |
| | 13,394 |
| | 10,917 |
|
| ISecG divested business | | — |
| | — |
| | 534 |
|
| Total revenue | | $ | 71,965 |
| | $ | 70,848 |
| | $ | 62,761 |
|
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12 Includes all of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products. | Includes our tablet and service provider revenue. |
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2
| Includes all of our non-platform products for DCG, IOTG, and CCG, such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products. |
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| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8284 |
In 2019,2021, our three largest customers accounted for 41%43% of our net revenue (39% in 2018, 40%2020 and 41% in 2017)2019), with Dell Inc. accounting for 21% (17% in 2020 and 17% (16% in 2018, 16% in 2017)2019), Lenovo Group Limited accounting for 13%12% (12% in 2018,2020 and 13% in 2017)2019), and HP Inc. accounting for 11% (11%10% (10% in 2018,2020 and 11% in 2017)2019). These three customers accounted for 39%42% of our accounts receivable as of December 28, 2019 (45%25, 2021 (43% as of December 29, 2018)26, 2020). 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 isregion, based on the billing location of the customer. Revenue from unaffiliated customers for each periodcustomer, was as follows:
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| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| China (including Hong Kong) | | $ | 20,026 |
| | $ | 18,824 |
| | $ | 14,796 |
|
| Singapore | | 15,650 |
| | 15,409 |
| | 14,285 |
|
| United States | | 15,617 |
| | 14,303 |
| | 12,543 |
|
| Taiwan | | 10,058 |
| | 10,646 |
| | 10,518 |
|
| Other countries | | 10,614 |
| | 11,666 |
| | 10,619 |
|
| Total net revenue | | $ | 71,965 |
| | $ | 70,848 |
| | $ | 62,761 |
|
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| China | | $ | 21,141 | | | $ | 20,257 | | | $ | 20,026 | |
| Singapore | | 14,254 | | | 17,845 | | | 15,650 | |
| United States | | 14,107 | | | 16,573 | | | 15,617 | |
| Taiwan | | 13,461 | | | 11,605 | | | 10,058 | |
| Other regions | | 16,061 | | | 11,587 | | | 10,614 | |
| Total net revenue | | $ | 79,024 | | | $ | 77,867 | | | $ | 71,965 | |
|
| | | | |
NOTE 5Note 4 : | EARNINGS PER SHAREEarnings 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. | | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions, Except Per Share Amounts) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Net income available to common stockholders | | $ | 19,868 | | | $ | 20,899 | | | $ | 21,048 | |
| Weighted average shares of common stock outstanding—basic | | 4,059 | | | 4,199 | | | 4,417 | |
| Dilutive effect of employee incentive plans | | 31 | | | 33 | | | 41 | |
| Dilutive effect of convertible debt | | — | | | — | | | 15 | |
| Weighted average shares of common stock outstanding—diluted | | 4,090 | | | 4,232 | | | 4,473 | |
| Earnings per share—basic | | $ | 4.89 | | | $ | 4.98 | | | $ | 4.77 | |
| Earnings per share—diluted | | $ | 4.86 | | | $ | 4.94 | | | $ | 4.71 | |
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.
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| | | | | | | | | | | | |
| Years Ended (In Millions, Except Per Share Amounts) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Net income available to common stockholders | | $ | 21,048 |
| | $ | 21,053 |
| | $ | 9,601 |
|
| Weighted average shares of common stock outstanding—Basic | | 4,417 |
| | 4,611 |
| | 4,701 |
|
| Dilutive effect of employee incentive plans | | 41 |
| | 50 |
| | 47 |
|
| Dilutive effect of convertible debt | | 15 |
| | 40 |
| | 87 |
|
| Weighted average shares of common stock outstanding—Diluted | | 4,473 |
| | 4,701 |
| | 4,835 |
|
| Earnings per share—Basic | | $ | 4.77 |
| | $ | 4.57 |
| | $ | 2.04 |
|
| Earnings per share—Diluted | | $ | 4.71 |
| | $ | 4.48 |
| | $ | 1.99 |
|
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 2006 ESPP. In December 2017,January 2020, we paid cash to satisfyfully redeemed the conversionremaining principal of our convertible debentures due 2035, which we excluded from our diluted earnings per share computation starting in the fourth quarter of 2017 and are no longer dilutive. In November 2019, we issued a notice of redemption for the remaining $372 million of 2009 Debentures with a redemption date of January 9, 2020. Our 2009 Debentures required settlement of the principal amount of the debt in cash upon conversion. Since the conversion premium was paid in cash or stock at our option, we determined the potentially dilutive shares of common stock by applying the treasury stock method.Debentures. We included our 2009 Debentures in the calculation of diluted earnings per share of common stock in all periods presented2019 by applying the treasury stock method because the average market price was above the conversion price.
Securities that would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.
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| | | | |
FINANCIAL STATEMENTSNote 5 : | Notes to Financial Statements | 83Contract Liabilities |
|
| |
NOTE 6 : | CONTRACT LIABILITIES |
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
Prepaid supply agreements
| | $ | 1,805 |
| | $ | 2,587 |
|
| Other | | 236 |
| | 122 |
|
| Total contract liabilities | | $ | 2,041 |
| | $ | 2,709 |
|
Contract liabilities are primarily related toconsist of prepayments received from customers on long-term prepaid customer supply agreements toward future NSG product delivery. The short-term portiondelivery and other revenue deferrals from regular ongoing business activity. Contract liabilities were $498 million as of contract liabilities is reported on the Consolidated Balance Sheets within other accrued liabilities.December 25, 2021 ($1.9 billion as of December 26, 2020).
The following table shows the changes in contract liability balances relating to long-term prepaid customer supply agreements during 2019:2021:
|
| | | | |
| (In Millions) | | |
| Prepaid supply agreements balance as of December 29, 2018 | | $ | 2,587 |
|
| Prepaids utilized | | (782 | ) |
| Prepaid supply agreements balance as of December 28, 2019 | | $ | 1,805 |
|
As new long-term prepaid supply agreements are entered into and performance obligations are negotiated, this component of the contract liability balance will increase, and as customers purchase product and utilize their prepaid balances, the balance will decrease.
We expect our remaining contract liability balance of $1.8 billion to be recognized into revenue over the next 4 years. The timing and amount of future anticipated revenue may vary from our expectations due to changes in supply, demand, and market pricing.
| | | | | | | | |
| (In Millions) | | |
| Prepaid customer supply agreements balance as of December 26, 2020 | | $ | 1,625 | |
| | |
NOTE 7 :Concession payment | OTHER FINANCIAL STATEMENT DETAILS | (950) | |
| Prepaids utilized | | (633) | |
| Prepaid customer supply agreements balance as of December 25, 2021 | | $ | 42 | |
During the first quarter of 2021, we settled an agreement with our largest prepaid customer, whose prepayment balance made up $1.6 billion of our contract liability balance as of December 26, 2020. We returned $950 million to the customer and recognized $584 million in revenue for having completed performance of the prepaid customer supply agreement. The prepaid customer supply agreement is excluded from the NAND memory business and is recorded as Corporate revenue in 2021 in the "all other" category presented in "Note 3: Operating Segments" within the Consolidated Financial Statements.
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 85 |
INVENTORIES | | | | | |
| Note 6 : | Other Financial Statement Details |
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Raw materials | | $ | 840 |
| | $ | 813 |
|
| Work in process | | 6,225 |
| | 4,511 |
|
| Finished goods | | 1,679 |
| | 1,929 |
|
| Total inventories | | $ | 8,744 |
| | $ | 7,253 |
|
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Raw materials | | $ | 1,441 | | | $ | 908 | |
| Work in process | | 6,656 | | | 5,693 | |
| Finished goods | | 2,679 | | | 1,826 | |
| Total inventories | | $ | 10,776 | | | $ | 8,427 | |
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Land and buildings | | $ | 37,743 |
| | $ | 30,954 |
|
| Machinery and equipment | | 74,901 |
| | 66,721 |
|
| Construction in progress | | 16,063 |
| | 16,643 |
|
| Total property, plant and equipment, gross | | 128,707 |
| | 114,318 |
|
Less: accumulated depreciation | | (73,321 | ) | | (65,342 | ) |
| Total property, plant and equipment, net | | $ | 55,386 |
| | $ | 48,976 |
|
Substantially all of ourProperty, Plant and Equipment
| | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Land and buildings | | $ | 40,039 | | | $ | 37,536 | |
| Machinery and equipment | | 86,955 | | | 79,384 | |
| Construction in progress | | 21,545 | | | 17,309 | |
| Total property, plant and equipment, gross | | 148,539 | | | 134,229 | |
| Less: accumulated depreciation | | (85,294) | | | (77,645) | |
| Total property, plant and equipment, net | | $ | 63,245 | | | $ | 56,584 | |
Our depreciable property, plant and equipment assets are depreciated over the following estimated useful lives: machinery and equipment, 2 to 5 years,years; and buildings, 10 to 3025 years.
|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 84 |
Net property, plant and equipment by country at the end of each period was as follows:
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| United States | | $ | 35,262 |
| | $ | 27,512 |
|
| Israel | | 8,463 |
| | 8,861 |
|
| China | | 5,315 |
| | 6,417 |
|
| Ireland | | 3,854 |
| | 3,947 |
|
| Other countries | | 2,492 |
| | 2,239 |
|
| Total property, plant and equipment, net | | $ | 55,386 |
| | $ | 48,976 |
|
| | | | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | |
| United States | | $ | 43,428 | | | $ | 38,829 | | | |
| Israel | | 7,754 | | | 7,837 | | | |
| Ireland | | 7,503 | | | 5,828 | | | |
| | | | | | |
| Other countries | | 4,560 | | | 4,090 | | | |
| Total property, plant and equipment, net | | $ | 63,245 | | | $ | 56,584 | | | |
OTHER LONG-TERM ASSETS |
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Non-current deferred tax assets | | $ | 1,209 |
| | $ | 1,122 |
|
| Pre-payments for property, plant and equipment | | 1,641 |
| | 1,507 |
|
| Loans receivable | | 554 |
| | 479 |
|
| Other | | 2,149 |
| | 1,313 |
|
| Total other long-term assets | | $ | 5,553 |
| | $ | 4,421 |
|
OTHER ACCRUED LIABILITIESOther Accrued Liabilities
Other accrued liabilities include deferred compensation of $2.1$2.8 billion as of December 28, 201925, 2021 ($1.72.5 billion as of December 29, 2018)26, 2020) and collateral received for derivatives under credit support annex agreements of $1.0 billion as of December 25, 2021 ($2.0 billion as of December 26, 2020).
ADVERTISINGAdvertising
Advertising costs, including direct marketing, are expensed as incurred and recorded within MG&A expensesexpenses. Advertising costs were $1.1 billion in 2021 ($763 million in 2020 and $832 million in 2019 ($1.2 billion in 20182019).
Interest and $1.4 billion in 2017).Other, Net
INTEREST AND OTHER, NET
The components of interest and other, net for each period were as follows: |
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Interest income | | $ | 483 |
| | $ | 438 |
| | $ | 441 |
|
| Interest expense | | (489 | ) | | (468 | ) | | (646 | ) |
| Other, net | | 490 |
| | 156 |
| | (144 | ) |
| Total interest and other, net | | $ | 484 |
|
| $ | 126 |
|
| $ | (349 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Interest income | | $ | 144 | | | $ | 272 | | | $ | 483 | |
| Interest expense | | (597) | | | (629) | | | (489) | |
| Other, net | | (29) | | | (147) | | | 490 | |
| Total interest and other, net | | $ | (482) | | | $ | (504) | | | $ | 484 | |
Interest expense in the preceding table is net of $472398 million of interest capitalized in 20192021 ($496338 million in 20182020 and $313$472 million in 2017)2019).
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8586 |
|
| | | | |
NOTE 8Note 7 : | RESTRUCTURING AND OTHER CHARGESRestructuring and Other Charges |
|
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| 2019 Restructuring Program | | $ | 393 |
| | $ | — |
| | $ | — |
|
| 2016 Restructuring Program | | — |
| | (72 | ) | | 135 |
|
| ISecG separation costs and other charges | | — |
| | — |
| | 249 |
|
| Total restructuring and other charges | | $ | 393 |
| | $ | (72 | ) | | $ | 384 |
|
2019 RESTRUCTURING PROGRAM | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Employee severance and benefit arrangements | | $ | 48 | | | $ | 124 | |
| Litigation charges and other | | 2,291 | | | 67 | |
| Asset impairment charges | | 287 | | | 7 | |
| Total restructuring and other charges | | $ | 2,626 | | | $ | 198 | |
A restructuring program was approved in the secondfirst quarter of 20192020 to further align our workforce with our continuing investments in the business and to execute the planned exitdivestiture of the smartphone modem business. We expect theseHome Gateway Platform, a division of CCG. These actions to bewere substantially complete as of September 25, 2021.
Litigation charges and other includes a charge of $2.2 billion in the first quarter of 2021 related to the VLSI Technology LLC (VLSI) litigation, which is recorded as a Corporate charge in the "all other" category presented in "Note 3: Operating Segments" within Notes to Consolidated Financial Statements. Refer to "Note 19: Commitments and Contingencies" within Notes to Consolidated Financial Statements for further information on legal proceedings related to the VLSI litigation.
Asset impairment charges includes impairments related to the shutdown in the second quarter of 2020. 2021 of two of our non-strategic businesses, the results of which are included in the "all other" category presented in "Note 3: Operating Segments" within Notes to Consolidated Financial Statements. The goodwill related to these businesses was impaired, resulting in a charge of $238 million recognized in the second quarter of 2021 in the "all other" category along with other impairment charges related to these businesses.
Restructuring and other charges (benefits) by type for the 2019 Restructuring Program were as follows:
|
| | | | |
| Years Ended (In Millions) | | Dec 28,
2019 |
| Employee severance and benefit arrangements | | $ | 280 |
|
| Asset impairment and other charges | | 113 |
|
| Total restructuring and other charges | | $ | 393 |
|
|
| | | | |
NOTE 9Note 8 : | INCOME TAXESIncome Taxes |
INCOME TAX PROVISIONIncome Tax Provision
Income before taxes and the provision for taxes consisted of the following: |
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Income before taxes: | | | | | | |
| U.S. | | $ | 13,729 |
| | $ | 14,753 |
| | $ | 11,141 |
|
| Non-U.S. | | 10,329 |
| | 8,564 |
| | 9,211 |
|
| Total income before taxes | | 24,058 |
| | 23,317 |
| | 20,352 |
|
| Provision for taxes: | | | | | | |
| Current: | | | | | | |
| Federal | | 1,391 |
| | 2,786 |
| | 8,307 |
|
| State | | 37 |
| | (11 | ) | | 27 |
|
| Non-U.S. | | 1,060 |
| | 1,097 |
| | 899 |
|
| Total current provision for taxes | | 2,488 |
| | 3,872 |
| | 9,233 |
|
| Deferred: | | | | | | |
| Federal | | 597 |
| | (1,389 | ) | | 1,680 |
|
| Other | | (75 | ) | | (219 | ) | | (162 | ) |
| Total deferred provision for taxes | | 522 |
| | (1,608 | ) | | 1,518 |
|
| Total provision for taxes | | $ | 3,010 |
| | $ | 2,264 |
| | $ | 10,751 |
|
| Effective tax rate | | 12.5 | % | | 9.7 | % | | 52.8 | % |
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Income before taxes: | | | | | | |
| US | | $ | 9,361 | | | $ | 15,452 | | | $ | 13,729 | |
| Non-US | | 12,342 | | | 9,626 | | | 10,329 | |
| Total income before taxes | | 21,703 | | | 25,078 | | | 24,058 | |
| Provision for taxes: | | | | | | |
| Current: | | | | | | |
| Federal | | 1,304 | | | 1,120 | | | 1,391 | |
| State | | 75 | | | 46 | | | 37 | |
| Non-US | | 1,198 | | | 1,244 | | | 1,060 | |
| Total current provision for taxes | | 2,577 | | | 2,410 | | | 2,488 | |
| Deferred: | | | | | | |
| Federal | | (863) | | | 1,369 | | | 597 | |
| State | | (25) | | | 25 | | | 1 | |
| Non-US | | 146 | | | 375 | | | (76) | |
| Total deferred provision for taxes | | (742) | | | 1,769 | | | 522 | |
| Total provision for taxes | | $ | 1,835 | | | $ | 4,179 | | | $ | 3,010 | |
| Effective tax rate | | 8.5 | % | | 16.7 | % | | 12.5 | % |
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8687 |
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 | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Statutory federal income tax rate | | 21.0 | % | | 21.0 | % | | 35.0 | % |
| Increase (reduction) in rate resulting from: | | | | | | |
| Non-U.S. income taxed at different rates | | (3.7 | ) | | (3.6 | ) | | (7.6 | ) |
| Research and development tax credits | | (2.3 | ) | | (2.7 | ) | | (2.3 | ) |
| Domestic manufacturing deduction benefit | | — |
| | — |
| | (1.3 | ) |
| Foreign derived intangible income benefit | | (3.2 | ) | | (3.7 | ) | | — |
|
| Tax Reform | | — |
| | (1.3 | ) | | 26.8 |
|
| ISecG divestiture | | — |
| | — |
| | 3.3 |
|
| Other | | 0.7 |
| | (0.1 | ) | | (1.1 | ) |
| Effective tax rate | | 12.5 | % | | 9.7 | % | | 52.8 | % |
The majority of the increase in our | | | | | | | | | | | | | | | | | | | | |
| Years Ended | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Statutory federal income tax rate | | 21.0 | % | | 21.0 | % | | 21.0 | % |
| Increase (reduction) in rate resulting from: | | | | | | |
| Non-US income taxed at different rates | | (5.9) | | | (3.7) | | | (3.7) | |
| Research and development tax credits | | (2.4) | | | (2.1) | | | (2.3) | |
| Restructuring of certain non-U.S. subsidiaries | | (3.4) | | | — | | | — | |
| Foreign derived intangible income benefit | | (2.2) | | | (1.9) | | | (3.2) | |
| Change in permanent reinvestment assertion | | — | | | 1.6 | | | — | |
| | | | | | |
| | | | | | |
| Other | | 1.4 | | | 1.8 | | | 0.7 | |
| Effective tax rate | | 8.5 | % | | 16.7 | % | | 12.5 | % |
Our effective tax rate decreased in 20192021 compared to 2018 was2020, primarily driven by one-time tax benefits that occurreddue to the restructuring of certain non-US subsidiaries as well as a higher proportion of our income in 2018.
non-US jurisdictions. As a result of the restructuring, we established deferred tax assets and released the valuation allowances of certain foreign deferred tax assets. The majority of these deferred tax assets established in 2021 fully offset the decreasedeferred tax liabilities recognized in 2020 driven by a change in our permanent reinvestment assertion with respect to undistributed earnings in China, as a result of the planned divestiture of our NAND memory business.
Our effective tax rate increased in 20182020 compared to 2017 resulted from initial tax expense from Tax Reform and the tax impacts from the ISecG divestiture that we had2019, primarily driven by a change in 2017, but notour permanent reinvestment assertion with respect to undistributed earnings in 2018. The reductionChina, as a result of the U.S. statutory rate, combined withplanned divestiture of our NAND memory business. It also increased due to the net impact of the enactment or repeal of specific tax law provisions through Tax Reform, drove the remaining decreasereduction in our effective tax rateforeign derived intangible income benefit in 2018.2020.
We derive the effective tax rate benefit attributed to non-U.S.non-US income taxed at different rates primarily from our operations in China, Hong Kong, Ireland, Israel, and Israel.Malaysia. The statutory tax rates in these jurisdictions range from 12.5% to 25.0%24.0%. In addition, weWe are subject to reduced tax rates in ChinaIsrael and IsraelMalaysia as long as we conduct certain eligible activities and make certain capital investments. TheseWe have conditional reduced tax rates that expire at various dates through 20262056 and we expect to apply for renewals upon expiration.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8788 |
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) | | Dec 28,
2019 | | Dec 29,
2018 |
| Deferred tax assets: | | | | |
| Accrued compensation and other benefits | | $ | 740 |
| | $ | 570 |
|
| Share-based compensation | | 294 |
| | 273 |
|
| Inventory | | 760 |
| | 517 |
|
| State credits and net operating losses | | 1,511 |
| | 1,297 |
|
| Other, net | | 515 |
| | 512 |
|
| Gross deferred tax assets | | 3,820 |
| | 3,169 |
|
| Valuation allowance | | (1,534 | ) | | (1,302 | ) |
| Total deferred tax assets | | 2,286 |
| | 1,867 |
|
| Deferred tax liabilities: | | | | |
| Property, plant and equipment | | (1,807 | ) | | (878 | ) |
| Licenses and intangibles | | (720 | ) | | (744 | ) |
| Convertible debt | | (88 | ) | | (204 | ) |
| Unrealized gains on investments and derivatives | | (292 | ) | | (266 | ) |
| Other, net | | (214 | ) | | (318 | ) |
| Total deferred tax liabilities | | (3,121 | ) | | (2,410 | ) |
| Net deferred tax assets (liabilities) | | $ | (835 | ) | | $ | (543 | ) |
| | | | | |
| Reported as: | | | | |
| Deferred tax assets | | 1,209 |
| | 1,122 |
|
| Deferred tax liabilities | | (2,044 | ) | | (1,665 | ) |
| Net deferred tax assets (liabilities) | | $ | (835 | ) | | $ | (543 | ) |
| | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Deferred tax assets: | | | | |
| Accrued compensation and other benefits | | $ | 1,019 | | | $ | 865 | |
| Share-based compensation | | 477 | | | 324 | |
| Litigation charge | | 467 | | | — | |
| Inventory | | 914 | | | 835 | |
| R&D expenditures capitalization | | 519 | | | — | |
| State credits and net operating losses | | 2,010 | | | 1,829 | |
| Other, net | | 819 | | | 617 | |
| Gross deferred tax assets | | 6,225 | | | 4,470 | |
| Valuation allowance | | (2,259) | | | (1,963) | |
| Total deferred tax assets | | 3,966 | | | 2,507 | |
| Deferred tax liabilities: | | | | |
| Property, plant and equipment | | (4,213) | | | (3,109) | |
| Licenses and intangibles | | (486) | | | (725) | |
| | | | |
| Unrealized gains on investments and derivatives | | (819) | | | (735) | |
| Unremitted earnings of non-US subsidiaries | | — | | | (403) | |
| Other, net | | (241) | | | (146) | |
| Total deferred tax liabilities | | (5,759) | | | (5,118) | |
| Net deferred tax assets (liabilities) | | $ | (1,793) | | | $ | (2,611) | |
| | | | |
| Reported as: | | | | |
| Deferred tax assets | | 874 | | | 1,232 | |
| Deferred tax liabilities | | (2,667) | | | (3,843) | |
| Net deferred tax assets (liabilities) | | $ | (1,793) | | | $ | (2,611) | |
Change in valuation allowance for deferred tax assets were as follows:
|
| | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Balance at Beginning of Year | | Additions Charged to Expenses/ Other Accounts | | Net (Deductions) Recoveries | | Balance at End of Year |
| Valuation allowance for deferred tax assets | | | | | | | | |
| December 28, 2019 | | $ | 1,302 |
| | $ | 239 |
| | $ | (7 | ) | | $ | 1,534 |
|
| December 29, 2018 | | $ | 1,171 |
| | $ | 185 |
| | $ | (54 | ) | | $ | 1,302 |
|
| December 30, 2017 | | $ | 953 |
| | $ | 237 |
| | $ | (19 | ) | | $ | 1,171 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Balance at Beginning of Year | | Additions Charged to Expenses/
Other Accounts | | Net
(Deductions)
Recoveries | | Balance at
End of Year |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Valuation allowance for deferred tax assets | | | | | | | | |
| December 25, 2021 | | $ | 1,963 | | | $ | 442 | | | $ | (146) | | | $ | 2,259 | |
| December 26, 2020 | | $ | 1,534 | | | $ | 378 | | | $ | 51 | | | $ | 1,963 | |
| December 28, 2019 | | $ | 1,302 | | | $ | 239 | | | $ | (7) | | | $ | 1,534 | |
Deferred tax assets are included within other long-term assets on the Consolidated Balance Sheets.
The valuation allowance as of December 28, 201925, 2021 included allowances primarily related to unrealized state credit carryforwards of $1.5$2.0 billion.
As of December 28, 2019,25, 2021, our federal and non-U.S.non-US net operating loss carryforwards for income tax purposes were $427$644 million and $357 million,$1.1 billion, respectively. Most of the non-U.S.non-US net operating loss carryforwards have no expiration date. The remaining non-U.S.non-US and some U.S.US federal and state net operating loss carryforwards expire at various dates through 2040. A significant amount of the net operating loss carryforwards in the U.S.US relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. The federal and non-US net operating loss carryforwards include $357 million and $860 million, respectively, that is not likely to be recovered and has been reduced by a valuation allowance.
At December 28, 2019,25, 2021, we have undistributed earnings of certain foreign subsidiaries of approximately $22.0$18.9 billion that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 8889 |
Current income taxes receivable of $76$23 million as of December 28, 201925, 2021 ($162131 million as of December 29, 2018)26, 2020) are included in other current assets. Current income taxes payable of $575$1.1 billion as of December 25, 2021 ($756 million as of December 28, 2019 ($366.0 million as of December 29, 2018)26, 2020) are included in other accrued liabilities.
Long-term income taxes payable of $4.9$4.3 billion as of December 28, 201925, 2021 ($4.94.6 billion as of December 29, 2018) includes uncertain tax positions, reduced by the associated federal deduction for state taxes and non-U.S. tax credits. Long-term income taxes payable may also include other long-term tax liabilities that are not uncertain but have not yet been paid, including the substantial majority26, 2020) is primarily comprised of the transition tax from Tax Reform, which is payable over eight years beginning in 2018.2018, as well as amounts for uncertain tax positions, reduced by the associated deduction for state taxes and non-US tax credits.
UNCERTAIN TAX POSITIONSUncertain Tax Positions
Unrecognized tax benefits were $548 million as of December 28, 2019 ($283 million as of December 29, 2018 and $211 million as of December 30, 2017). | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Beginning gross unrecognized tax benefits | | $ | 828 | | | $ | 548 | | | $ | 283 | |
| Settlements and effective settlements with tax authorities | | (25) | | | (142) | | | (4) | |
| | | | | | |
| Changes in balances related to tax position taken during prior periods | | (26) | | | 165 | | 122 | |
| | | | | | |
| Changes in balances related to tax position taken during current period | | 243 | | 257 | | 147 |
| Ending gross unrecognized tax benefits | | $ | 1,020 | | | $ | 828 | | | $ | 548 | |
If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result in a tax benefit of $454$721 million as of December 28, 201925, 2021 ($178550 million as of December 29, 2018)26, 2020) and a reduction in the effective tax rate. The tax benefit for settlements, effective settlements, and remeasurements was insignificant in all periods presented. 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 the various jurisdictions.jurisdictions in which we conduct business. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S.US federal and non-U.S.non-US tax audits may be concluded within the next 12 months, which could increase or decrease the balance of our gross unrecognized tax benefits. We estimate that the unrecognized tax benefits as of December 28, 201925, 2021 could decrease by as much as $300$327 million in the next 12 months.
We file federal, state, and non-U.S.non-US tax returns. Excluding pre-acquisition Altera tax years, we are no longer subject to U.S.US federal and non-U.S.non-US tax examinations for years prior to 2012.2013. For U.S.US state tax returns, we are no longer subject to tax examination for years prior to 2012. We are subject to U.S. federal examination for pre-acquisition Altera tax years back 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 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 2019, the Ninth Circuit Court of Appeals issued its opinion on the Altera litigation in favor of the government. We filed a petition for rehearing to the Ninth Circuit Court of Appeals, which was declined in the fourth quarter of 2019. We are currently assessing next steps.2014.
|
| | | | |
NOTE 10Note 9 : | INVESTMENTSInvestments |
DEBT INVESTMENTSDebt Investments
Trading Assets
Net gains related toFor trading assets still held at the reporting date, werewe recorded net losses of $606 million in 2021 (net gains of $694 million in 2020 and net gains of $26 million in 2019 (net losses of $188 million in 2018 and net gains of $414 million in 2017)2019). Net gains on the related derivatives were $609 million in 2021 (net losses of $667 million in 2020 and net gains of $22 million in 2019 (net gains of $163 million in 2018 and net losses of $422 million in 2017)2019).
Available-for-Sale Debt Investments
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 28, 2019 | | December 29, 2018 |
| (In Millions) | | Adjusted Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Adjusted Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| Corporate debt | | $ | 2,914 |
| | $ | 44 |
| | $ | — |
| | $ | 2,958 |
| | $ | 3,068 |
| | $ | 2 |
| | $ | (28 | ) | | $ | 3,042 |
|
| Financial institution instruments | | 3,007 |
| | 15 |
| | (1 | ) | | 3,021 |
| | 3,076 |
| | 3 |
| | (11 | ) | | 3,068 |
|
| Government debt | | 560 |
| | 4 |
| | — |
| | 564 |
| | 1,069 |
| | 1 |
| | (9 | ) | | 1,061 |
|
| Total available-for-sale debt investments | | $ | 6,481 |
| | $ | 63 |
| | $ | (1 | ) | | $ | 6,543 |
| | $ | 7,213 |
| | $ | 6 |
| | $ | (48 | ) | | $ | 7,171 |
|
Available-for-sale investments include corporate debt, government debt, and financial institution instruments. Government debt includes instruments such as non-U.S.non-US government bonds and U.S.US 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. SubstantiallyAs of December 25, 2021 and December 26, 2020, substantially all time deposits were issued by institutions outside the U.S.US. The adjusted cost of our available-for-sale investments was $5.0 billion as of December 28, 2019and25, 2021 ($7.8 billion as of December 29, 2018.26, 2020). The adjusted cost of our available-for-sale investments approximated the fair value for these periods.
|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 89 |
The fair values of available-for-sale debt investments by contractual maturity as of December 28, 201925, 2021 were as follows:
| | | | | | | | |
| (In Millions) | | Fair Value |
| Due in 1 year or less | | $ | 2,931 | |
| Due in 1–2 years | | 559 | |
| Due in 2–5 years | | 281 | |
| Due after 5 years | | — | |
| Instruments not due at a single maturity date | | 1,216 | |
| Total | | $ | 4,987 | |
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 90 |
|
| | | | |
| (In Millions) | | Fair Value |
| Due in 1 year or less | | $ | 2,203 |
|
| Due in 1–2 years | | 1,065 |
|
| Due in 2–5 years | | 2,171 |
|
| Due after 5 years | | 40 |
|
| Instruments not due at a single maturity date | | 1,064 |
|
| Total | | $ | 6,543 |
|
EQUITY INVESTMENTS
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Marketable equity securities | | $ | 450 |
| | $ | 1,440 |
|
| Non-marketable equity securities | | 3,480 |
| | 2,978 |
|
| Equity method investments | | 37 |
| | 1,624 |
|
| Total | | $ | 3,967 |
| | $ | 6,042 |
|
| | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Marketable equity securities | | $ | 2,171 | | | $ | 1,830 | |
| Non-marketable equity securities | | 4,111 | | | 3,304 | |
| Equity method investments | | 16 | | | 18 | |
| Total | | $ | 6,298 | | | $ | 5,152 | |
The components of gains (losses) on equity investments, net for each period were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Ongoing mark-to-market adjustments on marketable equity securities | | $ | (130) | | | $ | (133) | | | $ | 277 | |
| Observable price adjustments on non-marketable equity securities | | 750 | | | 176 | | | 293 | |
| Impairment charges | | (154) | | | (303) | | | (122) | |
Sale of equity investments and other 1 | | 2,263 | | | 2,164 | | | 1,091 | |
| Total gains (losses) on equity investments, net | | $ | 2,729 | | | $ | 1,904 | | | $ | 1,539 | |
1 |
| | | | | | | | | | | | |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
Ongoing mark-to-market adjustments on marketable equity securities1 | | $ | 277 |
| | $ | (129 | ) | | — |
|
Observable price adjustments on non-marketable equity securities1 | | 293 |
| | 202 |
| | — |
|
| Impairment charges | | (122 | ) | | (424 | ) | | (833 | ) |
Sale of equity investments and other 2 | | 1,091 |
| | 226 |
| | 3,484 |
|
| Total gains (losses) on equity investments, net | | $ | 1,539 |
| | $ | (125 | ) | | $ | 2,651 |
|
| |
1
| Ongoing mark-to-market adjustments and observable price adjustments relate to the new financial instruments standard adopted in the first quarter of 2018, and are not applicable in prior periods. |
| |
2
| Sale of equity investments and other includes realized gains (losses) on sales of non-marketable equity investments, our share of equity method investee gains (losses), and initial fair value adjustments recorded upon a security becoming marketable. In 2017, sales of equity investments and other also included realized gains (losses) on sales of available-for-sale equity securities, which are reflected in ongoing mark-to-market adjustments on marketable equity securities subsequent to 2017. |
In 2019, we recognized $293 million in observable price adjustments ($202 million in observable price adjustments in 2018).recorded upon a security becoming marketable, realized gains (losses) on sales of non-marketable equity investments, and our share of equity method investee gains (losses) and distributions.
In 2019,2021, we also recognized impairments of $122$154 million on non-marketable equity securities ($132290 million in 20182020 and $555$122 million in 2017)2019). During
As of December 25, 2021 the second quartercumulative amount of 2017, we determined we had an other-than-temporary decline in theimpairments for equity securities without readily determinable fair value of our investment in Cloudera Inc.is $916 million and recognized an impairment charge of $278 million.upward observable price adjustments were $1.1 billion.
In 2019, we recognized 0 equity method investee losses ($153 million in 2018 and $223 million in 2017).
GainsNet unrealized gains and losses for our marketable and non-marketable equity securities during each period were as follows:
|
| | | | | | | | |
| (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Net gains (losses) recognized during the period on equity securities | | $ | 734 |
| | $ | 298 |
|
| Less: Net (gains) losses recognized during the period on equity securities sold during the period | | (424 | ) | | (445 | ) |
| Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date | | $ | 310 |
| | $ | (147 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| (In Millions) | | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Net gains (losses) recognized during the period on equity securities | | | $ | 1,210 | | | $ | 1,679 | | | $ | 734 | |
| Less: Net (gains) losses recognized during the period on equity securities sold during the period | | | (259) | | | (254) | | | (424) | |
| Net unrealized gains (losses) recognized during the period on equity securities still held at the reporting date | | | $ | 951 | | | $ | 1,425 | | | $ | 310 | |
ASMLMcAfee Corp.
AsMcAfee completed its initial public offering in October 2020. Due to our 41% ownership and significant influence as of December 29, 2018, Intel owned25, 2021, we account for it as an equity method investment. We had no accounting carrying value as of December 25, 2021 and as of December 26, 2020. During 2021, we recognized McAfee dividends of $1.3 billion, which includes a special dividend of $1.1 billion of sharespaid in ASML, all of which we sold in 2019. During 2017, we recognized $3.4 billion in realized gains on sales of a portion of our interest in ASML.
|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 90 |
IMFT
IMFT was formed in 2006 by Micron and Intel to jointly develop NAND flash memory and 3D XPoint™ technology products. IMFT was an unconsolidated variable interest entity and all costs of IMFT were passed on to Micron and Intel throughconnection with the sale of products or services in proportional share of ownership. IMFT depended on MicronMcAfee's Enterprise Business to Symphony Technology Group and Intel for any additional cash needs to be provided in the form of cash calls or MDF. During the third quarter of 2018, we recognized an impairment charge of $290$228 million related to IMFT. As of December 29, 2018, we had a carrying value of $1.6 billion in IMFT and owned a 49% interest in the entity. Our proportional share of IMFT costs was approximately $550 million in 2019 (approximately $494 million in 2018 and $415 million in 2017).
In January 2019, Micron exercised its right to call our interest in IMFT and on October 31, 2019, Intel sold its non-controlling interest in IMFT to Micron. With thepartial sale of our interestinvestment in IMFT and MDF repayment throughout the year, we received $1.7 billion in cash proceeds during 2019. With the saleMcAfee. We recognized McAfee dividends of our interest, we reported a gain of $107$126 million in the fourth quarter of 2019. We will continue to purchase products manufactured by Micron at the IMFT facility under established supply agreements.
McAfee
During the second quarter of 2017, we closed our divestiture of the ISecG business2020 and retained a49% interest in McAfee as partial consideration. Our investment is accounted for under the equity method of accounting. During 2019, we received $632 million in dividend distributions from McAfee. During 2017, we received $735 million in dividend distributions from McAfee. As of December 28, 2019, we had 0 accounting carrying value in McAfee. For further information related2019.
In November 2021, McAfee announced an agreement to the divestiture of the ISecG business, see "Note 11: Acquisitions and Divestitures."be acquired by an investor group, which is subject to closing conditions.
Beijing Unisoc Technology Ltd. (Unisoc)
During 2015, we invested $966 million for a minority stake of Beijing UniSpreadtrum Technology Ltd., a holding company under Tsinghua Unigroup Ltd. During 2017, we reduced our expectation of the company's future operating performance due to competitive pressures, which resulted in an impairment charge of $308 million. Beijing UniSpreadtrum Technology Ltd. and RDA Microelectronics subsequently merged and rebranded themselves as Unisoc. We account for our interest in Beijing Unisoc Technology Ltd. (Unisoc) as a non-marketable equity security. The second phaseIn the first quarter of 2021, we recognized $471 million in observable price adjustments in our investment in Unisoc and as of December 25, 2021, the net book value of the investment required additional funding of approximately $500 million. However,was $1.1 billion ($658 million as of October 2019, this obligation has been terminated by mutual agreement.December 26, 2020).
|
| | | | |
NOTE 11Note 10 : | ACQUISITIONS AND DIVESTITURESAcquisitions and Divestitures |
ACQUISITIONSAcquisitions
We completed 54 acquisitions in both 20192021 and 2018,6 acquisitions in 2020, all of which qualified as business combinations. Except for the acquisition of Habana Labs, these acquisitions are not significant to our results of operations, individually or in the aggregate. The consideration for the acquisitions in 20192021 and 20182020 primarily consisted of cash and was allocated to goodwill and identified intangible assets. For information on the assignment of goodwill to our operating segments, see "Note 12:11: Goodwill," and for information on the classification of intangible assets, see "Note 13:12: Identified Intangible Assets."
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 91 |
Moovit
On December 12, 2019,May 4, 2020, we acquired Habana Labs, an Israel-based developerMoovit, a MaaS solutions company, for total consideration of programmable deep learning accelerators targeting AI workloads in the data center. Habana Labs strengthens our AI portfolio and accelerates our efforts to capitalize on the nascent, fast-growing AI silicon market opportunity. Total consideration to acquire Habana Labs was $1.7 billion.$915 million. The fair values of the assets acquired relate to goodwill of $1.5 billion$638 million and acquisition-related intangible assets of $250 million, which was primarily in-process research and development.$331 million. The goodwill and operating results of Habana Labs are included in our DCG operating segment.
Goodwill of $1.5 billion arising from the acquisition is attributed to the expected synergies and other benefits that will be generated from the combination of Intel and Habana Labs.Moovit. Substantially all of the goodwill recognized iswill not be deductible for local tax purposes. The acquisition-related intangible assets are primarily related to Moovit's monthly active user base and application platform. The goodwill and operating results of Moovit are included in our Mobileye operating segment.
Divestitures
NAND Memory Business
In October 2020, we signed an agreement with SK hynix Inc. (SK hynix) to divest our NAND memory business for $9.0 billion in cash. The NAND memory business includes our NAND memory fabrication facility in Dalian, China and certain related equipment and tangible assets (the Fab Assets), our NAND SSD business (the NAND SSD Business), and our NAND memory technology and manufacturing business (the NAND OpCo Business). The transaction will be completed in two closings.
The first closing was completed on December 29, 2021, subsequent to our fiscal 2021 year-end. At first closing, SK hynix paid $7.0 billion of consideration, with the remaining $2.0 billion to be received at the second closing of the transaction, expected to be deductibleno earlier than March 2025. In connection with the first closing, we expect to recognize a pre-tax gain of approximately $1.0 billion within interest and other, net, and tax expense of approximately $450 million. Based on our ongoing obligation under the NAND wafer manufacturing and sale agreement, approximately $600 million of the initial closing consideration will be deferred and recognized between first and second closing within interest and other, net.
At the first closing, we sold to SK hynix the Fab Assets and the NAND SSD Business and transferred certain employees, IP, and other assets related to the NAND OpCo Business to separately created wholly owned subsidiaries of Intel. The equity interest of the NAND OpCo Business will transfer to SK hynix at the second closing. In connection with the first closing, we and certain affiliates of SK hynix also entered into a NAND wafer manufacturing and sale agreement, pursuant to which we will manufacture and sell to SK hynix NAND memory wafers to be manufactured using the Fab Assets in Dalian, China until the second closing. We have concluded based on the terms of the transaction agreements that the subsidiaries will be variable interest entities for tax purposes.which we are not the primary beneficiary, because the governance structure of these entities does not allow us to direct the activities that would most significantly impact their economic performance. In line with this conclusion, we will fully deconsolidate our ongoing interests in the NAND OpCo Business in the first quarter of 2022, and will record a receivable for the second closing proceeds of $1.9 billion.
| | | | | | | | | | | | | | |
| (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 |
| Inventories | | $ | 953 | | | $ | 962 | |
| Property, plant and equipment, net | | 5,989 | | | 4,363 | |
| Total assets | | $ | 6,942 | | | $ | 5,325 | |
|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 91 |
Home Gateway Platform Division
DIVESTITURESOn July 31, 2020, we completed the divestiture of the majority of Home Gateway Platform, a division of CCG, for proceeds of $150 million. The divestiture included the transfer of certain employees, equipment, and an ongoing supply agreement for future units.
Smartphone Modem Business
On December 2, 2019, we completed the divestiture of the majority of our smartphone modem business, including certain employees, IP, equipment, and leases. Net assets sold were $267 million. We recognized a pre-tax gain of $690 million on the divestiture.
Wind River | | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 92 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In Millions) | | Dec 26, 2020 | | Acquisitions | | | | Other | | Dec 25, 2021 |
| Client Computing Group | | $ | 4,360 | | | $ | 73 | | | | | $ | — | | | $ | 4,433 | |
| Data Center Group | | 7,232 | | | 123 | | | | | — | | | 7,355 | |
| Internet of Things Group | | 1,591 | | | — | | | | | — | | | 1,591 | |
| Mobileye | | 10,928 | | | — | | | | | — | | | 10,928 | |
| Programmable Solutions Group | | 2,622 | | | — | | | | | 34 | | | 2,656 | |
| | | | | | | | | | |
| All other | | 238 | | | — | | | | | (238) | | | — | |
| Total | | $ | 26,971 | | | $ | 196 | | | | | $ | (204) | | | $ | 26,963 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | Dec 28, 2019 | | Acquisitions | | | | Other | | Dec 26, 2020 |
| Client Computing Group | | $ | 4,333 | | | $ | 27 | | | | | $ | — | | | $ | 4,360 | |
| Data Center Group | | 7,182 | | | 50 | | | | | — | | | 7,232 | |
| Internet of Things Group | | 1,579 | | | 12 | | | | — | | | 1,591 |
| Mobileye | | 10,290 | | | 638 | | | | — | | | 10,928 |
| Programmable Solutions Group | | 2,654 | | | 2 | | | | (34) | | | 2,622 |
| | | | | | | | | | |
| All other | | 238 | | | — | | | | | — | | | 238 |
| Total | | $ | 26,276 | | | $ | 729 | | | | | $ | (34) | | | $ | 26,971 | |
During the second quarter of 2018, we completed the divestiture of Wind River and recognized a pre-tax gain of $494 million.
Intel Security Group
During the second quarter of 2017, we closed the transaction with TPG VII Manta Holdings, L.P., now known as Manta Holdings, L.P., transferring certain assets and liabilities relating to ISecG to a newly formed, jointly owned, separate cybersecurity company called McAfee. As of the transaction close date,2021, we recognized a pre-tax gaingoodwill impairment loss of $387$238 million related to two non-strategic businesses that we exited, recorded 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.
Goodwill activity for each period was as follows: |
| | | | | | | | | | | | | | | | | | | | |
(In Millions) | | Dec 29,
2018 | | Acquisitions | | Transfers | | Other | | Dec 28,
2019 |
| Data Center Group | | $ | 5,424 |
| | $ | 1,758 |
| | $ | — |
| | $ | — |
| | $ | 7,155 |
|
| Internet of Things Group | | 1,579 |
| | — |
| | — |
| | — |
| | 1,579 |
|
| Mobileye | | 10,290 |
| | — |
| | — |
| | — |
| | 10,290 |
|
| Programmable Solutions Group | | 2,579 |
| | 67 |
| | — |
| | 8 |
| | 2,681 |
|
| Client Computing Group | | 4,403 |
| | — |
| | — |
| | (70 | ) | | 4,333 |
|
| All other | | 238 |
| | — |
| | — |
| | — |
| | 238 |
|
| Total | | $ | 24,513 |
| | $ | 1,825 |
| | $ | — |
| | $ | (62 | ) | | $ | 26,276 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | Dec 30,
2017 | | Acquisitions | | Transfers | | Other | | Dec 29,
2018 |
| Data Center Group | | $ | 5,421 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | 5,424 |
|
| Internet of Things Group | | 1,126 |
| | 16 | | 480 |
| | (43 | ) | | 1,579 |
| Mobileye | | 10,278 |
| | 7 | | — |
| | 5 |
| | 10,290 |
| Programmable Solutions Group | | 2,490 |
| | 89 | | — |
| | — |
| | 2,579 |
| Client Computing Group | | 4,356 |
| | 47 | | — |
| | — |
| | 4,403 |
| All other | | 718 |
| | — |
| | (480) | | — |
| | 238 |
| Total | | $ | 24,389 |
| | $ | 162 |
| | $ | — |
| | $ | (38 | ) | | $ | 24,513 |
|
During the third quarter of 2018, we made an organizational change to combine our AI investments in edge computing with IOTG; accordingly, approximately $480 million of goodwill was reallocated from "all other" to the IOTG operating segment.
category. During the fourth quarters of 20192021 and 2018,2020, we completed our annual impairment assessments and we concluded that goodwill was not impaired in either of these years.impaired. The accumulated impairment loss as of December 28, 201925, 2021 was $719$957 million: $365 million associated with CCG, $275 million associated with DCG, and $79 million associated with IOTG.IOTG, and the remainder associated with non-reportable segments.
|
| | | | |
FINANCIAL STATEMENTSNote 12 : | Notes to Financial Statements | 92 |
|
| |
NOTE 13 : | IDENTIFIED INTANGIBLE ASSETS |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 28, 2019 | | December 29, 2018 |
| (In Millions) | | Gross Assets | | Accumulated Amortization | | Net | | Gross Assets | | Accumulated Amortization | | Net |
| Developed technology | | $ | 9,407 |
| | $ | (3,801 | ) | | $ | 5,606 |
| | $ | 9,611 |
| | $ | (3,021 | ) | | $ | 6,590 |
|
| Customer relationships and brands | | 2,160 |
| | (708 | ) | | 1,452 |
| | 2,179 |
| | (527 | ) | | 1,652 |
|
| Licensed technology and patents | | 2,975 |
| | (1,455 | ) | | 1,520 |
| | 2,932 |
| | (1,406 | ) | | 1,526 |
|
| In-process R&D | | 1,664 |
| | — |
| | 1,664 |
| | 1,497 |
| | — |
| | 1,497 |
|
| Other non-amortizing intangibles | | 585 |
| | — |
| | 585 |
| | 571 |
| | — |
| | 571 |
|
| Total identified intangible assets | | $ | 16,791 |
| | $ | (5,964 | ) | | $ | 10,827 |
| | $ | 16,790 |
| | $ | (4,954 | ) | | $ | 11,836 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 25, 2021 | | December 26, 2020 |
| (In Millions) | | Gross Assets | | Accumulated Amortization | | Net | | Gross Assets | | Accumulated Amortization | | Net |
| Developed technology | | $ | 11,102 | | | $ | (6,026) | | | $ | 5,076 | | | $ | 10,188 | | | $ | (4,880) | | | $ | 5,308 | |
| Customer relationships and brands | | 2,110 | | | (1,063) | | | 1,047 | | | 2,110 | | | (854) | | | 1,256 | |
| Licensed technology and patents | | 2,893 | | | (1,746) | | | 1,147 | | | 2,836 | | | (1,629) | | | 1,207 | |
| In-process R&D | | — | | | — | | | — | | | 954 | | | — | | | 954 | |
| Other non-amortizing intangibles | | — | | | — | | | — | | | 301 | | | — | | | 301 | |
| Total identified intangible assets | | $ | 16,105 | | | $ | (8,835) | | | $ | 7,270 | | | $ | 16,389 | | | $ | (7,363) | | | $ | 9,026 | |
Amortization expenses recorded for identified intangible assets in the Consolidated Statements of Income for each period and the weighted average useful life were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Location | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 | | Weighted Average Useful Life1 |
| Developed technology | | Cost of sales | | $ | 1,283 | | | $ | 1,211 | | | $ | 1,124 | | | 9 years |
| Customer relationships and brands | | Marketing, general and administrative | | 209 | | | 205 | | | 200 | | | 11 years |
| Licensed technology and patents | | Cost of sales | | 347 | | | 341 | | | 298 | | | 13 years |
| Total amortization expenses | | | | $ | 1,839 | | | $ | 1,757 | | | $ | 1,622 | | | |
|
| | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Location | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 | | Weighted Average Useful Life1 |
| Developed technology | | Cost of sales | | $ | 1,124 |
| | $ | 1,105 |
| | $ | 912 |
| | 9 years |
| Customer relationships and brands | | Amortization of acquisition-related intangibles | | 200 |
| | 200 |
| | 177 |
| | 11 years |
| Licensed technology and patents | | Cost of sales | | 298 |
| | 260 |
| | 288 |
| | 12 years |
| Total amortization expenses | | | | $ | 1,622 |
| | $ | 1,565 |
| | $ | 1,377 |
| | |
| |
11 Represents weighted average useful life in years of intangible assets during 2021.
| Represents weighted average useful life in years of intangible assets during 2019.
|
We expect future amortization expense for the next five years and thereafter to be as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
| Future amortization expenses | | $ | 1,652 |
| | $ | 1,567 |
| | $ | 1,443 |
| | $ | 1,344 |
| | $ | 996 |
| | $ | 1,576 |
| | $ | 8,578 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
| Future amortization expenses | | $ | 1,854 | | | $ | 1,622 | | | $ | 1,188 | | | $ | 779 | | | $ | 598 | | | $ | 1,229 | | | $ | 7,270 | |
|
| | | | | | | | | | |
NOTE 14 : | BORROWINGSFinancial Statements | Notes to Consolidated Financial Statements | 93 |
SHORT-TERM DEBT
As of December 28, 2019, short-termShort-Term Debt
Short-term debt, was $3.7 billion,which primarily comprised of our current portion of long-term debt. As of December 29, 2018, short-term debt was $1.3 billion, comprised of $761 millionincludes the current portion of long-term debt, was $4.6 billion as of December 25, 2021 and $500 million commercial paper and drafts payable.$2.5 billion as of December 26, 2020.
OurThe current portion of long-term debt includes our 2009 Debentures, as well as debt classified as short-termshort term based on contractualtime remaining until maturity.
We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Financial Statements | 93 |
LONG-TERM DEBT
|
| | | | | | | | | | |
| | | Dec 28,
2019 | | Dec 29,
2018 |
| (In Millions) | | Effective Interest Rate | | Amount | | Amount |
| Floating-rate senior notes: | | | | | | |
| Three-month LIBOR plus 0.08%, due May 2020 | | 2.56% | | $ | 700 |
| | $ | 700 |
|
| Three-month LIBOR plus 0.35%, due May 2022 | | 2.82% | | 800 |
| | 800 |
|
| Fixed-rate senior notes: | | | | | | |
3.25%, due December 20191 | | —% | | — |
| | 177 |
|
| 1.85%, due May 2020 | | 1.89% | | 1,000 |
| | 1,000 |
|
| 2.45%, due July 2020 | | 2.49% | | 1,750 |
| | 1,750 |
|
| 1.70%, due May 2021 | | 1.79% | | 500 |
| | 500 |
|
| 3.30%, due October 2021 | | 3.71% | | 2,000 |
| | 2,000 |
|
| 2.35%, due May 2022 | | 2.74% | | 750 |
| | 750 |
|
| 3.10%, due July 2022 | | 3.50% | | 1,000 |
| | 1,000 |
|
4.00%, due December 20221 | | 2.97% | | 382 |
| | 389 |
|
| 2.70%, due December 2022 | | 3.09% | | 1,500 |
| | 1,500 |
|
| 4.10%, due November 2023 | | 3.22% | | 400 |
| | 400 |
|
| 2.88%, due May 2024 | | 3.07% | | 1,250 |
| | 1,250 |
|
| 2.70%, due June 2024 | | 2.84% | | 600 |
| | 600 |
|
| 3.70%, due July 2025 | | 4.44% | | 2,250 |
| | 2,250 |
|
| 2.60%, due May 2026 | | 2.91% | | 1,000 |
| | 1,000 |
|
| 3.15%, due May 2027 | | 3.48% | | 1,000 |
| | 1,000 |
|
| 2.45%, due November 2029 | | 2.48% | | 1,250 |
| | — |
|
| 4.00%, due December 2032 | | 3.56% | | 750 |
| | 750 |
|
| 4.80%, due October 2041 | | 4.31% | | 802 |
| | 802 |
|
| 4.25%, due December 2042 | | 3.74% | | 567 |
| | 567 |
|
| 4.90%, due July 2045 | | 4.41% | | 772 |
| | 772 |
|
| 4.70%, due December 2045 | | —% | | — |
| | 915 |
|
| 4.10%, due May 2046 | | 3.68% | | 1,250 |
| | 1,250 |
|
| 4.10%, due May 2047 | | 3.64% | | 1,000 |
| | 1,000 |
|
| 4.10%, due August 2047 | | 3.20% | | 640 |
| | 640 |
|
| 3.73%, due December 2047 | | 4.07% | | 1,967 |
| | 1,967 |
|
| 3.25%, due November 2049 | | 3.26% | | 1,500 |
| | — |
|
| Oregon and Arizona bonds: | | | | | | |
| 2.40% - 2.70%, due December 2035 - 2040 | | 2.48% | | 423 |
| | 423 |
|
| 5.00%, due March 2049 | | 2.88% | | 138 |
| | — |
|
| 5.00%, due June 2049 | | 2.48% | | 438 |
| | — |
|
| Junior subordinated convertible debentures: | | | | | | |
3.25%, due August 20392 | | 3.37% | | 372 |
| | 988 |
|
| Total senior notes and other borrowings | | | | 28,751 |
| | 27,140 |
|
| Unamortized premium/discount and issuance costs | | | | (529 | ) | | (891 | ) |
| Hedge accounting fair value adjustments | | | | 781 |
| | (390 | ) |
| Long-term debt | | | | 29,003 |
| | 25,859 |
|
| Current portion of long-term debt | | | | (3,695 | ) | | (761 | ) |
| Total long-term debt | | | | $ | 25,308 |
| | $ | 25,098 |
|
| |
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 28, 2019 and December 29, 2018. |
| |
2
| Effective interest rate for the year ended December 29, 2018 was 3.42%. |
|
| | |
FINANCIAL STATEMENTS | Notes toConsolidated Financial Statements | 94 |
The fair value | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dec 25, 2021 | | | | Dec 26, 2020 | | | | |
| (In Millions) | | Effective Interest Rate | | Amount | | | | Amount | | | | |
| Floating-rate senior note: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three-month LIBOR plus 0.35%, due May 2022 | | 0.55% | | $ | 800 | | | | | $ | 800 | | | | | |
| Fixed-rate senior notes: | | | | | | | | | | | | |
| 1.70%, due May 2021 | | —% | | — | | | | | 500 | | | | | |
| 3.30%, due October 2021 | | —% | | — | | | | | 2,000 | | | | | |
| 2.35%, due May 2022 | | 1.96% | | 750 | | | | | 750 | | | | | |
| 3.10%, due July 2022 | | 2.70% | | 1,000 | | | | | 1,000 | | | | | |
4.00%, due December 20221 | | 2.96% | | 398 | | | | | 417 | | | | | |
| 2.70%, due December 2022 | | 2.28% | | 1,500 | | | | | 1,500 | | | | | |
| 4.10%, due November 2023 | | 3.22% | | 400 | | | | | 400 | | | | | |
| 2.88%, due May 2024 | | 2.31% | | 1,250 | | | | | 1,250 | | | | | |
| 2.70%, due June 2024 | | 2.14% | | 600 | | | | | 600 | | | | | |
| 3.40%, due March 2025 | | 3.45% | | 1,500 | | | | | 1,500 | | | | | |
| 3.70%, due July 2025 | | 2.16% | | 2,250 | | | | | 2,250 | | | | | |
| 2.60%, due May 2026 | | 0.63% | | 1,000 | | | | | 1,000 | | | | | |
| 3.75%, due March 2027 | | 3.79% | | 1,000 | | | | | 1,000 | | | | | |
| 3.15%, due May 2027 | | 1.21% | | 1,000 | | | | | 1,000 | | | | | |
| 1.60%, due August 2028 | | 1.68% | | 1,000 | | | | | — | | | | | |
| 2.45%, due November 2029 | | 2.39% | | 2,000 | | | | | 2,000 | | | | | |
| 3.90%, due March 2030 | | 3.93% | | 1,500 | | | | | 1,500 | | | | | |
| 2.00%, due August 2031 | | 2.04% | | 1,250 | | | | | — | | | | | |
| 4.00%, due December 2032 | | 1.24% | | 750 | | | | | 750 | | | | | |
| 4.60%, due March 2040 | | 4.61% | | 750 | | | | | 750 | | | | | |
| 2.80%, due August 2041 | | 2.82% | | 750 | | | | | — | | | | | |
| 4.80%, due October 2041 | | 2.01% | | 802 | | | | | 802 | | | | | |
| 4.25%, due December 2042 | | 1.42% | | 567 | | | | | 567 | | | | | |
| 4.90%, due July 2045 | | 2.13% | | 772 | | | | | 772 | | | | | |
| 4.10%, due May 2046 | | 1.40% | | 1,250 | | | | | 1,250 | | | | | |
| 4.10%, due May 2047 | | 1.37% | | 1,000 | | | | | 1,000 | | | | | |
| 4.10%, due August 2047 | | 0.92% | | 640 | | | | | 640 | | | | | |
| 3.73%, due December 2047 | | 1.77% | | 1,967 | | | | | 1,967 | | | | | |
| 3.25%, due November 2049 | | 3.20% | | 2,000 | | | | | 2,000 | | | | | |
| 4.75%, due March 2050 | | 4.74% | | 2,250 | | | | | 2,250 | | | | | |
| 3.05%, due August 2051 | | 3.07% | | 1,250 | | | | | — | | | | | |
| 3.10%, due February 2060 | | 3.11% | | 1,000 | | | | | 1,000 | | | | | |
| 4.95%, due March 2060 | | 4.99% | | 1,000 | | | | | 1,000 | | | | | |
| 3.20%, due August 2061 | | 3.22% | | 750 | | | | | — | | | | | |
| Oregon and Arizona bonds: | | | | | | | | | | | | |
| 2.40% - 2.70%, due December 2035 - 2040 | | 2.49% | | 423 | | | | | 423 | | | | | |
| 5.00%, due March 2049 | | 2.13% | | 138 | | | | | 138 | | | | | |
| 5.00%, due June 2049 | | 2.15% | | 438 | | | | | 438 | | | | | |
| Total senior notes and other borrowings | | | | 37,695 | | | | | 35,214 | | | | | |
| Unamortized premium/discount and issuance costs | | | | (405) | | | | | (378) | | | | | |
| Hedge accounting fair value adjustments | | | | 811 | | | | | 1,565 | | | | | |
| Long-term debt | | | | 38,101 | | | | | 36,401 | | | | | |
| Current portion of long-term debt | | | | (4,591) | | | | | (2,504) | | | | | |
| Total long-term debt | | | | $ | 33,510 | | | | | $ | 33,897 | | | | | |
1To 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 our convertible debentures is determined using discounted$396 million at December 25, 2021, which effectively converted these notes to US-dollar-denominated notes. For further discussion on derivatives in cash flow models with observable market inputs,hedging relationships, see "Note 16: Derivative Financial Instruments." Principal and takes into consideration variables suchunamortized discount/issuance costs for the Australian-dollar-denominated notes in the table above were calculated using foreign currency exchange rates as interest rate changes, comparable instruments, subordination discount, and credit-rating changes. As of December 28, 201925, 2021 and December 29, 2018, the fair value26, 2020.
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 95 |
Senior Notes
During 2019,In 2021, we issued a total of $2.8$5.0 billion aggregate principal amount of senior notes. Net proceeds from the offeringofferings are being used for general corporate purposes, which may include refinancing outstanding debt, funding for working capital, and repurchasing sharescapital expenditures. During 2021, we repaid $500 million of our common stock.1.70% senior notes that matured in May 2021 and $2.0 billion of our 3.30% senior notes that matured in October 2021.
In 2019,2020, we redeemed our $915 million, 4.70%issued a total of $10.3 billion aggregate principal amount of senior notes due December 2045.and repaid $1.0 billion of our 1.85% senior notes that matured in May 2020 and $1.8 billion of our 2.45% senior notes that matured in July 2020. We also repaid $700 million in floating-rate senior notes that matured in May 2020.
Our floating-rate senior notes paynote pays interest quarterly and our fixed-rate senior 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.
Oregon and Arizona BondsRevolving Credit Facility
In 2019, we received proceeds of $648 million in aggregate from the sale of the 2019 Arizona Bonds and the 2019 Oregon Bonds. The bonds are our unsecured general obligations in accordance with loan agreements2021, we entered into with the Industrial Development Authoritya $5.0 billion variable-rate revolving credit facility that, if drawn, is expected to be used for general corporate purposes. The revolving credit facility matures in March 2026 and had no borrowings outstanding as of the City of Chandler, Arizona and the State of Oregon Business Development Commission. The bonds mature in 2049 and carry an interest rate of 5.00%. The 2019 Arizona Bonds and the 2019 Oregon Bonds are subject to mandatory tender in June 2024 and March 2022, respectively, at which time we can re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until another fixed-rate period is selected or until their final maturity date.
In 2018, we remarketed $423 million principal of the 2018 Arizona Bonds and the 2018 Oregon Bonds. The bonds are our unsecured general obligations in accordance with loan agreements we entered into with the Industrial Development Authority of the City of Chandler, Arizona and the State of Oregon Business Development Commission. The bonds mature between 2035 and 2040 and carry interest rates of 2.40% - 2.70%. Each series of the 2018 Arizona Bonds and the 2018 Oregon Bonds is subject to mandatory tender in August 2023, at which time we can remarket the bonds as either fixed-rate bonds for a specified period, or as variable-rate bonds until another fixed-rate period is selected or their final maturity date.December 25, 2021.
Convertible Debentures
In 2009, we issued the 2009 Debentures, which paywere convertible, subject to certain conditions, into shares of our common stock and paid a fixed rate of interest semiannually. In 2019,2020, we paid $1.5$1.1 billion in cash to satisfy conversion obligations for $615settle our remaining $372 million in principal, resulting in a cumulative loss of $156$109 million in interest and other, net and $1.0 billion$750 million as a reduction toin stockholders' equity related to the conversion feature.
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 settle conversion of the 2009 Debentures in cash up to the face value, and any amount in excess of face value is settled in cash or stock at our option. As of 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 November 2019, we issued a notice of redemption for the remaining $372 million of 2009 Debentures with a redemption date of January 9, 2020. During the fourth quarter of 2019, the closing stock price conversion right condition of the 2009 Debentures continued to be met and therefore the debentures are convertible at the option of the holders until January 6, 2020, prior to our redemption. Our 2009 Debentures required settlement of the principal amount of the debt in cash upon conversion.
As a result, the $217 million carrying amount of the 2009 Debentures was classified as short-term debt on our Consolidated Balance Sheet as of December 28, 2019 ($569 million as of December 29, 2018). The excess of the amount required to be settled in cash if converted over the carrying amount of the 2009 Debentures of $155 million has been classified as temporary equity on our Consolidated Balance Sheet as of December 28, 2019 ($419 million as of December 29, 2018).
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 | 95 |
|
| | | | | | | | |
| | | 2009 Debentures |
| (In Millions, Except Per Share Amounts) | | Dec 28,
2019 | | Dec 29,
2018 |
| Outstanding principal | | $ | 372 |
| | $ | 988 |
|
Unamortized discount1 | | $ | 155 |
| | $ | 419 |
|
| Net debt carrying amount | | $ | 217 |
| | $ | 569 |
|
| Conversion rate (shares of common stock per $1,000 principal amount of debentures) | | 49.69 |
| | 49.01 |
|
| Effective conversion price (per share of common stock) | | $ | 20.13 |
| | $ | 20.40 |
|
| |
1
| The unamortized discounts for the 2009 Debentures are amortized over the remaining life of the debt. |
Debt Maturities
Our aggregate debt maturities, excluding commercial paper and drafts payable, based on outstanding principal as of December 28, 2019,25, 2021, by year payable, are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 and thereafter | | Total |
| | | $ | 3,450 |
| | $ | 2,500 |
| | $ | 4,432 |
| | $ | 400 |
| | $ | 1,850 |
| | $ | 16,119 |
| | $ | 28,751 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 and thereafter | | Total |
| | $ | 4,586 | | | $ | 400 | | | $ | 1,850 | | | $ | 3,750 | | | $ | 1,000 | | | $ | 26,109 | | | $ | 37,695 | |
In the preceding table, the 2009 Debentures are classified based on their stated maturity date, regardless of their classification on the Consolidated Balance Sheet.
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 96 |
|
| | | | |
NOTE 15Note 14 : | FAIR VALUEFair Value |
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 25, 2021 | | December 26, 2020 |
| | Fair Value Measured and Recorded at Reporting Date Using | | Total | | Fair Value Measured and
Recorded at Reporting Date Using | | Total |
| (In Millions) | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | |
| Assets | | | | | | | | | | | | | | | | |
| Cash equivalents: | | | | | | | | | | | | | | | | |
| Corporate debt | | $ | — | | | $ | 65 | | | $ | — | | | $ | 65 | | | $ | — | | $ | 50 | | | $ | — | | $ | 50 | |
Financial institution instruments1 | | 1,216 | | | 763 | | | — | | | 1,979 | | | 2,781 | | | 636 | | | — | | 3,417 | |
| | | | | | | | | | | | | | | | |
Reverse repurchase
agreements | | — | | | 1,595 | | | — | | | 1,595 | | | — | | 1,900 | | | — | | 1,900 | |
| Short-term investments: | | | | | | | | | | | | | | | | |
| Corporate debt | | — | | | 648 | | | — | | | 648 | | | — | | 428 | | | — | | 428 | |
Financial institution instruments1 | | — | | | 1,243 | | | — | | | 1,243 | | | — | | 1,179 | | | — | | 1,179 | |
Government debt2 | | — | | | 212 | | | — | | | 212 | | | — | | 685 | | | — | | 685 | |
| Trading assets: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Corporate debt | | — | | | 5,143 | | | — | | | 5,143 | | | — | | 3,815 | | | — | | 3,815 | |
Financial institution instruments1 | | 154 | | | 3,729 | | | — | | | 3,883 | | | 131 | | | 2,847 | | | — | | 2,978 | |
Government debt2 | | — | | | 12,457 | | | — | | | 12,457 | | | — | | 8,945 | | | — | | 8,945 | |
| Other current assets: | | | | | | | | | | | | | | | | |
| Derivative assets | | 80 | | | 576 | | | — | | | 656 | | | 48 | | | 644 | | | — | | 692 | |
Loans receivable3 | | — | | | 152 | | | — | | | 152 | | | — | | 439 | | | — | | 439 | |
| Marketable equity securities | | 1,854 | | | 317 | | | — | | | 2,171 | | | 136 | | | 1,694 | | | — | | 1,830 | |
| Other long-term investments: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Corporate debt | | — | | | 576 | | | — | | | 576 | | | — | | 1,520 | | | — | | 1,520 | |
Financial institution instruments1 | | — | | | 190 | | | — | | | 190 | | | — | | 257 | | | — | | 257 | |
Government debt2 | | 50 | | | 24 | | | — | | | 74 | | | — | | 415 | | | — | | 415 | |
| Other long-term assets: | | | | | | | | | | | | | | | | |
| Derivative assets | | — | | | 772 | | | 7 | | | 779 | | | — | | 1,520 | | | 30 | | | 1,550 | |
Loans receivable3 | | — | | | 57 | | | — | | | 57 | | | — | | 157 | | | — | | 157 | |
| Total assets measured and recorded at fair value | | $ | 3,354 | | | $ | 28,519 | | | $ | 7 | | | $ | 31,880 | | | $ | 3,096 | | | $ | 27,131 | | | $ | 30 | | | $ | 30,257 | |
| Liabilities | | | | | | | | | | | | | | | | |
| Other accrued liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | $ | 4 | | | $ | 516 | | | $ | — | | | $ | 520 | | | $ | — | | $ | 810 | | | $ | — | | $ | 810 | |
| | | | | | | | | | | | | | | | |
| Other long-term liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | — | | | 9 | | | — | | | 9 | | | — | | 5 | | | — | | 5 | |
| Total liabilities measured and recorded at fair value | | $ | 4 | | | $ | 525 | | | $ | — | | | $ | 529 | | | $ | — | | $ | 815 | | | $ | — | | $ | 815 | |
ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS2Level 1 investments consist primarily of US Treasury securities. Level 2 investments in government debt consist primarily of non-US government debt, as well as marketable equity securities subject to security-specific restrictions.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 28, 2019 | | December 29, 2018 |
| | | Fair Value Measured and Recorded at Reporting Date Using | | Total | | Fair Value Measured and Recorded at Reporting Date Using | | Total |
| (In Millions) | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | |
| Assets | | | | | | | | | | | | | | | | |
| Cash equivalents: | | | | | | | | | | | | | | | | |
| Corporate debt | | $ | — |
| | $ | 713 |
| | $ | — |
| | $ | 713 |
| | $ | — |
| | $ | 262 |
| | $ | — |
| | $ | 262 |
|
Financial institution instruments1 | | 1,064 |
| | 408 |
| | — |
| | 1,472 |
| | 550 |
| | 183 |
| | — |
| | 733 |
|
| Reverse repurchase agreements | | — |
| | 1,500 |
| | — |
| | 1,500 |
| | — |
| | 1,850 |
| | — |
| | 1,850 |
|
| Short-term investments: | | | | | | | | | | | | | | | | |
| Corporate debt | | — |
| | 347 |
| | — |
| | 347 |
| | — |
| | 937 |
| | — |
| | 937 |
|
Financial institution instruments1 | | — |
| | 724 |
| | — |
| | 724 |
| | — |
| | 1,423 |
| | — |
| | 1,423 |
|
Government debt2 | | — |
| | 11 |
| | — |
| | 11 |
| | — |
| | 428 |
| | — |
| | 428 |
|
| Trading assets: | | | | | | | | | | | | | | | | |
| Corporate debt | | — |
| | 2,848 |
| | — |
| | 2,848 |
| | — |
| | 2,635 |
| | — |
| | 2,635 |
|
Financial institution instruments1 | | 87 |
| | 1,578 |
| | — |
| | 1,665 |
| | 67 |
| | 1,273 |
| | — |
| | 1,340 |
|
Government debt2 | | — |
| | 3,334 |
| | — |
| | 3,334 |
| | — |
| | 1,868 |
| | — |
| | 1,868 |
|
| Other current assets: | | | | | | | | | | | | | | | | |
| Derivative assets | | 50 |
| | 230 |
| | — |
| | 280 |
| | — |
| | 180 |
| | — |
| | 180 |
|
Loans receivable3 | | — |
| | — |
| | — |
| | — |
| | — |
| | 354 |
| | — |
| | 354 |
|
| Marketable equity securities | | 450 |
| | — |
| | — |
| | 450 |
| | 1,440 |
| | — |
| | — |
| | 1,440 |
|
| Other long-term investments: | | | | | | | | | | | | | | | | |
| Corporate debt | | — |
| | 1,898 |
| | — |
| | 1,898 |
| | — |
| | 1,843 |
| | — |
| | 1,843 |
|
Financial institution instruments1 | | — |
| | 825 |
| | — |
| | 825 |
| | — |
| | 912 |
| | — |
| | 912 |
|
Government debt2 | | — |
| | 553 |
| | — |
| | 553 |
| | — |
| | 633 |
| | — |
| | 633 |
|
| Other long-term assets: | | | | | | | | | | | | | | | | |
| Derivative assets | | — |
| | 690 |
| | 16 |
| | 706 |
| | — |
| | 100 |
| | — |
| | 100 |
|
Loans receivable3 | | — |
| | 554 |
| | — |
| | 554 |
| | — |
| | 229 |
| | — |
| | 229 |
|
| Total assets measured and recorded at fair value | | $ | 1,651 |
| | $ | 16,213 |
| | $ | 16 |
| | $ | 17,880 |
| | $ | 2,057 |
| | $ | 15,110 |
| | $ | — |
| | $ | 17,167 |
|
| Liabilities | | | | | | | | | | | | | | | | |
| Other accrued liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | $ | 3 |
| | $ | 287 |
| | $ | — |
| | $ | 290 |
| | $ | — |
| | $ | 412 |
| | $ | — |
| | $ | 412 |
|
| Other long-term liabilities: | | | | | | | | | | | | | | | | |
| Derivative liabilities | | — |
| | 13 |
| | — |
| | 13 |
| | — |
| | 415 |
| | 68 |
| | 483 |
|
| Total liabilities measured and recorded at fair value | | $ | 3 |
| | $ | 300 |
| | $ | — |
| | $ | 303 |
| | $ | — |
| | $ | 827 |
| | $ | 68 |
| | $ | 895 |
|
| |
1The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency.
| Level 1 investments in financial institution instruments 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 2 investments in government debt consist primarily of U.S. agency notes and non-U.S. government debt. |
| |
3
| The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency. |
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 97 |
ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASISAssets Measured and Recorded at Fair Value on a Non-Recurring Basis
Our non-marketable equity securities, equity method investments, and certain non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment or observable price adjustment is recognized in the current period. If an impairment or observable price adjustment is recognized on our non-marketable equity securities during the period, we classify these assets as Level 3 within the fair value hierarchy based on the nature of the fair value inputs.3.
We classifiedclassify non-marketable equity securities and non-marketable equity method investments as Level 3. Impairments recognized on these investments held as of December 28, 201925, 2021 were $113$138 million ($416266 million on investments held as of December 29, 201826, 2020 and $537$113 million on investments held as of December 30, 2017)28, 2019).
FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASISFinancial Instruments Not Recorded at Fair Value on a Recurring Basis
Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not been remeasured or impaired in the current period, grants receivable, loans receivable, reverse repurchase agreements, and our short-term and long-termissued debt.
As of December 28, 2019,We classify the aggregate carryingfair value of grants receivable loans receivable, and reverse repurchase agreements was $543 million (the aggregate carrying amount as of December 29, 2018 was $833 million).Level 2. The estimated fair value of these financial instruments approximates their carrying value. The aggregate carrying value and is categorizedof grants receivable as Level 2 withinof December 25, 2021 was $317 million (the aggregate carrying value of grants receivable as of December 26, 2020 was $139 million).
We classify the fair value hierarchy based on the nature of theissued debt (excluding commercial paper and drafts payable) as Level 2. The fair value inputs.of these instruments was $41.5 billion as of December 25, 2021 ($40.9 billion as of December 26, 2020).
|
| | | | |
NOTE 16Note 15 : | OTHER COMPREHENSIVE INCOME (LOSS)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) | | Unrealized Holding Gains (Losses) on Available-for-Sale Equity Investments | | Unrealized Holding Gains (Losses) on Derivatives | | Actuarial Valuation and Other Pension Expenses | | Translation Adjustments and Other | | Total |
| December 31, 2016 | | $ | 2,179 |
| | $ | (259 | ) | | $ | (1,280 | ) | | $ | (534 | ) | | $ | 106 |
|
| Other comprehensive income (loss) before reclassifications | | 2,765 |
| | 605 |
| | 275 |
| | (2 | ) | | 3,643 |
|
| Amounts reclassified out of accumulated other comprehensive income (loss) | | (3,433 | ) | | (69 | ) | | 103 |
| | 509 |
| | (2,890 | ) |
| Tax effects | | 234 |
| | (171 | ) | | (61 | ) | | 1 |
| | 3 |
|
| Other comprehensive income (loss) | | (434 | ) | | 365 |
| | 317 |
| | 508 |
| | 756 |
|
| December 30, 2017 | | 1,745 |
| | 106 |
| | (963 | ) | | (26 | ) | | 862 |
|
| Impact of change in accounting standards | | (1,745 | ) | | 24 |
| | (65 | ) | | (4 | ) | | (1,790 | ) |
| Opening Balance as of December 31, 2017 | | — |
| | 130 |
| | (1,028 | ) | | (30 | ) | | (928 | ) |
| Other comprehensive income (loss) before reclassifications | | — |
| | (310 | ) | | 157 |
| | (16 | ) | | (169 | ) |
| Amounts reclassified out of accumulated other comprehensive income (loss) | | — |
| | 9 |
| | 109 |
| | 8 |
| | 126 |
|
| Tax effects | | — |
| | 48 |
| | (56 | ) | | 5 |
| | (3 | ) |
| Other comprehensive income (loss) | | — |
| | (253 | ) | | 210 |
| | (3 | ) | | (46 | ) |
| December 29, 2018 | | — |
| | (123 | ) | | (818 | ) | | (33 | ) | | (974 | ) |
| Other comprehensive income (loss) before reclassifications | | — |
| | (11 | ) | | (753 | ) | | 109 |
| | (655 | ) |
| Amounts reclassified out of accumulated other comprehensive income (loss) | | — |
| | 195 |
| | 67 |
| | (6 | ) | | 256 |
|
| Tax effects | | — |
| | (7 | ) | | 122 |
| | (22 | ) | | 93 |
|
| Other comprehensive income (loss) | | — |
| | 177 |
| | (564 | ) | | 81 |
| | (306 | ) |
| December 28, 2019 | | $ | — |
| | $ | 54 |
| | $ | (1,382 | ) | | $ | 48 |
| | $ | (1,280 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | | | Unrealized Holding Gains (Losses) on Derivatives | | Actuarial Valuation and Other Pension Expenses | | Translation Adjustments and Other | | Total |
| | | | | | | | | | |
| | | | | | | | | | |
| December 29, 2018 | | | | $ | (123) | | | $ | (818) | | | $ | (33) | | | $ | (974) | |
| Other comprehensive income (loss) before reclassifications | | | | (11) | | | (753) | | | 109 | | | (655) | |
| Amounts reclassified out of accumulated other comprehensive income (loss) | | | | 195 | | | 67 | | | (6) | | | 256 | |
| Tax effects | | | | (7) | | | 122 | | | (22) | | | 93 | |
| Other comprehensive income (loss) | | | | 177 | | | (564) | | | 81 | | | (306) | |
| December 28, 2019 | | | | 54 | | | (1,382) | | | 48 | | | (1,280) | |
| | | | | | | | | | |
| | | | | | | | | | |
| Other comprehensive income (loss) before reclassifications | | | | 806 | | | (323) | | | 55 | | | 538 | |
| Amounts reclassified out of accumulated other comprehensive income (loss) | | | | (8) | | | 89 | | | (11) | | | 70 | |
| Tax effects | | | | (121) | | | 51 | | | (9) | | | (79) | |
| Other comprehensive income (loss) | | | | 677 | | | (183) | | | 35 | | | 529 | |
| December 26, 2020 | | | | 731 | | | (1,565) | | | 83 | | | (751) | |
| Other comprehensive income (loss) before reclassifications | | | | (434) | | | 476 | | | (58) | | | (16) | |
| Amounts reclassified out of accumulated other comprehensive income (loss) | | | | (226) | | | 101 | | | (19) | | | (144) | |
| Tax effects | | | | 140 | | | (126) | | | 17 | | | 31 | |
| Other comprehensive income (loss) | | | | (520) | | | 451 | | | (60) | | | (129) | |
| December 25, 2021 | | | | $ | 211 | | | $ | (1,114) | | | $ | 23 | | | $ | (880) | |
| | | | | | | | | | |
| | | | | | | | | | |
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."
During the second quarter of 2017,We estimate that we reclassified $507will reclassify approximately $8 million (before taxes) of currency translation adjustment losses included innet derivative gains from accumulated other comprehensive income (loss) into earnings as a result of our divestiture of ISecG. For more information, see "Note 11: Acquisitions and Divestitures."
|
| | | | | | | | | | |
FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 98 |
|
| | | | |
NOTE 17Note 16 : | DERIVATIVE FINANCIAL INSTRUMENTSDerivative Financial Instruments |
Volume of Derivative Activity
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) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 | (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Foreign currency contracts | | $ | 23,981 |
| | $ | 19,223 |
| | $ | 19,958 |
| Foreign currency contracts | | $ | 38,024 | | | $ | 31,209 | | | $ | 23,981 | |
| Interest rate contracts | | 14,302 |
| | 22,447 |
| | 16,823 |
| Interest rate contracts | | 15,209 | | | 14,461 | | | 14,302 | |
| Other | | 1,753 |
| | 1,356 |
| | 1,636 |
| Other | | 2,517 | | | 2,026 | | | 1,753 | |
| Total | | $ | 40,036 |
|
| $ | 43,026 |
|
| $ | 38,417 |
| Total | | $ | 55,750 | | | $ | 47,696 | | | $ | 40,036 | |
During 2019,2021 and 2020, we did not enter into any new pay variable or receive fixedpay-variable, receive-fixed interest rate swaps to hedge against changes in the fair value attributable to benchmark interest rates related to our outstanding senior notes. However, we entered into $7.1 billion of such swaps in 2018 and $4.8 billion in 2017. These hedges were designated as fair value hedges. The total notional amount of theseoutstanding pay-variable, receive-fixed interest rate swaps was $12.0 billion as of December 28, 201925, 2021 and $20.0$12.0 billion as of December 29, 2018. During the third quarter of26, 2020. In 2019,, we unwound $7.1 billion of these swaps, resulting in a $111 million gain to be amortized over the remaining life of the debt.
Fair Value of Derivative Instruments in the Consolidated Balance Sheets
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 25, 2021 | | December 26, 2020 |
| (In Millions) | | Assets1 | | Liabilities2 | | Assets1 | | Liabilities2 |
| Derivatives designated as hedging instruments: | | | | | | | | |
Foreign currency contracts3 | | $ | 80 | | | $ | 163 | | | $ | 551 | | | $ | 2 | |
| Interest rate contracts | | 774 | | | — | | | 1,498 | | | — | |
| | | | | | | | |
| Total derivatives designated as hedging instruments | | 854 | | | 163 | | | 2,049 | | | 2 | |
| Derivatives not designated as hedging instruments: | | | | | | | | |
Foreign currency contracts3 | | 475 | | | 297 | | | 142 | | | 685 | |
| Interest rate contracts | | 26 | | | 65 | | | 3 | | | 128 | |
| Equity contracts | | 80 | | | 4 | | | 48 | | | — | |
| Total derivatives not designated as hedging instruments | | 581 | | | 366 | | | 193 | | | 813 | |
| Total derivatives | | $ | 1,435 | | | $ | 529 | | | $ | 2,242 | | | $ | 815 | |
1Derivative assets are recorded as other assets, current and long-term.
FAIR VALUE OF DERIVATIVE INSTRUMENTS IN THE CONSOLIDATED BALANCE SHEETS2Derivative liabilities are recorded as other liabilities, current and long-term.
|
| | | | | | | | | | | | | | | | |
| | | December 28, 2019 | | December 29, 2018 |
| (In Millions) | | Assets1 | | Liabilities2 | | Assets1 | | Liabilities2 |
| Derivatives designated as hedging instruments | | | | | | | | |
Foreign currency contracts3 | | $ | 56 |
| | $ | 159 |
| | $ | 44 |
| | $ | 244 |
|
| Interest rate contracts | | 690 |
| | 9 |
| | 84 |
| | 474 |
|
| Total derivatives designated as hedging instruments | | 746 |
|
| 168 |
|
| 128 |
|
| 718 |
|
| Derivatives not designated as hedging instruments | | | | | | | | |
Foreign currency contracts3 | | 179 |
| | 78 |
| | 132 |
| | 155 |
|
| Interest rate contracts | | 11 |
| | 54 |
| | 20 |
| | 22 |
|
| Equity contracts | | 50 |
| | 3 |
| | — |
| | — |
|
| Total derivatives not designated as hedging instruments | | 240 |
|
| 135 |
|
| 152 |
|
| 177 |
|
| Total derivatives | | $ | 986 |
|
| $ | 303 |
|
| $ | 280 |
|
| $ | 895 |
|
| |
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 | 99 |
AMOUNTS OFFSET IN THE CONSOLIDATED BALANCE SHEETS
The gross amounts of our derivative instruments and reverse repurchase agreementsAgreements 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 25, 2021 |
| | | | | | | | Gross Amounts Not Offset in the Balance Sheet | | |
| (In Millions) | | 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 |
| Assets: | | | | | | | | | | | | |
| Derivative assets subject to master netting arrangements | | $ | 1,427 | | | $ | — | | | $ | 1,427 | | | $ | (332) | | | $ | (986) | | | $ | 109 | |
| Reverse repurchase agreements | | 1,595 | | | — | | | 1,595 | | | — | | | (1,595) | | | — | |
| Total assets | | 3,022 | | | — | | | 3,022 | | | (332) | | | (2,581) | | | 109 | |
| Liabilities: | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | 392 | | | — | | | 392 | | | (332) | | | (60) | | | — | |
| | | | | | | | | | | | |
| Total liabilities | | $ | 392 | | | $ | — | | | $ | 392 | | | $ | (332) | | | $ | (60) | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 28, 2019 |
| | | | | | | | | Gross Amounts Not Offset in the Balance Sheet | | |
| (In Millions) | | 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 |
| Assets: | | | | | | | | | | | | |
| Derivative assets subject to master netting arrangements | | $ | 974 |
| | $ | — |
| | $ | 974 |
| | $ | (144 | ) | | $ | (808 | ) | | $ | 22 |
|
| Reverse repurchase agreements | | 1,850 |
| | — |
| | 1,850 |
| | — |
| | (1,850 | ) | | — |
|
| Total assets | | 2,824 |
|
| — |
|
| 2,824 |
|
| (144 | ) |
| (2,658 | ) |
| 22 |
|
| Liabilities: | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | 262 |
| | — |
| | 262 |
| | (144 | ) | | (72 | ) | | 46 |
|
| Total liabilities | | $ | 262 |
|
| $ | — |
|
| $ | 262 |
|
| $ | (144 | ) |
| $ | (72 | ) |
| $ | 46 |
|
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 99 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 29, 2018 |
| | | | | | | | | Gross Amounts Not Offset in the Balance Sheet | | |
| (In Millions) | | 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 |
| Assets: | | | | | | | | | | | | |
| Derivative assets subject to master netting arrangements | | $ | 292 |
| | $ | — |
| | $ | 292 |
| | $ | (220 | ) | | $ | (72 | ) | | $ | — |
|
| Reverse repurchase agreements | | 2,099 |
| | — |
| | 2,099 |
| | — |
| | (1,999 | ) | | 100 |
|
| Total assets | | 2,391 |
|
| — |
|
| 2,391 |
|
| (220 | ) |
| (2,071 | ) |
| 100 |
|
| Liabilities: | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | 890 |
| | — |
| | 890 |
| | (220 | ) | | (576 | ) | | 94 |
|
| Total liabilities | | $ | 890 |
|
| $ | — |
|
| $ | 890 |
|
| $ | (220 | ) |
| $ | (576 | ) |
| $ | 94 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 26, 2020 |
| | | | | | | | Gross Amounts Not Offset in the Balance Sheet | | |
| (In Millions) | | 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 |
| Assets: | | | | | | | | | | | | |
| Derivative assets subject to master netting arrangements | | $ | 2,235 | | | $ | — | | | $ | 2,235 | | | $ | (264) | | | $ | (1,904) | | | $ | 67 | |
| Reverse repurchase agreements | | 1,900 | | | — | | | 1,900 | | | — | | | (1,900) | | | — | |
| Total assets | | 4,135 | | | — | | | 4,135 | | | (264) | | | (3,804) | | | 67 | |
| Liabilities: | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | 711 | | | — | | | 711 | | | (264) | | | (447) | | | — | |
| | | | | | | | | | | | |
| Total liabilities | | $ | 711 | | | $ | — | | | $ | 711 | | | $ | (264) | | | $ | (447) | | | $ | — | |
We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and reverse repurchase agreements, when we deem it appropriate.
|
| | |
FINANCIAL STATEMENTS | Notes to Financial Statements | 100 |
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPSDerivatives 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 $434 million net losses in 2021 ($806 million net gains in 2020 and $11 million net losses in 2019 ($310 million net losses in 2018 and $605 million net gains in 2017)2019). Substantially all of our cash flow hedges are foreign currency contracts for all periods presented.
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 16:15: Other Comprehensive Income (Loss)."
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPSDerivatives 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: |
| | | | | | | | | | | | |
| | | Gains (Losses) Recognized in Statement of Income on Derivatives |
| Years Ended (In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Interest rate contracts | | $ | 1,071 |
| | $ | (138 | ) | | $ | (68 | ) |
| Hedged items | | (1,071 | ) | | 138 |
| | 68 |
|
| Total | | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | |
| | Gains (Losses) Recognized in Statement of Income on Derivatives |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Interest rate contracts | | $ | (723) | | | $ | 817 | | | $ | 1,071 | |
| Hedged items | | 723 | | | (817) | | | (1,071) | |
| Total | | $ | — | | | $ | — | | | $ | — | |
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 | | Carrying Amount of the Hedged Item Assets/(Liabilities) | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities) |
| Years Ended (In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 25, 2021 | | Dec 26, 2020 |
| Long-term debt | | $ | (12,772) | | | $ | (13,495) | | | $ | (775) | | | $ | (1,498) | |
| | | | | | | | | | | |
| Financial Statements | Notes to Consolidated Financial Statements | 100 |
|
| | | | | | | | | | | | | | | | |
| Line Item in the Consolidated Balance Sheet in Which the Hedged Item Is Included | | Carrying Amount of the Hedged Item Asset/(Liabilities) | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities) |
Years Ended
(In Millions) | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 28,
2019 | | Dec 29,
2018 |
| Long-term debt | | $ | (12,678 | ) | | $ | (19,622 | ) | | $ | (681 | ) | | $ | 390 |
|
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTSDerivatives 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) | | Location of Gains (Losses) Recognized in Income on Derivatives | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Foreign currency contracts | | Interest and other, net | | $ | 204 |
| | $ | 372 |
| | $ | (547 | ) |
| Interest rate contracts | | Interest and other, net | | (32 | ) | | 9 |
| | 9 |
|
| Other | | Various | | 297 |
| | (147 | ) | | 203 |
|
| Total | | $ | 469 |
|
| $ | 234 |
|
| $ | (335 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended (In Millions) | | Location of Gains (Losses)
Recognized in Income on Derivatives | | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Foreign currency contracts | | Interest and other, net | | $ | 677 | | | $ | (572) | | | $ | 204 | |
| Interest rate contracts | | Interest and other, net | | 31 | | | (90) | | | (32) | |
| Other | | Various | | 360 | | | 284 | | | 297 | |
| Total | | $ | 1,068 | | | $ | (378) | | | $ | 469 | |
|
| | | | |
FINANCIAL STATEMENTSNote 17 : | Notes to Financial Statements | 101Retirement Benefit Plans |
|
| |
NOTE 18 : | RETIREMENT BENEFIT PLANS |
DEFINED CONTRIBUTION PLANSDefined Contribution Plans
We provide tax-qualified defined contribution plans for the benefit of eligible employees, former employees, and retirees in the U.S.US 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.US employees, we also provide an unfunded non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees.
We expensed $379$444 million in 2021 and $398 million in 2020 for discretionarymatching contributions tobased on the U.S.amount of employee contributions under the US qualified defined contribution and non-qualified deferred compensation plans in 2019 ($372plans. Prior to 2020, the contributions were discretionary and we expensed $379 million in 2018 and $346 million in 2017).2019.
U.S. RETIREE MEDICAL PLANUS Retiree Medical Plan
Upon retirement, we provide certain benefits to eligible U.S.US employees who were hired prior to 2014 under the U.S.US Retiree Medical Plan. The benefits can be used to pay all or a portion of the cost to purchase eligible coverage in a medical plan.
As of December 28, 201925, 2021 and December 29, 2018,26, 2020, the projected benefit obligation was $633$682 million and $547$741 million, respectively, which used the discount rate of 3.3%2.8% and 4.4%, respectively.2.4%. The December 28, 201925, 2021 and December 29, 201826, 2020 corresponding fair value of plan assets was $553$669 million and $476 million, respectively.$600 million.
The investment strategy for U.S.US Retiree Medical 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 isand fixed-income long credit portfolios. Both portfolios are actively managed by an external investment manager.managers. The tax-aware global equity portfolio is composed of a diversified mix of equities in developed countries. The tax-aware fixed-income long credit portfolio is composed of domestic securities. 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 are 65% equity and 35% fixed income investments. As of December 28, 2019, substantially all25, 2021, the majority of the U.S.US Retiree Medical Plan assets were invested in exchange-traded equity securities and were measured at fair value using Level 1 inputs. The remaining US Retiree Medical Plan assets were invested in fixed income investments and were measured at fair value using Level 2 inputs.
The estimated benefit payments for this plan over the next 10 years are as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025-2029 |
| Postretirement Medical Benefits | | $ | 28 |
| | $ | 30 |
| | $ | 31 |
| | $ | 32 |
| | $ | 34 |
| | $ | 183 |
|
PENSION BENEFIT PLANS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In Millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027-2031 |
| Postretirement Medical Benefits | | $ | 37 | | | $ | 38 | | | $ | 39 | | | $ | 41 | | | $ | 42 | | | $ | 219 | |
Pension Benefit Plans
We provide defined-benefit pension plans in certain countries, most significantly Ireland, the U.S., Ireland, Germany,US, Israel, and Israel.Germany. The substantial majority of the plans' benefits have been frozenfrozen.
Benefit Obligation and beginning on January 1, 2020, future benefit accrualsPlan Assets for the U.S. Pension Plan will be frozen to remaining eligible employees, which reduced our projected benefit obligation by $150 million at December 29, 2018.Benefit Plans
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FINANCIAL STATEMENTS | Notes to Financial Statements | 102 |
BENEFIT OBLIGATION AND PLAN ASSETS FOR PENSION BENEFIT 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.
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(In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Changes in projected benefit obligation: | | | | |
| Beginning projected benefit obligation | | $ | 3,433 |
| | $ | 3,842 |
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| Service cost | | 54 |
| | 65 |
|
| Interest cost | | 113 |
| | 113 |
|
| Actuarial (gain) loss | | 829 |
| | (204 | ) |
| Currency exchange rate changes | | (2 | ) | | (121 | ) |
| Plan curtailments | | — |
| | (150 | ) |
| Plan settlements | | (57 | ) | | (74 | ) |
| Other | | (86 | ) | | (38 | ) |
Ending projected benefit obligation1 | | 4,284 |
| | 3,433 |
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| Changes in fair value of plan assets: | | | | |
| Beginning fair value of plan assets | | 2,551 |
| | 2,287 |
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| Actual return on plan assets | | 193 |
| | (38 | ) |
| Employer contributions | | 30 |
| | 480 |
|
| Currency exchange rate changes | | 3 |
| | (62 | ) |
| Plan settlements | | (57 | ) | | (74 | ) |
| Other | | (66 | ) | | (42 | ) |
Ending fair value of plan assets2 | | 2,654 |
| | 2,551 |
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| Net funded status | | $ | 1,630 |
| | $ | 882 |
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| Amounts recognized in the Consolidated Balance Sheets | | | | |
| Other long-term assets | | $ | — |
| | $ | 244 |
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| Other long-term liabilities | | $ | 1,630 |
| | $ | 1,126 |
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Accumulated other comprehensive loss (income), before tax3 | | $ | 1,730 |
| | $ | 1,038 |
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1 | The projected benefit obligation was approximately 35% in the U.S. and 65% outside of the U.S. as of December 28, 2019 and December 29, 2018.Financial Statements | Notes to Consolidated Financial Statements | 101 |
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2
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(In Millions) | | Dec 25, 2021 | | Dec 26, 2020 | | Changes in projected benefit obligation: | | | | | | Beginning projected benefit obligation | | $ | 4,929 | | | $ | 4,284 | | | Service cost | | 54 | | | 49 | | | Interest cost | | 91 | | | 97 | | | Actuarial (gain) loss | | (284) | | | 373 | | | Currency exchange rate changes | | (150) | | | 261 | | | | | | | | Plan settlements | | (126) | | | (79) | | | Other | | (58) | | | (56) | | Ending projected benefit obligation1 | | 4,456 | | | 4,929 | | | | | | | | Changes in fair value of plan assets: | | | | | | Beginning fair value of plan assets | | 2,878 | | | 2,654 | | | Actual return on plan assets | | 145 | | | 203 | | | Currency exchange rate changes | | (63) | | | 113 | | | | | | | Plan settlements | | (126) | | | (79) | | | Other | | (17) | | | (13) | | Ending fair value of plan assets2 | | 2,817 | | | 2,878 | | | | | | | | Net unfunded status | | $ | 1,639 | | | $ | 2,051 | | | | | | | | Amounts recognized in the Consolidated Balance Sheets | | | | | | | | | | | Other long-term liabilities | | $ | 1,639 | | | $ | 2,051 | | Accumulated other comprehensive loss (income), before tax3 | | $ | 1,445 | | | $ | 1,911 | | | | | | | Accumulated benefit obligation4 | | $ | 4,086 | | | $ | 4,429 | |
1 The projected benefit obligation was approximately 30% in the US and 70% outside of the US as of December 25, 2021 and approximately 35% in the US and 65% outside of the US as of December 26, 2020. 2 The fair value of plan assets was approximately 50% in the US and 50% outside of the US as of December 25, 2021 and approximately 55% in the US and 45% outside of the US as of December 26, 2020. 3 The accumulated other comprehensive loss (income), before tax, was approximately 30% in the US and 70% outside of the US as of December 25, 2021 and approximately 35% in the US and 65% outside of the US as of December 26, 2020. 4 All plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets for all periods presented. | The fair value of plan assets was approximately 55% in the U.S. and 45% outside of the U.S. as of December 28, 2019 and December 29, 2018. |
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3
| The accumulated other comprehensive loss (income), before tax, was approximately 35% in the U.S. and 65% outside of the U.S. as of December 28, 2019 and December 29, 2018. |
Changes in actuarial gains and losses in the projected benefit obligation are generally driven by discount rate movement. 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.
As of December 28, 2019, all plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets. As of December 29, 2018, the accumulated benefit obligations were $1.2 billion and $2.0 billionAssumptions for the U.S. Pension Plan and non-U.S. plans, respectively. In 2018, the U.S. Pension Plan was in the net asset position and all non-U.S. plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets.Benefit Plans
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| | Dec 25, 2021 | | Dec 26, 2020 |
| Weighted average actuarial assumptions used to determine benefit obligations | | | | |
| Discount rate | | 2.2 | % | | 1.9 | % |
| Rate of compensation increase | | 3.2 | % | | 3.2 | % |
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FINANCIAL STATEMENTS | Notes to Financial Statements | 103 |
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(In Millions) | | Dec 28,
2019 | | Dec 29,
2018 |
| Plans with accumulated benefit obligation in excess of plan assets | | | | |
| Accumulated benefit obligation | | $ | 3,862 |
| | $ | 1,965 |
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| Plan assets | | $ | 2,654 |
| | $ | 1,106 |
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| Plans with projected benefit obligation in excess of plan assets | | | | |
| Projected benefit obligation | | $ | 4,284 |
| | $ | 2,232 |
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| Plan assets | | $ | 2,654 |
| | $ | 1,106 |
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ASSUMPTIONS FOR PENSION BENEFIT PLANS
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| | | Dec 28,
2019 | | Dec 29,
2018 |
| Weighted average actuarial assumptions used to determine benefit obligations | | | | |
| Discount rate | | 2.3 | % | | 3.3 | % |
| Rate of compensation increase | | 3.5 | % | | 3.5 | % |
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| | | 2019 | | 2018 | | 2017 |
| Weighted average actuarial assumptions used to determine costs | | | | | | |
| Discount rate | | 3.4 | % | | 3.0 | % | | 3.2 | % |
| Expected long-term rate of return on plan assets | | 4.7 | % | | 4.7 | % | | 4.6 | % |
| Rate of compensation increase | | 3.5 | % | | 3.3 | % | | 3.6 | % |
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| | 2021 | | 2020 | | 2019 |
| Weighted average actuarial assumptions used to determine costs | | | | | | |
| Discount rate | | 1.9 | % | | 2.3 | % | | 3.4 | % |
| Expected long-term rate of return on plan assets | | 2.7 | % | | 3.3 | % | | 4.7 | % |
| Rate of compensation increase | | 3.2 | % | | 3.2 | % | | 3.5 | % |
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.
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| Financial Statements | Notes to Consolidated Financial Statements | 102 |
Funding
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.US Retiree Medical 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 retiree medical plans were 65%68% funded as of December 28, 2019.25, 2021. The U.S.US Pension Plan, which accounts for 32%28% of the worldwide pension and retiree medical benefit obligations, was 96%99% 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.US retirement plans is determined in accordance with ERISA, which sets required minimum contributions. Cumulative company funding to the U.S.US Pension Plan currently exceeds the minimum ERISA funding requirements.
NET PERIODIC BENEFIT COSTNet Periodic Benefit Cost
The net periodic benefit cost for pension and U.S.US retiree medical benefits was $162 million in 2021 ($164 million in 2020 and $135 million in 2019 ($197 million in 2018 and $243 million in 2017)2019).
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| | December 25, 2021 | | Dec 26, 2020 |
| | Fair Value Measured at Reporting Date Using | | | | |
| (In Millions) | | Level 1 | | Level 2 | | Level 3 | | Total | | Total |
| Equity securities | | $ | — | | | $ | 342 | | | $ | — | | | $ | 342 | | | $ | 320 | |
| Fixed income | | — | | | 122 | | | 20 | | | 142 | | | 135 | |
| Assets measured by fair value hierarchy | | $ | — | | | $ | 464 | | | $ | 20 | | | $ | 484 | | | $ | 455 | |
| Assets measured at net asset value | | | | | | | | 2,311 | | | 2,401 | |
| Cash and cash equivalents | | | | | | | | 22 | | | 22 | |
| Total pension plan assets at fair value | | | | | | | | $ | 2,817 | | | $ | 2,878 | |
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FINANCIAL STATEMENTS | Notes to Financial Statements | 104 |
PENSION PLAN ASSETS |
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| | | December 28, 2019 | | Dec 29,
2018 |
| | | Fair Value Measured at Reporting Date Using | | | | |
| (In Millions) | | Level 1 | | Level 2 | | Level 3 | | Total | | Total |
| Equity securities | | $ | — |
| | $ | 278 |
| | $ | — |
| | $ | 278 |
| | $ | 261 |
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| Fixed income | | — |
| | 99 |
| | 20 |
| | 119 |
| | 111 |
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| Assets measured by fair value hierarchy | | $ | — |
| | $ | 377 |
| | $ | 20 |
| | $ | 397 |
| | $ | 372 |
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| Assets measured at net asset value | | | | | | | | 2,236 |
| | 2,138 |
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| Cash and cash equivalents | | | | | | | | 21 |
| | 41 |
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| Total pension plan assets at fair value | | | | | | | | $ | 2,654 |
| | $ | 2,551 |
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U.S.US Plan Assets
The investment strategy for U.S.US Pension Plan assets is to manage the funded status volatility, 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 are approximately 90% fixed income and 10% equity investments. During 2019,2021, the U.S.US Pension Plan assets were invested in collective investment trust funds, which are measured at net asset value.
Non-U.S.Non-US Plan Assets
The investments of the non-U.S.non-US 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.non-US plan assets that we have control over was approximately 45% fixed income, 35% equity, and 20% hedge fund investments in 2019.2021.
The equity investments in the non-U.S.non-US plan assets are invested in a diversified mix of equities of developed countries, including the U.S.,US, 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 funds, and equity index funds.
ESTIMATED FUTURE BENEFIT PAYMENTS FOR PENSION BENEFIT PLANSEstimated Future Benefit Payments for Pension Benefit Plans
Estimated benefit payments over the next 10 years are as follows: |
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| (In Millions) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2025-2029 |
| Pension benefits | | $ | 151 |
| | $ | 145 |
| | $ | 139 |
| | $ | 135 |
| | $ | 132 |
| | $ | 694 |
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| (In Millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027-2031 |
| Pension benefits | | $ | 147 | | | $ | 144 | | | $ | 141 | | | $ | 142 | | | $ | 146 | | | $ | 765 | |
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NOTE 19 : | EMPLOYEE EQUITY INCENTIVE PLANSFinancial Statements | Notes to Consolidated Financial Statements | 103 |
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| Note 18 : | 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 Plan and our 2006 ESPP.
Under the 2006 Plan, 866 million shares of common stock have been authorized for issuance as equity awards to employees and non-employee directors through June 2023. As of December 28, 2019, 22825, 2021, 128 million shares of common stock remained available for future grants.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 105 |
Under the 2006 Plan, we grant RSUs and stock options. We grant RSUs with a service condition as well as RSUs with a market condition, performance condition, and a service condition, which we call PSUs. Prior to granting PSUs, we granted OSUs, which were RSUs with only market and service conditions. PSUs are granted to a group of senior officers and employees. For PSUs granted in 2019,2021, the number of shares of our common stock to be received at vesting will range from 0% to 200% of the target grant amount, equally based on two metrics: our three-year cumulative non-GAAP EPS growth relative to a target rate and 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 28, 2019, 1325, 2021, 15 million PSUs and OSUs were outstanding. The PSUs granted in 2019 vest three years from the grant date, and OSUs, which were granted prior to 2019, generally vest three years and one month from the grant date. Other RSU awards and option awards generally vest over four years from the grant date. Stock options generally expire ten10 years from the date of grant.
SHARE-BASED COMPENSATIONShare-Based Compensation
Share-based compensation recognized in 20192021 was $2.0 billion ($1.9 billion in 2020 and $1.7 billion ($1.5 billion in 2018 and $1.4 billion in 2017)2019). During 2019,2021, the tax benefit that we realized for the tax deduction from share-based awards totaled $377 million ($380 million in 2020 and $359 million ($399 million in 2018 and $520 million in 2017)2019).
We estimate the fair value of RSUs with a service condition or performance 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 RSUs with a market condition using a Monte Carlo simulation model onas of the date of grant using historical volatility.
RESTRICTED STOCK UNITSRestricted Stock Units
Weighted average assumptions used in estimating grant values were as follows: |
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| | | Dec 28,
2019 | | Dec 29,
2018 | | Dec 30,
2017 |
| Estimated values | | $ | 48.06 |
| | $ | 48.95 |
| | $ | 35.30 |
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| Risk-free interest rate | | 2.3 | % | | 2.4 | % | | 1.4 | % |
| Dividend yield | | 2.5 | % | | 2.4 | % | | 2.9 | % |
| Volatility | | 25 | % | | 22 | % | | 23 | % |
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| | Dec 25, 2021 | | Dec 26, 2020 | | Dec 28, 2019 |
| Estimated values | | $ | 50.82 | | | $ | 54.82 | | | $ | 48.06 | |
| Risk-free interest rate | | 0.2 | % | | 0.4 | % | | 2.3 | % |
| Dividend yield | | 2.6 | % | | 2.3 | % | | 2.5 | % |
| Volatility | | 37 | % | | 30 | % | | 25 | % |
Summary of activities:
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| | | Number of Stock Units (In Millions) | | Weighted Average Grant-Date Fair Value |
| December 29, 2018 | | 89.9 |
| | $ | 39.07 |
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| Granted | | 37.6 |
| | $ | 48.06 |
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| Vested | | (35.2 | ) | | $ | 36.51 |
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| Forfeited | | (8.2 | ) | | $ | 42.20 |
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| December 28, 2019 | | 84.1 |
| | $ | 43.86 |
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| Expected to vest | 79.8 |
| | $ | 43.72 |
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| | Number of Stock Units (In Millions) | | Weighted Average Grant-Date Fair Value |
| December 26, 2020 | | 82.7 | | | $ | 50.14 | |
| Granted | | 76.8 | | | $ | 50.82 | |
| Vested | | (30.2) | | | $ | 47.64 | |
| Forfeited | | (11.3) | | | $ | 49.48 | |
| December 25, 2021 | | 118.0 | | | $ | 51.29 | |
| Expected to vest | 105.9 | | | $ | 51.47 | |
The aggregate fair value of awards that vested in 20192021 was $1.7 billion ($1.9 billion in 2020 and $1.9 billion ($2.0 billion in 2018 and $1.6 billion in 2017)2019), 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 20192021 was $1.4 billion ($1.3 billion in 2020 and $1.3 billion ($1.2 billion in 2018 and $1.1 billion in 2017)2019). 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 28, 2019,25, 2021, unrecognized compensation costs related to RSUs granted under our equity incentive plans were $2.1$3.8 billion. We expect to recognize those costs over a weighted average period of 1.31.5 years.
STOCK PURCHASE PLANStock Purchase Plan
The 2006 ESPP 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 ESPP, 373523 million shares of common stock are authorized for issuance through August 2021.2026. As of December 28, 2019, 11925, 2021, 227 million shares of common stock remained available for issuance.
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| Financial Statements | Notes to Consolidated Financial Statements | 104 |
Employees purchased 17.122 million shares of common stock in 20192021 for $688$925 million under the 2006 ESPP (13.7(21 million shares of common stock for $468$876 million in 20182020 and 14.517 million shares of common stock for $432$688 million in 2017)2019). As of December 28, 2019,25, 2021, unrecognized share-based compensation costs related to rights to acquire shares of common stock under the 2006 ESPP totaled $42$48 million. We expect to recognize those costs over a period of approximately two months.
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FINANCIAL STATEMENTSNote 19 : | Notes to Financial Statements | 106Commitments and Contingencies |
TableWe recognized operating leased assets in other long-term assets of Contents$549 million and corresponding accrued liabilities of $180 million, and other long-term liabilities of $295 million as of December 25, 2021. Our operating leases have remaining terms of 1 to 14 years and may include options to extend the leases for up to 37 years. The weighted average remaining lease term was 3.8 years, and the weighted average discount rate was 2.5% as of December 25, 2021 for our operating leases.
Operating lease expense was $798 million in 2021 ($416 million in 2020 and $185 million in 2019), including $620 million in variable lease expense in 2021.
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NOTE 20 : | COMMITMENTS AND CONTINGENCIES |
COMMITMENTS
CommitmentsIn 2021, we signed finance leases for construction or purchasesupplier capacity extending over approximately eight years. The leases will commence upon start of supplier production expected in 2023 with prepayments totaling approximately $980 million in 2022 and 2023. These prepayments will be recognized in property, plant and equipment upon payment.
Discounted and undiscounted lease payments under non-cancelable leases as of December 25, 2021, excluding non-lease components, were as follows:
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| (In Millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
| Operating lease payments | | $ | 183 | | | $ | 139 | | | $ | 79 | | | $ | 55 | | | $ | 16 | | | $ | 27 | | | $ | 499 | |
| Finance lease payments | | $ | 451 | | | $ | 529 | | | | | | | | | | | $ | 980 | |
| Present value of lease payments | | | | | | | | | | | | | | $ | 1,455 | |
Commitments
Commitments for capital expenditures totaled $10.9$27.0 billion as of December 28, 201925, 2021 ($9.08.6 billion as of December 29, 2018)26, 2020), a substantial majority of which will be due within the next 12 months. Other purchase obligations and commitments totaled approximately $2.8$12.4 billion as of December 28, 201925, 2021 (approximately $3.2$2.6 billion as of December 29, 2018)26, 2020). Other purchase obligations and commitments include payments due under supply agreements and various types of licenses and agreements to purchase goods or services. Contractual obligations for purchases of goods or services relate to agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities, fixed, minimum, or variable price provisions, and the approximate timing of the transaction. For further information on our lease commitments, see "Note 3: Recent Accounting Standards."obligations with cancellation provisions, amounts are limited to the non-cancelable portion or the minimum cancellation fee under the agreement.
LEGAL PROCEEDINGSLegal Proceedings
We are aregularly party to various legalongoing claims, litigation, and other proceedings, including those noted in this section. AlthoughIn the first quarter of 2021, we accrued a charge of $2.2 billion related to litigation involving VLSI, described below. Excluding this charge, 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,trends; however, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings, excessive verdicts, or other events could occur. Unfavorable resolutions could include substantial monetary damages.damages, fines, or penalties. Certain of these outstanding matters include speculative, substantial or indeterminate monetary awards. 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.
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| Financial Statements | Notes to Consolidated Financial Statements | 105 |
European Commission Competition Matter
In 2001, the 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’sIntel'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’sEC's 2009 decision in light of the Court of Justice’sJustice's clarifications of the law. In November 2017, the parties filed initial “Observations”"Observations" about the Court of Justice’sJustice's decision and the appeal and were invited by the General Court to offer supplemental comments to each other’s “Observations,”other's "Observations," which the parties submitted in March 2018. Responses to other questions posed by the General Court were filed in May and June 2018. The General Court has scheduledheard oral argument forin March 2020. Pending2020, and on January 26, 2022 issued a decision annulling the final decision in this matter,EC’s finding against Intel regarding rebates as well as the fine paidon Intel. Any appeal of the General Court’s decision must be brought before the Court of Justice by Intel has been placed by the EC in commercial bank accounts where it accrues interest.early April 2022.
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”"Spectre" and “Meltdown”"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 relating to the Spectre and Meltdown security vulnerabilities, as well as another variant of these vulnerabilities (“Foreshadow”) that has since been identified, have been filed against Intel and, in certain cases, our current and former executives and directors, in U.S.US federal and state courts and in certain courts in other countries.
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FINANCIAL STATEMENTS | Notes to Financial Statements | 107 |
As of January 22, 2020,25, 2022, consumer class action lawsuits relating to certainthe above class of security vulnerabilities publicly disclosed insince 2018 were pending in the U.S.,United States, Canada, and Israel. The plaintiffs, who purport to represent various classes of purchasers 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. In the U.S.,United States, numerous individual class action suits filed in various jurisdictions were consolidated in April 2018 for all pretrial proceedings in the U.S.US District Court for the District of Oregon. Intel filed aIn March 2020, the court granted Intel's motion to dismiss the complaint in that consolidated action but granted plaintiffs leave to amend. In March 2021, the court granted Intel's motion to dismiss the amended complaint but granted plaintiffs leave to further amend in October 2018, andpart. Plaintiffs filed a hearing on that motion was heldfurther amended complaint in February 2019.May 2021, which Intel moved to dismiss in July 2021. In Canada, in one case pending in the Superior Court of Justice of Ontario, an initial status conference has not yet been scheduled. In a second case pending in the Superior Court of Justice of Quebec, the court has stayeda stay of the case was in effect until April 2020.December 2021, and the parties' joint request for a further stay to May 2022 is pending with the court. In Israel, bothtwo consumer class action lawsuits were filed in the District Court of Haifa. InThe plaintiff voluntarily dismissed the first case, the District Court denied the parties' joint motion to stay filedlawsuit in January 2019, but to date has deferred Intel's deadline to respond to the complaint in view of Intel's pending motion to dismiss in the consolidated proceeding in the U.S.July 2021. Intel filed a motion to stay the second case pending resolution of the consolidated proceeding in the U.S.,US, and a hearing on that motion has been scheduled for May 2020.April 2022. Additional lawsuits and claims may be asserted seeking monetary damages or other related relief. We dispute the pending claims described above and intend to defend those lawsuits vigorously. Given the procedural posture and the nature of those cases, including that the pending 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 those matters.
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| Financial Statements | Notes to Consolidated Financial Statements | 106 |
In addition to these lawsuits, Intel stockholders have filed multiple shareholder derivative lawsuits since January 2018 against certain current and former members of our Board of Directors and certain current and former officers, alleging 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 seeksought to recover damages from the defendants on behalf of Intel. Some of the derivative actions were filed in the U.S.US District Court for the Northern District of California and were consolidated, and the others were filed in the Superior Court of the State of California in San Mateo County and were consolidated. The federal court granted defendants' motion to dismiss the consolidated complaint in the federal action in August 2018 on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the Board. The federal court granted plaintiffs leave to amend their complaint, but subsequently dismissed the cases without prejudice in January 2019 at plaintiffs' request. In August 2018, theThe California Superior Court grantedentered judgment in defendants' motionfavor in August 2020 after granting defendants' motions to dismiss theplaintiffs' consolidated complaint in the state court action on the ground that plaintiffs failedand three successive amended complaints, all for failure to plead facts sufficient to show theyplaintiffs were excused from making a pre-lawsuit demand on the Board. Plaintiffs filed a notice of appeal of the California court's judgment in October 2020. In January 2021, another Intel stockholder filed a derivative lawsuit in the Superior Court in San Mateo County against certain current and former officers and members of our Board butof Directors. The lawsuit asserts claims similar to those dismissed in August 2020, except that it alleges that the stockholder made a pre-lawsuit demand on our Board of Directors and that the demand was wrongfully refused. In May 2021, the court granted defendants' motion to stay the action pending the outcome of any litigation plaintiff may choose to file in Delaware where Intel's bylaws require such claims to be filed.
Litigation Related to 7nm Product Delay Announcement
Starting in July 2020, five securities class action lawsuits were filed in the United States District Court for the Northern District of California against Intel and certain current and former officers based on Intel’s July 2020 announcement of 7nm product delays. The plaintiffs, leavewho purport to amend.represent classes of acquirers of Intel stock between October 2019 and July 2020, generally allege that the defendants violated securities laws by making false or misleading statements about the timeline for 7nm products in light of subsequently announced delays. In October 2020, the court consolidated the lawsuits and appointed lead plaintiffs, and in January 2021 the lead plaintiffs filed a consolidated complaint. Defendants moved to dismiss the consolidated complaint in March 2021. We dispute the claims described above and intend to defend the lawsuits vigorously. Given the procedural posture and the nature of those cases, including that the pending 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 those matters. In July 2019,2021, Intel introduced a new process node naming structure, and the California Superior7nm process is now Intel 4.
Litigation Related to Patent and IP Claims
We have had IP infringement lawsuits filed against us, including but not limited to those discussed below. Most involve claims that certain of our products, services, and technologies infringe others' IP rights. Adverse results in these lawsuits may include awards of substantial fines and penalties, costly royalty or licensing agreements, or orders preventing us from offering certain features, functionalities, products, or services. As a result, we may have to change our business practices, and develop non-infringing products or technologies, which could result in a loss of revenues for us and otherwise harm our business. In addition, certain agreements with our customers require us to indemnify them against certain IP infringement claims, which can increase our costs as a result of defending such claims, and may require that we pay significant damages, accept product returns, or supply our customers with non-infringing products if there were an adverse ruling in any such claims. In addition, our customers and partners may discontinue the use of our products, services, and technologies, as a result of injunctions or otherwise, which could result in loss of revenues and adversely affect our business.
Institute of Microelectronics, Chinese Academy of Sciences v. Intel China, Ltd., et al.
In February 2018, the Institute of Microelectronics of the Chinese Academy of Sciences (IMECAS) sued Intel China, Ltd., Dell China, Ltd. (Dell), and Beijing Jingdong Century Information Technology, Ltd. (JD) for patent infringement in the Beijing Higher People's Court. IMECAS alleges that Intel's Core series processors infringe Chinese patent CN 102956457 ('457 Patent). The complaint demands an injunction and damages of at least RMB 200 million plus the cost of litigation. Intel is indemnifying Dell and JD. The Beijing Higher People's Court dismissed plaintiffs' amended complaintheld a final trial hearing in September 2021. No ruling has been issued. In March 2018, Intel filed an invalidation request on the same grounds as'457 patent with the previousChina National Intellectual Property Administration (CNIPA). The CNIPA held an oral hearing in September 2018 and in February 2019 upheld the validity of the challenged claims. Intel filed a complaint but again granted plaintiffs leavein April 2019 with the Beijing Intellectual Property (IP) Court challenging the February 2019 CNIPA ruling. The Beijing IP Court held oral arguments in July and October 2021 and in November 2021 affirmed the CNIPA ruling. In December 2021, Intel filed an appeal with the Supreme People's Court challenging the Beijing IP Court's affirmance of the CNIPA ruling. In January 2020, Intel filed a second invalidation request on the '457 patent with the CNIPA, for which the CNIPA heard oral argument in July 2020 and in November 2020 held the challenged apparatus claims invalid. IMECAS filed a complaint in February 2021 with the Beijing IP Court challenging the November 2020 CNIPA ruling. In December 2020, Intel filed a third invalidation request on the '457 patent with the CNIPA. The CNIPA held an oral hearing in June 2021 and in September 2021 upheld the validity of the challenged claims. Intel filed a complaint in December 2021 with the Beijing IP Court challenging the September 2021 CNIPA ruling. In September 2018 and March 2019, Intel filed petitions with the US Patent and Trademark Office (USPTO) requesting institution of inter partes review (IPR) of US Patent No. 9,070,719, the US counterpart to amend.the '457 patent. The USPTO denied institution of Intel's petitions in March and October 2019, respectively. In April 2019, Intel filed a request for rehearing and a petition for a Precedential Opinion Panel (POP) in the USPTO to challenge the denial of its first IPR petition, and in November 2019 the California Superior Court dismissed plaintiffs' second amended complaintIntel filed a request for rehearing on the same grounds assecond IPR petition. In January 2020, the two previous complaints, but again granted plaintiffs leave to amend. Defendants' motion to dismiss plaintiffs' third amended complaint is scheduled for hearing in March 2020.
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FINANCIAL STATEMENTS | Financial Statements | Notes to Consolidated Financial Statements | 107 |
In October 2019, IMECAS filed second and third lawsuits in the Beijing IP Court, alleging infringement of Chinese Patent No. CN 102386226 ('226 Patent) based on the manufacturing and sale of Intel® Core i3 microprocessors. Defendants in the second case are Lenovo (Beijing) Co., Ltd. (Lenovo) and Beijing Jiayun Huitong Technology Development Co. Ltd. (BJHT). Defendants in the third case are Intel Corp., Intel China Co., Ltd., the Intel China Beijing Branch, Beijing Digital China Co., Ltd. (Digital China), and JD. The complaint in the second lawsuit demands an injunction plus litigation costs and reserves the right to claim damages in unspecified amounts. Intel is indemnifying Lenovo in the second lawsuit. The Beijing IP Court held a trial hearing in the second lawsuit in November 2021, but no ruling has been issued. The complaint in the third lawsuit demands an injunction plus litigation costs and claims damages of RMB 10 million. Intel China's jurisdictional challenge in the third lawsuit was denied in June 2021 by the Beijing IP Court and in November 2021 by the Supreme People's Court. A trial hearing in the third lawsuit was held in January 2022, but no ruling has been issued. In July 2020, Intel and Lenovo filed invalidation requests on the '226 patent with the CNIPA. The CNIPA heard oral arguments in December 2020, during which IMECAS proposed amendments to two claims. In April 2021, the CNIPA upheld the validity of the challenged and amended claims on both invalidation requests. Intel and Lenovo filed complaints in July 2021 with the Beijing IP Court challenging the April 2021 CNIPA rulings; the Beijing IP Court held oral arguments in October 2021.
Given the procedural posture and the nature of these cases, the unspecified nature and extent of damages claimed by IMECAS, and uncertainty regarding the availability of injunctive relief under applicable law, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters. We dispute IMECAS's claims and intend to vigorously defend against them.
VLSI Technology LLC v. Intel
In October 2017, VLSI filed a complaint against Intel in the US District Court for the Northern District of California alleging infringement of eight patents acquired from NXP Semiconductors, N.V. (NXP). The patents, which originated at Freescale Semiconductor, Inc. and NXP B.V., are US Patent Nos. 7,268,588; 7,675,806; 7,706,207; 7,709,303; 8,004,922; 8,020,014; 8,268,672; and 8,566,836. VLSI accuses various FPGA and processor products of infringement. VLSI estimated its damages to be at least $5.5 billion, and its complaint further sought enhanced damages, future royalties, attorneys' fees, costs, and interest. In May, June, September, and October 2018, Intel filed IPR petitions challenging the patentability of certain claims in all eight of the patents in-suit. The PTAB instituted review of six patents and denied institution on two patents. As a result of the institution decisions, the parties stipulated to stay the District Court action in March 2019. In December 2019 and February 2020, the PTAB found all claims of the '588 and '303 patents, and some claims of the '922 patent, to be unpatentable. The PTAB found the challenged claims of the '014, '672 and '207 patents to be patentable. Intel appealed the PTAB’s decision as to ‘014, ‘672 and ‘207 patents. The Federal Circuit affirmed the PTAB’s decision as to the ‘672 and ‘207 patents, but reversed and remanded as to the ‘014 patent. Intel moved for a continuation of the stay in March 2020 pending the appeal. In June 2020, the District Court issued an order continuing the stay through August 2021. The court lifted the stay in September 2021 and scheduled a trial for March 2024.
In June 2018, VLSI filed a second suit against Intel, in US District Court for the District of Delaware, alleging infringement by various Intel processors of five additional patents acquired from NXP: US Patent Nos. 6,212,663; 7,246,027; 7,247,552; 7,523,331; and 8,081,026. VLSI accused Intel of willful infringement and seeks an injunction or, in the alternative, ongoing royalties, enhanced damages, attorneys' fees and costs, and interest. In March 2019, the District Court dismissed VLSI's claims for willful infringement as to all the patents-in-suit except the '027 patent, and also dismissed VLSI's allegations of indirect infringement as to the '633, '331, and '026 patents. In June 2019, Intel filed IPR petitions challenging the patentability of certain claims in all five patents-in-suit. In January 2020, VLSI said that it was no longer asserting any claims of the '633 patent. In January and February 2020, the PTAB instituted review of the '552, '633, '331 and '026 patents, but declined to institute review of the '027 patent. As a result, the District Court stayed the case as to the '026 and '552 patents but allowed the case to proceed on the '027 and '331 patents. In January 2021, the PTAB invalidated certain asserted claims of the '026 patent, and in February the PTAB invalidated all asserted claims of the '552 patent. Both parties filed notices of appeal regarding the PTAB's decision as to the '026 patent in March 2021, and in April 2021, VLSI filed a notice of appeal of the PTAB's decision as to the '552 patent. The case remains stayed as to both of those patents. For the '027 and '331 patents, VLSI is seeking damages of approximately $4.13 billion plus enhanced damages for the '027 patent. Intel is filing summary judgment motions and challenges to expert witnesses in accordance with the court's January 2022 deadline.
In March 2019, VLSI filed a third suit against Intel, also in US District Court for the District of Delaware, alleging infringement of six more patents acquired from NXP: US Patent Nos. 6,366,522; 6,663,187; 7,292,485; 7,606,983; 7,725,759; and 7,793,025. In April 2019, VLSI voluntarily dismissed this Delaware case without prejudice. In April 2019, VLSI filed three new infringement suits against Intel in the US District Court for the Western District of Texas (WDTX) accusing various Intel processors of infringement. The three suits collectively assert the same six patents from the voluntarily dismissed Delaware case plus two additional patents acquired from NXP, US Patent Nos. 7,523,373 and 8,156,357. VLSI accuses Intel of willful infringement and seeks an injunction or, in the alternative, ongoing royalties, enhanced damages, attorneys' fees and costs, and interest. In the first Texas case, VLSI asserted the '373 and '759 patents (in December 2020, the court granted Intel summary judgment of non-infringement on the '357 patent, which had also been assertedin the first Texas case). That case went to trial in February 2021, and the jury awarded a “lump sum” to VLSI of $1.5 billion for literal infringement of the ‘373 patent and $675 million for infringement under the doctrine of equivalents of the ‘759 patent. The jury found that Intel had not willfully infringed either patent. Intel has challenged the verdict with post-trial motions, including filing in May 2021 a motion for a new trial and a motion for judgment as a matter of law that the ‘373 and ‘759 patents are not infringed and the ‘759 patent is invalid. The court denied the motion for new trial in August 2021, but other post-trial motions, including the motion for judgment as a matter of law, remain pending. If the court does not vacate the verdict, Intel will challenge it on appeal.
The second Texas case went to trial in April 2021, and the jury found that Intel does not infringe the ‘522 and ‘187 patents. VLSI had sought approximately $3.0 billion for alleged infringement of those patents, plus enhanced damages for willful infringement. The court has not yet entered a judgment following the first or second trials in Texas.
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| Financial Statements | Notes to Consolidated Financial Statements | 108 |
In May 2019, VLSI filed a case in Shenzhen Intermediate People’s Court against Intel, Intel (China) Co., Ltd., Intel Trading (Shanghai) Co., Ltd., and Intel Products (Chengdu) Co., Ltd. VLSI asserts Chinese Patent 201410094015.9, accusing certain Intel Core processors of infringement. VLSI requests an injunction as well as RMB 1 million in damages and RMB 300 thousand in expenses. Defendants filed an invalidation petition in October 2019 with the CNIPA, which held a hearing in September 2021. In May 2020, defendants filed a motion to stay the trial court proceedings pending a determination on invalidity. The court held the first evidentiary hearing in November 2020 and the second in July 2021. The court also held trial proceedings in the hearing in July 2021 and concluded that further trial proceedings were needed but indicated those would be stayed pending the outcome of defendants’ invalidity challenge at the CNIPA. In July 2021, VLSI dismissed its case, but refiled it in August 2021. In November 2021, Intel moved for a stay of the August 2021 action pending a ruling on invalidity. The court has not yet ruled on that motion.
In May 2019, VLSI filed a second case in Shanghai Intellectual Property Court against Intel (China) Co., Ltd., Intel Trading (Shanghai) Co., Ltd., and Intel Products (Chengdu) Co., Ltd. VLSI asserts Chinese Patent 201080024173.7. VLSI accuses certain Intel Core processors and seeks an injunction, as well as RMB 1 million in damages and RMB 300 thousand in expenses. Defendants filed with the CNIPA an invalidation petition in October 2019 and the CNIPA held a hearing in September 2021, but has not yet issued a decision. In June 2020, defendants filed a motion to stay the trial court proceedings pending a determination on invalidity. The court held its first evidentiary hearing in September 2020. The court held a second evidentiary hearing in December 2020, and a trial the same month. At trial, VLSI dropped its monetary damages claim, but still requested expenses (RMB 300 thousand) and an injunction. The court has not yet issued a decision following the trial. Rather, the court stayed the case in December 2020 pending a determination on invalidity by the CNIPA.
In November 2019, Intel, along with Apple Inc., filed a complaint against Fortress Investment Group LLC, Fortress Credit Co. LLC, Uniloc 2017 LLC, Uniloc USA, Inc., Uniloc Luxembourg S.A.R.L., VLSI, INVT SPE LLC, Inventergy Global, Inc., DSS Technology Management, Inc., IXI IP, LLC, and Seven Networks, LLC. Plaintiffs allege violations of Section 1 of the Sherman Act by certain defendants, Section 7 of the Clayton Act by certain defendants, and California Business and Professions Code section 17200 by all defendants based on defendants' unlawful aggregation of patents. In 2020 and 2021, the court twice dismissed plaintiffs' complaint with leave to amend. In December 2020, the court granted a joint motion by Apple and Seven Networks to dismiss with prejudice Apple’s claims against Seven Networks. Plaintiffs filed a second amended complaint in March 2021. Defendants moved to dismiss the Second Amended Complaint in May 2021. Apple withdrew from the case and dismissed its claims in June 2021. The court heard defendants’ motion to dismiss the Second Amended Complaint in September 2021, and dismissed Intel’s claims with prejudice that same month, entering judgment in favor of defendants. Intel filed a notice of appeal in December 2021.
In June 2020, affiliates controlled by Fortress Investment Group, which also controls VLSI, acquired Finjan Holdings, Inc. Intel had signed a "Settlement, Release and Patent License Agreement" with Finjan in 2012, acquiring a license to the patents of Finjan and its affiliates, current or future, through a capture period of November 20, 2022. The agreement also contains covenants wherein Finjan agrees to cause its affiliates to comply with the agreement. As such, Intel maintains that it now has a license to the patents of VLSI, which has become a Finjan affiliate, and that Finjan must cause VLSI to dismiss its suits against Intel. In August 2020, Intel started dispute resolution proceedings under the agreement. As a part of this dispute resolution process, Intel and Finjan held a mediation in December 2020, but failed to resolve their differences. Intel filed suit to enforce its rights under the License Agreement with Finjan in January 2021 in Delaware Chancery Court. In March 2021, defendants filed motions to dismiss the Chancery Court proceedings. The court heard those motions in May 2021, and dismissed all of Intel’s claims—except the breach of contract claim—with prejudice in September 2021 for lack of jurisdiction because, the court reasoned, Intel’s license defense has been raised in the other US suits between Intel and VLSI and could be adjudicated in one of those actions. The court stayed Intel’s breach of contract claim pending a determination on whether Intel is licensed to VLSI’s patents. In September 2020, Intel filed motions to stay the Texas, Delaware, and Shanghai matters pending resolution of its dispute with Finjan. In November 2020, Intel filed a motion to stay the Shenzhen matter pending resolution of its dispute with Finjan. In November 2020, the Delaware court denied Intel's motion to stay. The other stay motions remain pending. Finally, Intel filed a motion to amend its answer in the Texas matters to add a license defense in November 2020, and filed a motion to amend its answer in the Delaware matter to add a license defense in February 2021. The Texas court has not yet ruled on Intel’s motion to amend, but the Delaware court granted Intel’s motion in July 2021.
In June 2021, OpenSky Industries LLC (OpenSky) requested IPR of certain claims of the ‘373 and ‘759 patents, including the ones a jury said Intel infringes. Both petitions copied Intel’s earlier petitions, and used the expert declarations previously submitted by Intel. Another entity named Patent Quality Assurance LLC (PQA) also petitioned for IPR of certain claims of the ’373 patent, including ones a jury said Intel infringes. PQA also largely copied Intel’s petition, but added a challenge to an additional claim and included newly signed declarations from Intel’s experts. In December 2021, the PTAB instituted OpenSky’s petition on the ‘759 patent, but declined to institute on the ‘373 patent. In December 2021, Intel filed a motion to join OpenSky’s ‘759 IPR. A decision on PQA’s IPR petition is expected in January 2022.
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KEY TERMS | Financial Statements | Notes to Consolidated Financial Statements | 109 |
After consideration of the verdicts in the WDTX cases and the additional pending lawsuits filed by VLSI, Intel accrued a charge of $2.2 billion in the first quarter of 2021. We dispute VLSI's claims and intend to vigorously defend against them.
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| Financial Statements | Notes to Consolidated Financial Statements | 110 |
We use terms throughout our document that are specific to Intel or that are abbreviations that may not be commonly known or used. Below is a list of these terms used in our document.
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| Term | | Definition |
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| 2006 Plan | | 2006 Equity Incentive Plan |
| 2006 ESPP | | 2006 Employee Stock Purchase Plan |
| 2009 Debentures | | 3.25% junior subordinated convertible debentures due 2039 |
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TERM | | DEFINITION |
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2006 Plan | | 2006 Equity Incentive Plan |
2006 ESPP5G | | 2006 Employee Stock Purchase Plan |
2009 Debentures | | 3.25% junior subordinated convertible debentures due 2039 |
2018 Arizona Bonds | | Bonds remarketed in 2018, which were issued by the Industrial Development Authority of the City of Chandler, Arizona and which are our unsecured obligations |
2018 Oregon Bonds | | Bonds remarketed in 2018, which were issued by the State of Oregon Business Development Commission and which are our unsecured obligations |
2019 Arizona Bonds | | Bonds issued in 2019 by the Industrial Development Authority of the City of Chandler, Arizona that are our unsecured obligations |
2019 Oregon Bonds | | Bonds issued in 2019 by the State of Oregon Business Development Commission that are our unsecured obligations |
5G | | The next-generationfifth-generation mobile network, which is expected to bring dramatic improvements in network speeds and latency, and which we view as a transformative technology and opportunity for many industries |
ADAS | | |
| ADAS | | Advanced driver-assistance systems |
ASICAdjacent products | | All of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Mobileye, NSG, and PSG products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs |
| AI | | Artificial intelligence |
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| ASIC | | Application-specific integrated circuit |
AV | | Autonomous vehicle |
CAGRASP | | Average selling price |
| AV | | Autonomous vehicle |
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| CAGR | | Compound annual growth rate |
CDPCCG | | Client Computing Group operating segment |
| CDP | | A nonprofit organization that runs a global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts |
CODM | | |
| CODM | | Chief operating decision maker |
Cloudification | | Refers to the application of cloud technologies and business practices to infrastructure outside the centralized cloud data center—bringing the same programmability, flexibility, and economies of scale to the network and edge. |
CPU | | |
| COVID-19 | | The infectious disease caused by the most recently discovered coronavirus (aka SARS-CoV-2), which was declared a global pandemic by the World Health Organization |
| CPU | | Processor or central processing unit |
Data-centric businesses | | Includes our |
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| CXL | | Compute Express Link; an open standard for high-speed CPU-to-device and CPU-to-memory connections |
| DCG | | Data Center Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solutions Group (NSG), Programmable Solutions Group (PSG), and all other businessesoperating segment |
ECeASIC | | European CommissionAn Intel line of structured ASICs that are an intermediary technology between FPGAs and standard-cell ASICs |
| EC | | European Commission |
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Edge (orcomputing or intelligent edge)edge | | AllocatedPlacing resources thatto move, store, and process data closer to the source or point of service deliverywhere data is generated and consumed |
ERISAEEO-1 | | EEO-1 Component 1 report; a mandatory annual data collection that requires employers meeting certain criteria to submit demographic workforce data, including data by race/ethnicity, sex and job categories. |
| EMIB | | Embedded multi-die interconnect bridge, a form of "2.5D" packaging technology developed by Intel that enables high-density interconnect of heterogeneous chips |
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| ERISA | | Employee Retirement Income Security Act |
| EUNCAP | | European New Car Assessment Programme |
| EV | | Electric vehicle |
| EUV | | Extreme ultraviolet lithography |
| Exchange Act | | Securities Exchange Act of 1934 |
| Form 10-K | | Annual Report on Form 10-K |
FPGAFoveros | | Intel's high-performance, three-dimensional stacked chip packaging technology |
| FPGA | | Field-programmable gate array |
GHG | | Greenhouse gas |
| GPU | | Graphics processing unit |
IDMGSR | | The EU-General Safety Regulation for motor vehicles |
| IDM | | Integrated device manufacturer, a semiconductor company that both designs and builds chips |
IMFT | | IM Flash Technologies, LLC |
| IFS | | Intel Foundry Services |
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| IMECAS | | Institute of Microelectronics, Chinese Academy of Sciences |
| IMRS | | Internet of Things Market Ready Solutions |
| Internet of Things | | Refers to theThe Internet of Things market in which we sell our IOTG and Mobileye products |
I/O | | Input/output |
IP | | Intellectual property |
ISecGI/O | | Intel Security Group (divested in Q2 2017)Input/output |
LEED*IOTG | | Leadership in Energy and Environmental Design, which is the most widely used green building rating system in the worldInternet of Things Group operating segment |
LevelsIP | | Intellectual property |
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| IPO | | Initial public offering |
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| IPU | | Infrastructure Processing Unit, a programmable networking device designed to enable cloud and communication service providers to reduce overhead and free up performance for CPUs |
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| L1 | | Level 1 of autonomous driving: | |
(L1) Level 1 | | Mostdriving; most functions are controlled by a human driver; certain functions (parking assist, acceleration, and limited steering) can be done automatically by the vehicle |
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SUPPLEMENTAL DETAILS | | 109 |
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(L2) Level 2 | | The of autonomous driving; the system controls both steering and acceleration using information about the driving environment, (e.g., lane centering and cruise control), but with the expectation that a human will perform all remaining aspects of driving; the driver can have his or her hands off the steering wheel, but must monitor the “dynamic"dynamic driving task”task" at all times |
(L2+) L2+ | | Level 2+ | | The of autonomous driving; the system controls both steering and acceleration using multi cameraa multi-camera sensor suite and/or high definitionhigh-definition maps to enhance and solidify L2 capabilities.capabilities |
(L3) Level 3 | | The system performs all aspects of the driving task with the expectation that a human will respond appropriately if intervention is necessary. The vehicle transfers control to the driver when necessary; the driver must be ready to retake control at all times, but does not need to continuously monitor conditions |
(L4) L4 | | Level 4 | | The of autonomous driving; the system performs all aspects of the driving task even if the driver does not respond appropriately to a request for intervention, including all safety-critical driving
(e.g., urban driving), no driver intervention is required at allall. |
(L5) Level 5 | | The system performs all aspects of the driving task under all roadway and environmental conditions. System performance is equal to a human driver in every scenario, including extreme environments |
| MaaS | | Mobility-as-a-Service |
McAfee | | Business, post divestiture of ISecG in Q2 2017, which we retained an interest in as part of our investment strategy |
| MD&A | | Management's Discussion & Analysis |
MDF | | Member debt financing |
| MG&A | | Marketing, general and administrative |
NAND | | |
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| NAND | | NAND flash memory |
nmNIC | | NanometerNetwork interface controller |
ODMnm | | Nanometer |
| NSG | | Non-Volatile Memory Solutions Group operating segment |
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| ODM | | Original design manufacturer |
| OEM | | Original equipment manufacturer |
PC-centric business | | Our Client Computing Group (CCG) business, including both platform and adjacent products |
PLD | | |
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| Platform products | | A microprocessor (CPU) and chipset, a stand-alone SoC, or a multichip package, based on Intel architecture. Platform products are primarily used in solutions sold through the CCG, DCG, and IOTG segments |
| PLD | | Programmable logic device |
| Program (specific to Mobileye business) | | A process that takes two to three years of intense activity with the carmaker and Tier 1 after a design win until Mobileye technology is launched into production |
| PRQ | | Product Release Qualification,release qualification, which is the milestone when costs to manufacture a product are included in inventory valuation |
QLCPSG | | Quad-level cellProgrammable Solutions Group operating segment |
| PSU | | Performance stock unit |
| QLC | | Quad-level cell |
| RAMP-C | | Rapid Assured Microelectronics Prototypes-Commercial, a program from the US Department of Defense to facilitate the use of a domestic commercial foundry infrastructure |
| R&D | | Research and development |
| RDFV | | Readily determinable fair value |
| REM | | Road Experience Management |
RSU | | |
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| RSU | | Restricted stock unit |
SEC | | U.S. |
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| SDS | | Self-driving system |
| SEC | | US Securities and Exchange Commission |
SiP | | System-in-package, |
| | |
| SoC | | A System-on-a-Chip, which integrates most of the components of a number of integrated circuits enclosed incomputer or other electronic system into a single chip carrier packagesilicon chip. We offer a range of SoC platform products in CCG, DCG, and IOTG |
SoC | | System-on-Chip |
SSD | | Solid-state drive |
TAMSSD | | Solid-state drive |
| TAM | | Total addressable market |
| Tax Reform | | U.S.US Tax Cuts and Jobs Act |
| TCFD | | Task Force on Climate-Related Financial Disclosures |
| TLC | | Triple-level cell |
TSR | | |
| | |
| | |
| TSR | | Total stockholder return |
U.S. | | |
| | |
| | |
| | |
| US GAAP | | U.S.US Generally Accepted Accounting Principles |
U.S.US Pension Plan | | U.S.US Intel Minimum Pension Plan |
U.S.US Retiree Medical Plan | | U.S.US Postretirement Medical Benefits Plan |
VPU | | |
| VPU | | Vision processing unit |
Wind River | | Wind River Systems, Inc. (divested in Q2 2018) |
xPU | | |
| xPU | | A term for processors that are designed for one of four major computing architectures: CPU, GPU, AI accelerator,accelerators, and FPGA |
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 110112 |
On July 26, 2021, we provided an update on our manufacturing process and packaging technology roadmaps. As part of this update, we introduced a new naming structure for our manufacturing process nodes, which includes the name changes summarized below: |
| | | | | | | | | |
FINANCIAL INFORMATION BY QUARTER (UNAUDITED) | | Previous Process Node Name | | New Process Node Name |
| 10nm SuperFin | | 10nm SuperFin (unchanged) |
| 10nm Enhanced SuperFin | | Intel 7 |
| Intel 7nm | | Intel 4 |
|
| | | | | | | | | | | | | | | | |
2019 for Quarter Ended
(In Millions, Except Per Share Amounts) | | December 28 | | September 28 | | June 29 | | March 30 |
| Net revenue | | $ | 20,209 |
| | $ | 19,190 |
| | $ | 16,505 |
| | $ | 16,061 |
|
| Gross margin | | $ | 11,878 |
| | $ | 11,295 |
| | $ | 9,878 |
| | $ | 9,089 |
|
| Net income | | $ | 6,905 |
| | $ | 5,990 |
| | $ | 4,179 |
| | $ | 3,974 |
|
| Earnings per share—Basic | | $ | 1.60 |
| | $ | 1.36 |
| | $ | 0.94 |
| | $ | 0.88 |
|
| Earnings per share—Diluted | | $ | 1.58 |
| | $ | 1.35 |
| | $ | 0.92 |
| | $ | 0.87 |
|
| Dividends per share of common stock: | | | | | | | | |
| Declared | | $ | — |
| | $ | 0.63 |
| | $ | — |
| | $ | 0.63 |
|
| Paid | | $ | 0.315 |
| | $ | 0.315 |
| | $ | 0.315 |
| | $ | 0.315 |
|
|
| | | | | | | | | | | | | | | | |
2018 for Quarter Ended
(In Millions, Except Per Share Amounts) | | December 29 | | September 29 | | June 30 | | March 31 |
| Net revenue | | $ | 18,657 |
| | $ | 19,163 |
| | $ | 16,962 |
| | $ | 16,066 |
|
| Gross margin | | $ | 11,227 |
| | $ | 12,360 |
| | $ | 10,419 |
| | $ | 9,731 |
|
| Net income (loss) | | $ | 5,195 |
| | $ | 6,398 |
| | $ | 5,006 |
| | $ | 4,454 |
|
| Earnings per share—Basic | | $ | 1.14 |
| | $ | 1.40 |
| | $ | 1.08 |
| | $ | 0.95 |
|
| Earnings per share—Diluted | | $ | 1.12 |
| | $ | 1.38 |
| | $ | 1.05 |
| | $ | 0.93 |
|
| Dividends per share of common stock: | | | | | | | | |
| Declared | | $ | — |
| | $ | 0.60 |
| | $ | — |
| | $ | 0.60 |
|
| Paid | | $ | 0.30 |
| | $ | 0.30 |
| | $ | 0.30 |
| | $ | 0.30 |
|
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 111113 |
|
| | | | |
CONTROLS AND PROCEDURESControls and Procedures | |
| |
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
BasedInherent Limitations on management’s evaluation (with the participationEffectiveness of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer 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 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 28, 2019 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 28, 2019. 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 Financial Statements and Supplemental Details.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLSControls
Our management, including the principal executive officer and principal financial officer, 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’ssystem'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.
Based on management's evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under 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 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 25, 2021 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 US GAAP.
Management assessed our internal control over financial reporting as of December 25, 2021. 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 US 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 Financial Statements and Supplemental Details.
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 112114 |
| | |
1.Exhibits | Financial Statements: See "Index to Consolidated Financial Statements" within the Consolidated Financial Statements. |
| |
2. | Financial Statement Schedules; not applicable or the required information is otherwise included in the Consolidated Financial Statements and accompanying notes. |
| |
3. | Exhibits: The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of this Form 10-K. |
1.Financial Statements: See "Index to Consolidated Financial Statements" within the Consolidated Financial Statements.
2.Financial Statement Schedules; not applicable or the required information is otherwise included in the Consolidated Financial Statements and accompanying notes.
3.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 | Supplemental Details | 113115 |
Exhibit Index
|
| | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or Furnished Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing Date | |
| 2.1 | |
| | 8-K | | 000-06217 | | 2.1 |
| | 3/13/2017 | | |
| 3.1 | | | | 8-K | | 000-06217 | | 3.1 |
| | 5/22/2006 | | |
| 3.2 | | | | 8-K | | 000-06217 | | 3.2 |
| | 1/17/2019 | | |
| 4.1 | | | | S-3ASR | | 333-132865 | | 4.4 |
| | 3/30/2006 | | |
| 4.2 | | | | 10-K | | 000-06217 | | 4.2.4 |
| | 2/20/2008 | | |
| 4.3 | | | | 10-Q | | 000-06217 | | 4.1 |
| | 11/2/2009 | | |
| 4.4 | | | | 8-K | | 000-06217 | | 4.01 |
| | 9/19/2011 | | |
| 4.5 | | | | 8-K | | 000-06217 | | 4.01 |
| | 12/11/2012 | | |
| 4.6 | | | | 8-K | | 000-06217 | | 4.01 |
| | 12/14/2012 | | |
| 4.7 | | | | 8-K | | 000-06217
| | 4.1 |
| | 7/29/2015 | | |
| 4.8 | | | | 8-K | | 000-06217 | | 4.1 |
| | 5/19/2016 | | |
| 4.9 | | | | 8-K | | 000-06217 | | 4.1 |
| | 5/11/2017 | | |
| 4.10 | | | | 8-K | | 000-06217 | | 4.1 |
| | 6/16/2017 | | |
| 4.11 | | | | 8-K | | 000-06217 | | 4.1 |
| | 8/14/2017 | | |
| 4.12 | | | | 10-K | | 000-06217 | | 4.2.13 |
| | 2/16/2018 | | |
| 4.13 | | | | 8-K | | 000-06217 | | 4.1 |
| | 11/21/2019 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or
Furnished
Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing
Date | |
| 2.1 | |
| | 8-K | | 000-06217 | | 2.1 | | | 10/20/2020 | | |
| 3.1 | | | | 8-K | | 000-06217 | | 3.1 | | | 5/22/2006 | | |
| 3.2 | | | | 8-K | | 000-06217 | | 3.2 | | | 3/16/2021 | | |
| 4.1 | | | | S-3ASR | | 333-132865 | | 4.4 | | | 3/30/2006 | | |
| 4.2 | | | | 10-K | | 000-06217 | | 4.2.4 | | 2/20/2008 | | |
| 4.3 | | | | 8-K | | 000-06217 | | 4.01 | | | 9/19/2011 | | |
| 4.4 | | | | 8-K | | 000-06217 | | 4.01 | | | 12/11/2012 | | |
| 4.5 | | | | 8-K | | 000-06217 | | 4.01 | | | 12/14/2012 | | |
| 4.6 | | | | 8-K | | 000-06217
| | 4.1 | | | 7/29/2015 | | |
| 4.7 | | | | 8-K | | 000-06217 | | 4.1 | | | 5/19/2016 | | |
| 4.8 | | | | 8-K | | 000-06217 | | 4.1 | | | 5/11/2017 | | |
| 4.9 | | | | 8-K | | 000-06217 | | 4.1 | | | 6/16/2017 | | |
| 4.10 | | | | 8-K | | 000-06217 | | 4.1 | | | 8/14/2017 | | |
| 4.11 | | | | 10-K | | 000-06217 | | 4.2.13 | | 2/16/2018 | | |
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 114116 |
|
| | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or Furnished Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing Date | |
| 4.14 | | | | 10-Q | | 000-06217 | | 4.1 |
| | 10/24/2019 | | |
| 4.15 | | | | 8-K | | 000-06217 | | 99.2 |
| | 12/28/2015 | | |
| | | 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. | | | | | | | | | | |
| 4.16 | | | | | | | | | | | | X |
10.1† | | | | 10-Q | | 000-06217 | | 10.1 |
| | 7/26/2019 | | |
10.1.2†
| | | | 10-Q | | 000-06217 | | 10.3 |
| | 8/3/2009 | | |
10.1.3†
| | | | 10-Q | | 000-06217 | | 10.1 |
| | 10/25/2018 | | |
10.1.4†
| | | | 10-Q | | 000-06217 | | 10.3 |
| | 4/27/2015
| | |
10.1.5†
| | | | 10-Q | | 000-06217 | | 10.3 |
| | 4/26/2019 | | |
10.1.6†
| | | | 10-Q | | 000-06217 | | 10.4 |
| | 4/26/2019 | | |
10.1.7†
| | | | 10-K | | 000-06217 | | 10.1.6 |
| | 2/16/2018 | | |
10.1.8†
| |
| | 10-Q | | 000-06217 | | 10.2 |
| | 10/25/2018 | | |
10.1.9†
| |
| | 10-Q | | 000-06217 | | 10.8 |
| | 4/26/2019 | | |
10.1.10†
| | | | 10-Q | | 000-06217 | | 10.1 |
| | 4/27/2017 | | |
10.1.11†
| | | | 10-Q | | 000-06217 | | 10.3 |
| | 10/25/2018 | | |
10.1.12†
| | | | 10-Q | | 000-06217 | | 10.5 |
| | 4/26/2019 | | |
10.1.13†
| | | | 10-Q | | 000-06217 | | 10.6 |
| | 4/26/2019 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or
Furnished
Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing
Date | |
| 4.12 | | | | 8-K | | 000-06217 | | 4.1 | | | 11/21/2019 | | |
| 4.13 | | | | 8-K | | 000-06217 | | 4.1 | | 2/13/2020 | | |
| 4.14 | | | | 8-K | | 000-06217 | | 4.2 | | | 2/13/2020 | | |
| 4.15 | | | | 8-K | | 000-06217 | | 4.1 | | | 3/25/2020 | | |
| 4.16 | | | | 8-K | | 000-06217 | | 4.1 | | | 8/12/2021 | | |
| 4.17 | | | | 8-K | | 000-06217 | | 99.2 | | | 12/28/2015 | | |
| | 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. | | | | | | | | | | |
| 4.18 | | | | | | | | | | | | X |
10.1† | | | | 10-Q | | 000-06217 | | 10.1 | | | 7/26/2019 | | |
10.1.2†
| | | | 10-Q | | 000-06217 | | 10.1 | | | 10/25/2018 | | |
10.1.3†
| | | | 10-Q | | 000-06217 | | 10.3 | | | 4/26/2019 | | |
10.1.4†
| | | | 10-Q | | 000-06217 | | 10.4 | | | 4/26/2019 | | |
10.1.5†
| | | | 10-Q | | 000-06217 | | 10.5 | | | 4/26/2019 | | |
10.1.6†
| | | | 10-Q | | 000-06217 | | 10.1 | | 4/24/2020 | | |
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 115117 |
|
| | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or Furnished Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing Date | |
10.1.14†
| | | | 10-Q | | 000-06217 | | 10.9 |
| | 4/26/2019 | | |
10.1.15†
| | | | 10-Q | | 000-06217 | | 10.10 |
| | 4/26/2019 | | |
10.1.16†
| | | | 10-Q | | 000-06217 | | 10.7 |
| | 4/26/2019 | | |
10.1.17†
| | | | 10-Q | | 000-06217 | | 10.1 |
| | 4/27/2015 | | |
10.1.18†
| | | | 10-Q | | 000-06217 | | 10.11 |
| | 4/26/2019 | | |
10.1.19†
| | | | 10-Q | | 000-06217 | | 10.2 |
| | 4/27/2017 | | |
10.2† | | | | 10-K | | 000-06217 | | 10.2 |
| | 2/1/2019 | | |
10.3† | | | | 10-K | | 000-06217 | | 10.9.2 |
| | 2/14/2014 | | |
10.4† | | | | 10-K | | 000-06217 | | 10.15 |
| | 2/22/2005 | | |
10.5† | | | | 10-Q | | 000-06217 | | 10.2 |
| | 10/31/2016 | | |
10.6† | | | | S-8 | | 333-172024 | | 99.1 |
| | 2/2/2011 | | |
10.7† | | | | 10-K | | 000-06217 | | 10.41 |
| | 2/26/2007 | | |
| 10.8 | | | | 8-K | | 000-06217 | | 10.1 |
| | 11/12/2009 | | |
10.9†† | | | | 8-K | | 000-06217 | | 10.1 |
| | 1/10/2011 | | |
10.10† | | | | 10-K | | 000-06217 | | 10.14 |
| | 2/12/2016 | | |
10.11† | | | | 8-K | | 000-06217 | | 10.1 |
| | 1/31/2019 | | |
10.12† | | | | 8-K | | 000-06217 | | 10.1 |
| | 4/3/2019 | | |
10.13† | | | | 10-K | | 000-06217 | | 10.13 |
| | 2/16/2018 | | |
10.14† | | | | 10-Q | | 000-06217 | | 10.12 |
| | 4/26/2019 | | |
| 21.1 | | | | | | | | | | | | X |
| 23.1 | | | | | | | | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or
Furnished
Herewith |
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing
Date | |
10.1.7†
| | | | 10-Q | | 000-06217 | | 10.6 | | | 4/26/2019 | | |
10.1.8†
| | | | 10-Q | | 000-06217 | | 10.9 | | | 4/26/2019 | | |
10.1.9†
| | | | 10-Q | | 000-06217 | | 10.7 | | | 4/26/2019 | | |
10.1.10†
| | | | 10-Q | | 000-06217 | | 10.11 | | | 4/26/2019 | | |
10.1.11† | | | | S-8 | | 333-253077 | | 99.1 | | | 2/12/2021 | | |
10.1.12† | | | | 10-Q | | 000-06217 | | 10.3 | | | 4/23/2021 | | |
10.1.13† | | | | 10-Q | | 000-06217 | | 10.4 | | | 4/23/2021 | | |
10.1.14† | | | | 10-Q | | 000-06217 | | 10.5 | | | 4/23/2021 | | |
10.1.15† | | | | 10-Q | | 000-06217 | | 10.6 | | | 4/23/2021 | | |
10.1.16† | | | | 10-Q | | 000-06217 | | 10.7 | | | 4/23/2021 | | |
10.1.17† | | | | 10-Q | | 000-06217 | | 10.8 | | | 4/23/2021 | | |
10.2† | | | | 8-K | | 000-06217 | | 10.1 | | | 1/22/2020 | | |
10.3† | | | | 10-Q | | 000-06217 | | 10.3 | | 4/24/2020 | | |
10.4† | | | | 10-Q | | 000-06217 | | 10.1 | | | 7/24/2020 | | |
10.5† | | | | 10-K | | 000-06217 | | 10.41 | | | 2/26/2007 | | |
10.6† | | | | 10-K | | 000-06217 | | 10.15 | | | 2/22/2005 | | |
10.7† | | | | 10-Q | | 000-06217 | | 10.2 | | | 10/31/2016 | | |
| 10.8 | | | | 8-K | | 000-06217 | | 10.1 | | | 11/12/2009 | | |
|
| | | | | | | |
SUPPLEMENTAL DETAILS | Supplemental Details | 116118 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | | Incorporated by Reference | | Filed or
Furnished
Herewith
|
| Exhibit Description | | Form | | File Number | | Exhibit | | Filing
Date
| |
31.110.9†† | | | | 8-K | | 000-06217 | | 10.1 | | | 1/10/2011 | | |
10.10† | | | | 10-Q | | 000-06217 | | 10.1 | | | 7/23/2021 | | |
10.11† | | | | 8-K | | 000-06217 | | 10.1 | | | 1/14/2021 | | |
10.12† | | | | 10-Q | | 000-06217 | | 10.12 | | | 4/26/2019 | | |
10.13† | | | | 8-K | | 000-06217 | | 10.1 | | 4/3/2019 | | |
| 21.1 | | | | | | | | | | | | X |
| 23.1 | | | | | | | | | | | | X |
| 31.1 | | | | | | | | | | | | X |
| 31.2 | | | | | | | | | | | | X |
| 32.1 | | | | | | | | | | | | X |
| 99.1 | | | | | | | | | | | | X |
101.INS101 | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentDocument Set for the consolidated financial statements and accompanying notes in Financial Statements and Supplemental Details | | | | | | | | | | X |
101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | | | | | X |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | | | X |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | X |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | | | X |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | | | X |
| 104 | | Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101
| | | | | | | | | | X |
| |
†
| Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate. |
† 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.
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SUPPLEMENTAL DETAILS | Supplemental Details | 117119 |
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| | | | |
FORMForm 10-K CROSS-REFERENCE INDEXCross-Reference Index | |
| |
| | | | | | | | |
| Item Number | Item | |
| Part I | | |
| Item 1. | Business: | |
| General development of business | |
| | |
Item Number | Item | |
Part I | | |
Item 1. | Business: | |
| General developmentDescription of business | |
| Narrative description of business | |
| | |
| Available information | |
| Item 1A. | Risk Factors | |
| Item 1B. | Unresolved Staff Comments | Not applicable |
| Item 2. | Properties | |
| Item 3. | Legal Proceedings | |
| Item 4. | Mine Safety Disclosures | Not applicable |
| | |
| Part II | | |
| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
| |
| Item 6. | Selected Financial Data[Reserved] | |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations: | |
| Results of operations | |
| Liquidity and capital resources | |
| Capital resources | |
| Off balance sheet arrangements | (a) |
| Contractual obligations | |
| Critical accounting estimates and policies | |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | |
| Item 8. | Financial Statements and Supplementary Data
| |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | Not applicable |
| Item 9A. | Controls and Procedures | |
| Item 9B. | Other Information | Not applicable |
| Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934 | |
Part IIIItem 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | Not applicable |
| | |
| Part III | | |
| Item 10. | Directors, Executive Officers, and Corporate Governance | |
| Item 11. | Executive Compensation | (c)(b) |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | (d)(c) |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | (e)(d) |
| Item 14. | Principal Accounting Fees and Services | (f)
(e) |
| | |
| Part IV | | |
| Item 15. | Exhibits and Financial Statement Schedules | |
| Item 16. | Form 10-K Summary | Not applicable |
| | |
| Signatures | | |
| |
(a) | As of December 28, 2019, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. |
| |
(b) | Incorporated by reference to "Proposal 1: Election of Directors," "Corporate Governance," "Code of Conduct," and "Other Matters-Delinquent Section 16(a) Reports" in the 2020 Proxy Statement. The information under the heading "Information about Our Executive Officers" within Other Key Information is also incorporated by reference in this section.
|
| |
(c) | Incorporated by reference to "Director Compensation," "Compensation Discussion and Analysis," "Report of the Compensation Committee," and "Executive Compensation" in the 2020 Proxy Statement.
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| |
(d) | Incorporated by reference to "Security Ownership of Certain Beneficial Owners and Management" and “Equity Compensation Plan Information” in the 2020 Proxy Statement.
|
| |
(e) | Incorporated by reference to "Corporate Governance" and "Certain Relationships and Related Transactions" in the 2020 Proxy Statement.
|
| |
(f) | Incorporated by reference to "Report of the Audit Committee" and "Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm" in the 2020 Proxy Statement.
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(b) Incorporated by reference to "Director Compensation," "Compensation Discussion and Analysis," "Report of the Compensation Committee," and "Executive Compensation" in the 2022 Proxy Statement.
(c) Incorporated by reference to "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in the 2022 Proxy Statement.
(d) Incorporated by reference to "Corporate Governance" and "Certain Relationships and Related Transactions" in the 2022 Proxy Statement.
(e) Incorporated by reference to "Report of the Audit Committee" and "Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm" in the 2022 Proxy Statement.
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SUPPLEMENTAL DETAILS | Supplemental Details | 118120 |
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 |
| | | |
| INTEL CORPORATION
Registrant
By: | | /s/ PATRICK P. GELSINGER |
| | | Patrick P. Gelsinger |
| By: | | /s/ ROBERT H. SWAN |
| | | Robert H. Swan |
| | | Chief Executive Officer, Director, and Principal Executive Officer |
| | | January 23, 202026, 2022 |
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/ PATRICK P. GELSINGER | | | /s/ DAVID ZINSNER |
| Patrick P. Gelsinger | | | David Zinsner |
| Chief Executive Officer, Director, and Principal Executive Officer | | | Executive Vice President, Chief Financial Officer, Principal |
| January 26, 2022 | | | Financial Officer, and Principal Accounting Officer |
| | | | January 26, 2022 |
| | | | |
| | | | |
| /s/ ROBERT H. SWAN | | | /s/ GEORGE S. DAVIS |
| Robert H. Swan | | | George S. Davis |
| Chief Executive Officer, Director, and Principal Executive Officer | | | Executive Vice President, |
| January 23, 2020 | | | Chief Financial Officer and Principal Financial Officer |
| | | | January 23, 2020 |
| | | | |
| /s/ KEVIN T. MCBRIDE | | | |
| Kevin T. McBride | | | |
| Vice President of Finance, Corporate Controller and Principal Accounting Officer | | | |
| January 23, 2020 | | | |
|
| | | | |
| /s/ ANDY D. BRYANT | | | /s/ DR. RISA LAVIZZO-MOUREY |
| | | | | | | | | | | | | | |
| Andy D. Bryant | | | Dr. Risa Lavizzo-Mourey |
| Director | | | Director |
| January 23, 2020 | | | January 23, 2020 |
| | | | |
| /s/ JAMES J. GOETZ | | | /s/ DR. TSU-JAE KING LIU |
| James J. Goetz
| | | Dr. Tsu-Jae King Liu |
| Director | | | Director |
| January 23, 202026, 2022 | | | January 23, 202026, 2022 |
| | | | |
| /s/ ALYSSA HENRY DR. ANDREA J. GOLDSMITH | | | /s/ GREGORY D. SMITH |
| Alyssa HenryAndrea J. Goldsmith | | | Gregory D. Smith |
| Director | | | Director |
| January 23, 202026, 2022 | | | January 23, 202026, 2022 |
| | | | |
| /s/ REED E. HUNDT ALYSSA HENRY | | | /s/ ANDREW WILSONDION J. WEISLER |
| Reed E. HundtAlyssa Henry | | | Andrew WilsonDion J. Weisler |
| Director | | | Director |
| January 23, 202026, 2022 | | | January 23, 202026, 2022 |
| | | | |
| /s/ DR. OMAR ISHRAK | | | /s/ FRANK D. YEARY |
| Dr. Omar Ishrak | | | Frank D. Yeary |
| Chairman of the Board and Director | | | Director |
| January 23, 202026, 2022 | | | January 23, 202026, 2022 |
| | | | |
| /s/ DR. RISA LAVIZZO-MOUREY | | | |
| Dr. Risa Lavizzo-Mourey | | | |
| Director | | | |
| January 26, 2022 | | | |
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SUPPLEMENTAL DETAILS | Supplemental Details | 119121 |
