Intel Corporation - Company Profile, Information, Business Description, History, Background Information on Intel Corporation

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History of Intel Corporation

Intel Corporation is the largest semiconductor manufacturer in the world, with major facilities in the United States, Europe, and Asia. Intel has changed the world dramatically since it was founded in 1968; the company invented the microprocessor, the 'computer on a chip' that made possible the first handheld calculators and personal computers (PCs). By the early 21st century, Intel's microprocessors were found in more than 80 percent of PCs worldwide. The company's product line also includes chipsets and motherboards; flash memory used in wireless communications and other applications; hubs, switches, routers, and other products for Ethernet networks; and embedded control chips used in networking products, laser printers, imaging devices, storage media, and other applications. Intel remained competitive through a combination of clever marketing, well-supported research and development, superior manufacturing proficiency, a vital corporate culture, legal proficiency, and an ongoing alliance with software giant Microsoft Corporation often referred to as 'Wintel.'

1968--79: From DRAM to the 8086

Intel's founders, Robert Noyce and Gordon Moore, were among the eight founders of Fairchild Semiconductor, established in 1957. While at Fairchild, Noyce and Moore invented the integrated circuit, and, in 1968, they decided to form their own company. They were soon joined by Andrew Grove, a Hungarian refugee who had arrived in the United States in 1956 and joined Fairchild in 1963. Grove would remain president and CEO of Intel into the 1990s.

To obtain start-up capital, Noyce and Moore approached Arthur Rock, a venture capitalist, with a one-page business plan simply stating their intention of developing large-scale integrated circuits. Rock, who had helped start Fairchild Semiconductor, as well as Teledyne and Scientific Data Systems, had confidence in Noyce and Moore and provided $3 million in capital. The company was incorporated on July 18, 1968, as N M Electronics (the letters standing for Noyce Moore), but quickly changed its name to Intel, formed from the first syllables of 'integrated electronics.' Intel gathered another $2 million in capital before going public in 1971.

Noyce and Moore's scanty business proposal belied a clear plan to produce large-scale integrated (LSI) semiconductor memories. At that time, semiconductor memories were ten times more expensive than standard magnetic core memories. Costs were falling, however, and Intel's founders felt that with the greater speed and efficiency of LSI technology, semiconductors would soon replace magnetic cores. Within a few months of its startup, Intel produced the 3101 Schottky bipolar memory, a high-speed random access memory (RAM) chip. The 3101 proved popular enough to sustain the company until the 1101, a metal oxide semiconductor (MOS) chip, was perfected and introduced in 1969. The following year, Intel introduced the 1103, a one Kilobyte (K) dynamic RAM, or DRAM, which was the first chip large enough to store a significant amount of information. With the 1103, Intel finally had a chip that really did begin to replace magnetic cores; DRAMs eventually proved indispensable to the personal computer.

The company's most dramatic impact on the computer industry involved its 1971 introduction of the 4004, the world's first microprocessor. Like many of Intel's innovations, the microprocessor was a byproduct of efforts to develop another technology. When a Japanese calculator manufacturer, Busicom, asked Intel to design cost-effective chips for a series of calculators, Intel engineer Ted Hoff was assigned to the project; during his search for such a design, Hoff conceived a plan for a central processing unit (CPU) on one chip. The 4004, which crammed 2,300 transistors onto a one-eighth- by one-sixth-inch chip, had the power of the old 3,000-cubic-foot ENIAC computer, which depended on 38,000 vacuum tubes.

Although Intel initially focused on the microprocessor as a computer enhancement that would allow users to add more memory to their units, the microprocessor's great potential--for everything from calculators to cash registers and traffic lights--soon became clear. The applications were facilitated by Intel's introduction of the 8008, an 8-bit microprocessor developed along with the 4004 but oriented toward data and character (rather than arithmetic) manipulation. The 8080, introduced in 1974, was the first truly general purpose microprocessor. For $360, Intel sold a whole computer on one chip, while conventional computers sold for thousands of dollars. The response was overwhelming. The 8080 soon became the industry standard and Intel the industry leader in the 8-bit market.

In response to ensuing competition in the manufacture of 8-bit microprocessors, Intel introduced the 8085, a faster chip with more functions. The company was also developing two more advanced projects, the 32-bit 432 and the 16-bit 8086. The 8086 was introduced in 1978 but took two years to achieve wide use, and, during this time, Motorola produced a competing chip (the 68000) that seemed to be selling faster. Intel responded with a massive sales effort to establish its architecture as the standard. When International Business Machines Corporation (IBM) chose the 8008, the 8086's 8-bit cousin, for its personal computer in 1980, Intel seemed to have beat out the competition.

During the 1970s, Intel had also developed the erasable programmable read-only memory (EPROM), another revolutionary but unintended research byproduct. Intel physicist Dov Frohman was working on the reliability problems of the silicon gate used in the MOS process when he realized that the disconnected, or 'floating,' gates that were causing malfunctions could be used to create a chip that was erasable and reprogrammable. Since conventional ROM chips had to be permanently programmed during manufacture, any change required the manufacture of a whole new chip. With EPROM, however, Intel could offer customers chips that could be erased and reprogrammed with ultraviolet light and electricity. At its introduction in 1971, EPROM was a novelty without much of a market. But the microprocessor, invented at the same time, created a demand for memory; the EPROM offered memory that could be conveniently used to test microprocessors.

Another major development at Intel during this time was that of peripheral controller chips. Streamlined for specific tasks and stripped of unneeded functions, peripheral chips could greatly increase a computer's abilities without raising software development costs. One of Intel's most important developments in peripherals was the coprocessor, first introduced in 1980. Coprocessor chips were an extension of the CPU that could handle specific computer-intensive tasks more efficiently than the CPU itself. Once again, innovation kept Intel ahead of its competition.

Intel's rapid growth, from the 12 employees at its founding in 1968 to 15,000 in 1980, demanded a careful approach to corporate culture. Noyce, Moore, and Grove, who remembered their frustration with Fairchild's bureaucratic bottlenecks, found that defining a workable management style was important. Informal weekly lunches with employees kept communication lines open while the company was small, but that system had become unwieldy. Thus, the founders installed a carefully outlined program emphasizing openness, decision making on the lowest levels, discipline, and problem solving rather than paper shuffling. Moreover, the company's top executives eschewed such luxuries as limousines, expense account lunches, and private parking spaces to establish a sense of teamwork with their subordinates.

In an interview with the Harvard Business Review in 1980, Noyce remarked on the company's hiring policy, stating, 'we expect people to work hard. We expect them to be here when they are committed to be here; we measure absolutely everything that we can in terms of performance.' Employee incentives included options on Intel stock, and technological breakthroughs were celebrated with custom-bottled champagne--'Vintage Intel' marked the first $250 million quarter, in 1983--the year sales reached $1 billion for the first time.

1980s: From 286 to 486

During the 1974 recession, Intel was forced to lay off 30 percent of its employees, and morale declined substantially as a result. Thus, in 1981, when economic struggles again surfaced, instead of laying off more employees, Intel accelerated new product development with the '125 Percent Solution,' which asked exempt employees to work two extra hours per day, without pay, for six months. A brief surge in sales the following year did not last, and, again, instead of more layoffs, Intel imposed pay cuts of up to ten percent. Such measures were not popular among all its workforce, but, by June 1983, all cuts had been restored and retroactive raises had been made. Moreover, in December 1982, IBM paid $250 million for a 12 percent share of Intel, giving the company not only a strong capital boost, but also strong ties to the undisputed industry leader. IBM would eventually increase its stake to 20 percent before selling its Intel stock in 1987.

During the early 1980s, Intel began to slip in some of its markets. Fierce competition in DRAMs, static RAMs, and EPROMs left Intel concentrating on microprocessors. While competitors claimed that Intel simply gave away its DRAM market, Moore told Business Week in 1988 that the company deliberately focused on microprocessors as the least cyclical field in which to operate. Customer service, an area Intel had been able to overlook for years as it dominated its markets, became more important as highly efficient Japanese and other increasingly innovative competitors challenged Intel's position. In addition, Intel's manufacturing record, strained in years past by undercapacity, needed fixing. Fab 7, Intel's seventh wafer-fabrication plant, opened in 1983 only to face two years of troubled operations before reaching full capacity. Between 1984 and 1988, Intel closed eight old plants, and in 1988 it spent some $450 million on new technology to bring its manufacturing capacity into line with its developmental prowess.

Despite these retrenchments, the company continued to excel in the microprocessor market. In 1982 Intel introduced its 80286 microprocessor, the chip that quickly came to dominate the upper-end PC market, when IBM came out with the 286-powered PC/AT. The 286 was followed in 1985 by Intel's 80386 chip, popularized in 1987 by the Compaq DESKPRO 386, which, despite bugs when it first came out, became one of the most popular chips on the market. While the 286 brought to the personal computer a speed and power that gave larger computers their first real challenge, the 386 offered even greater speed and power together with the ability to run more than one program at a time. The 386 featured 32-bit architecture and 275,000 transistors--more than twice the number of the 286.

In 1989 Intel introduced the 80486, a chip Business Week heralded as 'a veritable mainframe-on-a-chip.' The 486 included 1.2 million transistors and the first built-in math coprocessor, and was 50 times faster than the 4004, the first microprocessor. In designing the i486, Intel resisted an industry trend toward RISC (reduced instruction-set computing), a chip design that eliminated rarely used instructions in order to gain speed. Intel argued that what RISC chips gained in speed they lost in flexibility and that, moreover, RISC chips were not compatible with software already on the market, which Intel felt would secure the 486's position. A new chip, the 64-bit i860 announced in early 1989, however, did make use of RISC technology to offer what Intel claimed would be a 'supercomputer on a chip.'

Also in 1989, a major lawsuit that Intel had filed against NEC Corporation five years before was decided. Intel had claimed that NEC violated its copyright on the microcode, or embedded software instructions, of Intel's 8086 and 8088 chips. Although Intel had licensed NEC to produce the microcode, NEC had subsequently designed a similar chip of its own. At issue was whether microcode could be copyrighted. The court ruled that it could but that NEC had not violated any copyright in the case at hand. The suit made public some issues surrounding Intel's reputation. Some rivals and consumers, for example, claimed that Intel used its size and power to repress competition through such tactics as filing 'meritless' lawsuits and tying microprocessor sales to other chips. Other observers, however, praised Intel's protection of its intellectual property and, subsequently, its profits. The Federal Trade Commission conducted a two-year investigation of Intel's practices and did not recommend criminal charges against the company, but two rival companies--Advanced Micro Devices Inc. and Cyrix Corp.--filed antitrust lawsuits against Intel in 1993.

1990s: The Pentium Decade

Intel's annual net income topped $1 billion for the first time in 1992, following a very successful, brand-building marketing campaign. Intel ads aggressively sought to bolster consumer interest in and demand for computers that featured 'Intel Inside.' By late 1993, the company's brand equity totaled $17.8 billion--more than three times its 1992 sales. Also during this time, Intel began to branch out from chipmaking. In 1992, the company's Intel Products Group introduced network, communications, and personal conferencing products for retail sale directly to PC users.

In 1993 Intel released its fifth-generation Pentium processor, a trademarked chip capable of executing over 100 million instructions per second (MIPS) and supporting, for example, real-time video communication. The Pentium processor, with its 3.1 million transistors, was up to five times more powerful than the 33-megahertz Intel 486 DX microprocessor (and 1,500 times the speed of the 4004), but, in an unusual marketing maneuver, the company suggested that 'all but the most demanding users' would seek out PCs powered by the previous chip. The Pentium's reputation was initially sullied by the revelation of an embedded mathematical flaw, but Intel moved quickly to fix the problem.

The company enjoyed a dramatic 50 percent revenue increase in 1993, reaching $8.78 billion from $5.84 billion in 1992. Moreover, Intel's net income leapt 115 percent to $2.3 billion, repudiating Wall Street's worries that competition had squeezed profit margins. While Intel faced strong competition both from chip makers such as giant Motorola, Inc.'s PowerPC and former partner IBM, its place at the leading edge of technology was undisputed.

A key initiative that kept Intel ahead of its competitors was the company's move beyond chip design into computer design. With the advent of the Pentium, Intel began designing chipsets and motherboards--the latter being the PC circuit board that combined a microprocessor and a chipset into the basic subsystem of a PC. With the company now selling the guts of a PC, dozens of computer manufacturers began making and selling Pentium-based machines.

In the mid-1990s, as sales of PCs accelerated and multimedia and the Internet were beginning to emerge, Intel continued developing ever more powerful microprocessors. In 1995 the Pentium Pro hit the market sporting 5.5 million transistors and capable of performing up to 300 MIPS. Intel next added MMX technology to its existing line of Pentium processors. MMX consisted of a new set of instructions that was designed specifically to improve the multimedia performance of personal computers. Fueled by exploding demand, revenues hit $20.85 billion by 1996, while net income soared to $5.16 billion.

At this point Intel was continuing its longtime strategy of designing new, more powerful chips for the top end of the market while allowing previous-generation microprocessors to migrate down to the lower segments of the market. With the introduction of the Pentium II in May 1997, however, the company adopted a new strategy of developing a range of microprocessors for every segment of the computing market. The Pentium II, with 7.5 transistors, debuted with a top-end model that clocked at 300 MHZ. Originally designed for high-end desktop PCs, the Pentium II was soon adapted for use in notebook and laptop computers. With the following year came the launch of the Celeron processor, which was designed specifically for the value PC desktop sector, a rapidly growing segment of the market ever since the early 1997 debut of a sub-$1,000 PC from Compaq. Also in 1998 Intel for the first time designed a microprocessor--the Pentium II Xeon--especially for midrange and higher-end servers and workstations. At the same time Intel was moving into another burgeoning sector, that of embedded control chips for networking and other applications, such as digital set-top boxes.

Meanwhile Intel settled a dispute with Digital Equipment Corporation (DEC) over the development of the Pentium chip by acquiring DEC's semiconductor operations. In May 1997 Craig R. Barrett was named president of Intel, having joined the company in 1974, serving as head of manufacturing starting in 1985, and being named chief operating officer in 1993. Grove remained chairman and CEO for one year, whereupon Barrett was named president and CEO, with Grove retaining the chairmanship. In early 1999 Intel reached a settlement with the Federal Trade Commission on an antitrust suit, thereby avoiding the protracted litigation and negative publicity that beset its Wintel partner, Microsoft, in the late 1990s. Reflecting the increasing importance of technology to the U.S. economy, Intel was added to the Dow Jones Industrial Average in November 1999.

During the late 1990s Intel made several strategic acquisitions that rapidly gave the company a significant presence in areas outside its microprocessor core: wireless communications products, such as flash memory for mobile phones and two-way pagers; networking building blocks, such as hubs, switches, and routers; and embedded control chips for laser printers, storage media, and automotive systems. Intel also entered the market for e-commerce services, rapidly building up the largest business-to-business e-commerce site in the world, with $1 billion per month in online sales by mid-1999. The company was not neglecting its core, however; in 1999 Intel had its largest microprocessor launch ever with the simultaneous introduction of 15 Pentium III and Pentium III Xeon processors. In early 2000 a one-gigahertz Pentium III chip hit the market. Later in 2000 came the debut of the next generation processor for the early 21st century, the Itanium, the company's first 64-bit processor, which was initially designed to meet the needs of powerful Internet servers. With its continuing development of ever more powerful processors and its aggressive expansion into other key technology areas, Intel appeared certain to remain one of the linchpins of the information economy in the new millennium.

Principal Subsidiaries: Componentes Intel de Costa Rica, S.A.; DSP Communications, Inc.; Dialogic Corporation; Intel Commodities Limited (Cayman); Intel Corporation (UK) Limited; Intel Electronics Limited (Israel); Intel International BV (Netherlands); Intel Ireland Limited (Cayman); Intel Kabushiki Kaisha (Japan); Intel Massachusetts, Inc.; Intel Overseas Corporation; Intel Products (M) Sdn. Bhd. (Malaysia); Intel Puerto Rico, Inc; Intel Semiconductor Limited; Intel Technology Phils, Inc. (Philippines); Intel Technology Sdn. Berhad (Malaysia); IPivot, Inc.; Level One Communications, Inc.; Mission College Investments Limited (Cayman).

Principal Operating Units: Intel Architecture Business Group; Wireless Communications and Computing Group; Communications Products Group; Network Communications Group; New Business Group.

Principal Competitors: Acer Inc.; Advanced Micro Devices, Inc.; Atmel Corporation; Cisco Systems, Inc.; Electronic Data Systems Corporation; Exodus Communications, Inc.; Fujitsu Limited; Harris Corporation; Hitachi, Ltd.; International Business Machines Corporation; Integrated Device Technology, Inc.; Lucent Technologies Inc.; Macronix International Co., Ltd.; Microchip Technology Incorporated; Mitsubishi Electric Industrial Co., Ltd.; Motorola, Inc.; National Semiconductor Corporation; NEC Corporation; Nortel Networks Corporation; Koninklijke Philips Electronics N.V.; Samsung Electronics Co., Ltd.; Sharp Corporation; STMicroelectronics N.V.; Sun Microsystems, Inc.; Texas Instruments Incorporated; 3Com Corporation; Toshiba Corporation; Transmeta Corporation; VIA Technologies, Inc.


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Further Reference

Brandt, Richard, Otis Port, and Robert D. Hof, 'Intel: The Next Revolution,' Business Week, September 26, 1988, p. 74.Bylinsky, Gene, 'Intel's Biggest Shrinking Job Yet,' Fortune, May 3, 1982, pp. 250+.Clark, Tim, 'Inside Intel's Marketing Machine,' Business Marketing, October 1992, pp. 14--19.Corcoran, Elizabeth, 'Reinventing Intel,' Forbes, May 3, 1999, pp. 154--59.Defining Intel: 25 Years/25 Events, Santa Clara: Intel Corporation, 1993.Garland, Susan B., and Andy Reinhardt, 'Making Antitrust Fit High Tech,' Business Week, March 22, 1999, p. 34.Gottlieb, Carrie, 'Intel's Plan for Staying on Top,' Fortune, March 27, 1989, pp. 98+.Hof, Robert D., Larry Armstrong, and Gary McWilliams, 'Intel Unbound,' Business Week, October 9, 1995, pp. 148+.'Is the Semiconductor Boom Too Much of a Good Thing for Intel?,' Business Week, April 23, 1984, pp. 114+.Jackson, Tim, Inside Intel: Andy Grove and the Rise of the World's Most Powerful Chip Company, New York: Dutton, 1997, 424 p.Kirkpatrick, David, 'Intel Goes for Broke,' Fortune, May 16, 1994, pp. 62--66, 68.------, 'Intel's Amazing Profit Machine,' Fortune, February 17, 1997, pp. 60+.------, 'Mr. Grove Goes to China,' Fortune, August 17, 1998, pp. 154--61.Palmer, Jay, 'Zero Hour,' Barron's October 4, 1999, pp. 33--34, 36.A Revolution in Progress: A History of Intel to Date, Santa Clara, Calif.: Intel Corporation, 1984.Reinhardt, Andy, 'The New Intel: Craig Barrett Is Leading the Chip Giant into Riskier Terrain,' Business Week, March 13, 2000, pp. 110+.------, 'Who Says Intel's Chips Are Down?,' Business Week, December 7, 1998, p. 103.Reinhardt, Andy, Ira Sager, and Peter Burrows, 'Intel: Can Andy Grove Keep Profits Up in an Era of Cheap PCs?,' Business Week, December 22, 1997, pp. 71--74, 76--77.Ristelhueber, Robert, 'Intel: The Company People Love to Hate,' Electronic Business Buyer, September 1993, pp. 58--67.Wilson, John W., 'Intel Wakes Up to a Whole New Marketplace in Chips,' Business Week, September 2, 1985, pp. 73+.Yu, Albert, Creating the Digital Future: The Secrets of Consistent Innovation at Intel, New York: Free Press, 1998, 214 p.

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