UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



þ ☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December ~~29, 2018.~~28, 2019.
	or
¨ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to.

Commission File Number 000-06217

INTEL CORPORATION

(Exact name of registrant as specified in its charter)



	Delaware		94-1672743
(State or other jurisdiction of incorporation or ~~organization~~ organization)			(I.R.S. Employer Identification No.)

2200 Mission College Boulevard,	Santa Clara,	California	95054-1549
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code ~~(408)~~ (408) 765-8080

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $0.001 par value	~~The~~ INTC	Nasdaq Global Select Market*Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesþ☑ No ¨☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨☐Noþ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesþ☑ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large ~~accelerated filer~~ þ Accelerated Filer	Accelerated ~~filer~~ ¨ Filer	~~Non-accelerated filer~~ ¨ Non-Accelerated Filer	Smaller ~~reporting company~~ ¨ Reporting Company	Emerging ~~growth company~~ ¨ Growth Company
☑	☐	☐	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No þ☑

Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June ~~29, 2018,~~28, 2019, based upon the closing price of the common stock as reported by the Nasdaq Global Select Market on such date, was ~~$229.2~~$212.0 billion. ~~4,497~~4,277 million shares of common stock were outstanding as of January ~~26, 2019.~~17, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement related to its ~~2019~~2020 Annual Stockholders’ Meeting to be filed subsequently are incorporated by reference into Part III of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s proxy statement shall not be deemed to be part of this report.

TABLE OF CONTENTS

ORGANIZATION OF OUR ANNUAL REPORT ON FORM 10-K

The order and presentation of content in our ~~Annual Report on~~ Form 10-K ~~(Form 10-K)~~ differs from the traditional ~~U.S. Securities and Exchange Commission (SEC)~~SEC Form 10-K format. ~~We believe that our~~Our format ~~improves~~is designed to improve readability and better presents how we organize and manage our business. See "Form 10-K Cross-Reference Index" within the Financial Statements and Supplemental Details for a cross-reference index to the traditional SEC Form 10-K format. To reflect our focus on transforming from a PC-centric¹ company to a data-centric company, we have presented our data-centric businesses¹ first in the "Segment Trends and Results" within MD&A.

We have defined certain terms and abbreviations used throughout our Form 10-K in "Key Terms" within the Financial Statements and Supplemental Details.

The preparation of ~~consolidated financial statements~~our Consolidated Financial Statements is in conformity with U.S. ~~generally accepted accounting principles (GAAP).~~GAAP. We have included key metrics that we use to measure our business, some of which are non-GAAP measures. See these "Non-GAAP Financial Measures" within ~~Other Key Information.~~MD&A.



FUNDAMENTALS OF OUR BUSINESS		PAGE
Introduction to Our Business		3
A Year in Review		4
Our Strategy		6
~~How We Organize Our Business~~		8
~~Our Products~~		9
Our Capital		10
~~Who Manages Our Business~~		188

MANAGEMENT'S DISCUSSION AND ANALYSIS ~~(MD&A)~~
~~Overview~~How We Organize Our Business		1916
~~Revenue, Gross Margin, and Operating Expenses~~Our Products		2017
Segment Trends and Results		2318
~~Other~~ Consolidated Results of Operations		3835
Liquidity and Capital Resources		3940
Contractual Obligations		4243
Quantitative and Qualitative Disclosures about Market Risk		43
Non-GAAP Financial Measures		45

OTHER KEY INFORMATION
Selected Financial Data		4547
Sales and Marketing		4648
Competition		4749
Intellectual Property Rights and Licensing		4849
Critical Accounting Estimates		4950
Risk Factors		49
~~Non-GAAP Financial Measures~~		5850
Properties		6061
Market for Our Common Stock		6061
Information about Our Executive Officers		63
Availability of Company Information		6164

FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
Auditor's Reports		6366
Consolidated Financial Statements		6569
Notes to the Consolidated Financial Statements		7074
Key Terms		109
Financial Information by Quarter		111
Controls and Procedures		112
Exhibits ~~and Financial Statement Schedules~~		113
Form 10-K Cross-Reference Index		118


¹	Intel's definition is included in "Key Terms" within the Financial Statements and Supplemental Details.

Table of Contents

FORWARD-LOOKING STATEMENTS

This ~~Annual Report on~~ Form 10-K contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” "opportunities," "future," “believes,” “seeks,” "targets," “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance; future business, social, and environmental performance, goals, and measures; our anticipated growth and trends in our ~~businesses,~~businesses; projected growth and trends in markets relevant to our ~~businesses,~~businesses; future products and technology and the expected availability and benefits of such products and technology; expected timing and impact of acquisitions, divestitures, and other significant transactions; expected completion of restructuring activities; expected returns to stockholders; future production capacity and product supply; uncertain events or assumptions, including statements relating to ~~total addressable market (TAM)~~TAM or market ~~opportunity,~~opportunity; and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and particularly in “Risk Factors” within Other Key Information. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. ~~The~~Unless specifically indicated otherwise, the forward-looking statements in this Form 10-K do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that ~~had~~have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-K are made as of the date of this filing, including expectations based on third-party information and projections that management believes to be reputable, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.

NOTE REGARDING THIRD-PARTY INFORMATION

This ~~Annual Report on~~ Form 10-K includes market data and certain other statistical information and estimates that are based on reports and other publications from industry analysts, market research firms, and other independent sources, as well as ~~management��s~~management’s own good faith estimates and analyses. Intel believes these third-party reports to be reputable, but has not independently verified the underlying data sources, methodologies, or assumptions. The reports and other publications referenced are generally available to the public and were not commissioned by Intel. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information.

~~INTEL UNIQUE TERMS~~

~~We use specific terms throughout this document to describe our business and results. Below are key terms and how we define them:~~



~~PLATFORM PRODUCTS~~*		~~A microprocessor (processor or central processing unit (CPU))~~Other names and ~~chipset, a stand-alone System-on-Chip (SoC), or a multichip package, based on Intel~~^® ~~architecture. Platform products are primarily used in solutions sold through~~brands may be claimed as the ~~Client Computing Group (CCG), Data Center Group (DCG), and Internet~~property of ~~Things Group (IOTG) segments.~~

~~ADJACENT PRODUCTS~~		All of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Non-Volatile Memory Solutions Group (NSG), Programmable Solutions Group (PSG), and Mobileye products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs.

~~PC-CENTRIC BUSINESS~~		~~Our CCG business, including both platform and adjacent products.~~

~~DATA-CENTRIC BUSINESSES~~		~~Our DCG, IOTG, NSG, PSG, and all other businesses, including Mobileye.~~others.

* Other names and brands may be claimed as the property of others.

The Bluetooth^® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by Intel Corporation is under license.

Intel, ~~the Intel logo,~~ 3D XPoint, ~~Arria,~~ Celeron, Intel Agilex, Intel Atom, Intel Core, eASIC, Intel Inside, the Intel logo, the Intel Inside logo, Intel Nervana, Intel Optane, ~~Intel Xeon Phi,~~ Itanium, Movidius, Myriad, OpenVINO, Pentium, Quark, Stratix, Thunderbolt, Intel vPro, Xeon, and ~~XMM~~ are trademarks of Intel Corporation or its ~~subsidiaries in the U.S. and/or other countries.~~subsidiaries.



		1

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		2

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		INTRODUCTION TO OUR BUSINESS

		WeIntel was founded in 1968 and our technology has been at the heart of computing breakthroughs ever since. More than 50 years later, we are a world leader in the design and manufacturing of essential technologies that power the cloud and an increasingly smart, connected world. ~~We offer computing, networking, data storage, and communications~~Intel is transforming from a PC-centric company to a data-centric company, with workload-optimized solutions designed to help a broad set of customers ~~spanning multiple industries. In 1968, Intel was incorporated in California (reincorporated in Delaware in 1989), in what became known as Silicon Valley,~~process, move, and store ever-increasing amounts of data. This exponential growth of data is reshaping computing and expanding our opportunity. We are investing to lead data-driven technology ~~has been at the heart of computing breakthroughs ever since.~~ ~~We're now~~inflections that position us to play a bigger role in the midst of a corporate transformation as we grow beyond our traditional PC and server businesses into data-rich markets addressing the explosive demands to process, analyze, store, and transfer data. The transformation is well underway, with our data-centric businesses representing an increasing sharesuccess of our ~~overall revenue.~~customers. These include: the rise of AI, the transformation of networks, the intelligent edge¹ emerging with the Internet of Things, and autonomous driving. Intel’s ambitions have never been greater: to create world-changing technology that enriches the lives of every person on earth. Our ~~vision is to build a smart and connected world that runs on Intel~~^® ~~solutions. This vision is supported by our~~ commitment to corporate responsibility ~~our relentless pursuit of Moore's Law,~~ and to creating an inclusive environment to support the talent of our amazing ~~employees.~~ people supports our ambitions and makes us stronger. When every employee has a voice and a sense of belonging, Intel can be more innovative, agile, and competitive.


			"~~Don’t be encumbered by history. Go off~~We are at a key inflection point with the exponential growth of data creating massive demand for semiconductors. Cloud workloads are diversifying, networks are transforming, and domore computing performance is moving to the edge. We have been on a multi-year journey to reposition the company’s portfolio to take advantage of this industry catalyst. Today, we have the product and technology leadership that uniquely positions us to capitalize on these trends, and we are investing in the IP required to help our customers win the inflections of the future." ~~something wonderful~~." —Bob Swan, Chief Executive Officer


		¹Intel's definition is included in "Key Terms" within the Financial Statements and Supplemental Details. – ~~Bob Noyce, Intel Co-Founder~~



		3

Table of Contents

A YEAR IN REVIEW



Five years ago, we set out a strategy to transform from a PC-centric to a data-centric company. Our 2018 results serve as a strong proof point that our strategy is working and our transformation is well underway. We achieved record revenue and earnings per share (EPS), driven by strong business performance, continued operating leverage, and a lower tax rate. Revenue from our data-centric businesses collectively increased by double digits. Our PC-centric business grew above our expectations and continued to be a source of profit, cash flow, scale, and intellectual property (IP). While we have had delays in implementing our 10 nanometer (nm) manufacturing process technology, we have continued to innovate in our 14nm products, introducing leadership products that deliver more value to our customers. We've expanded beyond PC and server businesses with significant growth in adjacent products, and gained share in an expanded $300 billion TAM¹~~. Our employees are executing to our strategy by developing compelling technology and delivering innovative products to our customers, enabling strong financial growth.~~		~~"The investments in technology and talent we have made in our~~Our transformation to a data-centric company ~~position Intel~~continued in 2019, and we experienced strong demand and reached critical product milestones. We achieved record revenue of $72.0 billion, 48% of which was from our data-centric businesses. We invested $13.4 billion in R&D while reducing our spending to ~~serve~~27% of revenue. Additionally, we made capital investments of $16.2 billion, generated $33.1 billion cash from operations and $16.9 billion of free cash flow, and returned $5.6 billion in dividends to stockholders. We continue to focus on improving supply and supporting our customers' growth. We increased our wafer capacity during 2019; however, we did not see a ~~broader set~~commensurate increase in client CPU unit volume as wafer capacity was largely consumed by increases in modem and chipset volumes, and unit die sizes. Our 10nm manufacturing process entered full production as we launched our first products from this advanced technology. We are accelerating the pace of process node introductions and moving back to a 2- to 2.5-year cadence. We are on track to deliver our first 7nm-based product, a discrete GPU, at the end of 2021. 5G continues to be a strategic priority, and our exit from the 5G smartphone modem business is enabling us to increase the focus of our 5G efforts on the opportunity to modernize network and edge infrastructure.

	"We achieved record revenue for the fourth consecutive year, exercised discipline to drive spending efficiencies, and returned capital to our stockholders. Our results reflect a relentless commitment to improve execution that benefits our customers ~~in an expanded market for silicon.~~and increases shareholder value." —~~Bob Swan,~~ ~~Intel~~ George Davis, Chief ~~Executive~~Financial Officer

$70.8B $23.3B $24.5B $4.48 $4.58

GAAP GAAP
non-GAAP²
GAAP
non-GAAP²
Revenue up $8.1B or 13% from 2017; data-centric up 18% and PC-centric up 9% Operating income up $5.3B or 29% from 2017 Operating income up $4.9B or 25% from 2017 Diluted EPS up $2.49 or 126% from 2017 Diluted EPS up $1.11 or 32% from 2017

Strong growth with record revenue across the business. Top-line growth and continued operating margin leverage while investing in key opportunities such as artificial intelligence (AI) and autonomous driving.
Demand for high-performance products, adjacency growth, disciplined spending focus, and lower tax rate from Tax Reform³.

$72.0B

$22.0B

$23.8B

$4.71

$4.87

$33.1B

$16.9B

GAAP

non-GAAP¹

GAAP

non-GAAP¹

GAAP

non-GAAP¹

Revenue up 2% from 2018; Data-centric up 3% and PC-centric flat

Operating income down $1.3B or 5% from 2018; 2019 operating margin at 31%

Operating income down $797M or 3% from 2018; 2019 operating margin at 33%

Diluted EPS up $0.23 or 5% from 2018

Diluted EPS up $0.29 or 6% from 2018

Operating cash flow up $3.7B or 13%; operating cash flow to net income at 157%

Free cash flow up $2.7B or 19%; free cash flow to non-GAAP net income at 78%

High-performance product sales in the second half of 2019, partially offset by NAND pricing pressure and decrease in platform² unit sales

Lower gross margin from decrease in NAND market pricing and lower platform unit sales, partially offset by platform ASP strength

Lower shares outstanding and platform ASP strength, partially offset by a decrease in platform unit sales and lower NAND market pricing

Working capital changes driven by tax and other assets and liabilities, partially offset by lower memory prepayments and inventory build




~~GOAL~~		~~GOAL~~	~~GOAL~~
~~Achieve at least low double-digit growth of data-centric businesses and limit PC-centric business decline to low single digits.~~GOAL (2019 - 2021)		~~Grow~~GOAL (2019 - 2021)	GOAL (2019 - 2021)	GOAL (2019 - 2021)
Low single-digit growth over the next three years to $76B-$78B; data-centric businesses high single- digit growth and PC-centric business approximately flat to slightly down		Keep non-GAAP operating ~~income faster than revenue.~~margin roughly flat at approximately 32% over the next three years	Grow non-GAAP diluted EPS ~~faster than~~in line with revenue over the next three years	Achieve free cash flow of approximately 80% of non-GAAP ~~operating income.~~net income by 2021


~~RESULT~~ ✓~~ACHIEVED~~	~~RESULT~~ ✓~~ACHIEVED~~
Progress		~~RESULT~~ ✓~~ACHIEVED~~
Exceeded our goal on both fronts with 18% data-centric businesses growth and 9% PC-centric business growth. Total revenue was approximately $6.0 billion higher than our expectation at the beginning of 2018.Progress		~~On a non-GAAP basis, operating income grew faster than revenue two years in a row. From 2017 to 2018, non-GAAP operating income grew 25%, compared to 13% revenue growth.~~Progress	~~On a non-GAAP basis,~~Progress
Revenue grew 2% from 2018 to 2019, to $72.0B		Non-GAAP operating margin was 33% in 2019	Non-GAAP diluted EPS grew ~~faster than operating~~6% from 2018 to 2019; revenue grew 2% over the same period	Free cash flow was 78% of non-GAAP net income ~~two years in a row. From 2017 to 2018, non-GAAP diluted EPS grew 32%, compared to 25% non-GAAP operating income growth.~~


¹	~~Source: Intel calculated 2022 TAM derived from industry analyst reports.~~ See "Non-GAAP Financial Measures" within MD&A.


²	See ~~"Non-GAAP Financial Measures"~~"Our Products" within ~~Other Key Information.~~


³	~~Tax Reform refers to the U.S. Tax Cuts and Jobs Act enacted in December 2017.~~MD&A.



FUNDAMENTALS OF OUR BUSINESS	~~A Year In Review~~	4

Table of Contents



DATA-CENTRIC BUSINESSES EXPAND WITH NEW OPPORTUNITIES				PC-CENTRIC BUSINESS ~~THRIVES~~INNOVATES
Data-Centric Portfolio Launch				10nm-based 10th Generation Intel^®Core^TM Shipping
~~Our~~We introduced a portfolio of data-centric ~~businesses have grown significantly over the last two years. To extend the momentum~~solutions consisting of ~~this growth, we continue to offer innovative new products that provide higher performance and better value for our customers. We expect that our leadership products such as the second~~2nd generation Intel^® Xeon^® Scalable processors, ~~and~~ Intel^® ~~Stratix~~^®~~10 SX FPGA will further advance our opportunity in AI~~ Optane™ DC memory and storage solutions, and software and platform technologies optimized to help our customers ~~process~~extract more value from their data. Our latest data center solutions target a wide range of use cases within cloud computing, network infrastructure, and ~~analyze the flood of data implicit in big bets.~~intelligent edge applications, and support high-growth workloads, including AI and 5G.
				~~Our focus on product segmentation, innovation, and performance in PCs continued. To extend product leadership and deliver more value to customers, we launched~~We started shipping our ~~9th~~10nm-based 10th generation Intel^® Core^™TM i9 processors, ~~which target~~previously referred to as Ice Lake. Our 10th generation Intel^® Core^TM processor silicon will enable the ~~growing gaming market segment.~~first wave of PCs with instructions for AI, includes an all-new CPU Core architecture and Gen 11 graphics engine, and is the first client CPU to integrate Wi-Fi 6 and Thunderbolt™ 3 connectivity modules.


10nm FPGAs Shipping
We began shipping engineering samples of Intel^® Agilex™ FPGAs to customers. The 10nm-based FPGAs are used by our customers to develop advanced solutions for networking, 5G, and accelerated data analytics. The Intel^® Agilex™ FPGA family leverages heterogeneous 3D SiP technology to deliver higher performance or higher power efficiency.
				Project Athena Innovation Program
				Project Athena is a new multi-year innovation program to help the PC ecosystem create advanced laptops that meet ambitious key experience indicators in performance, responsiveness, battery life, form factor, and AI. The first laptops verified through the innovation program became
Habana Labs Acquisition
We acquired Habana Labs Ltd., an Israel-based developer of programmable deep learning accelerators for the data center, for approximately $1.7 billion. Habana's AI processors provide data scientists and developers with accelerator hardware that improves processing performance and reduces power consumption. Habana's Gaudi* AI training processor is currently sampling with select hyperscale customers. Large-node training systems based on Gaudi* are expected to deliver up to four times increase in throughput versus systems built with the equivalent number of GPUs. The acquisition strengthens our AI portfolio and accelerates our efforts in the nascent, fast-growing AI silicon market.
				available in 2019, identified by the visual marker "Engineered for Mobile Performance."



BIG BETS ~~MAKE PROGRESS~~UPDATE			~~BOB SWAN OUR NEW CEO~~
		~~Our~~We aim to be at the forefront of the constant technological change in our industry. We will evaluate new and existing big bets based on the following criteria: the "bet" is leading the edge of a technology inflection, it plays a significant role in our customers' success, and it offers a clear path to profitability and attractive returns. Currently, our big bets are memory, autonomous driving, and 5G.
We exited 5G smartphone modem business to increase the focus of our 5G efforts on the broader opportunity to modernize network and ~~we have made~~edge infrastructure.
	We continue to make progress ~~on all fronts to expand~~in memory and ~~compete in the data-centric world.~~autonomous driving. We ~~are shipping~~launched Intel^® ~~Optane~~^™ Optane™ DC persistent memory for the data ~~centers. We also announced our first 5G new radio (NR) multi-mode modem~~center and continue to take steps to improve NAND profitability. Mobileye's EyeQ*5, the vision central computer performing sensor fusion for ~~2019 and our plan to commercialize Mobility-as-a-Service (MaaS) with~~fully autonomous ~~vehicles through a joint venture starting 2019.~~driving, is operational in Mobileye's autonomous test vehicles.			On January 30, 2019, our Board of Directors appointed Bob Swan as our Chief Executive Officer, the seventh CEO in Intel’s 50-year history. Mr. Swan joined Intel as our Chief Financial Officer in October 2016.
			"While process and CPU leadership remain fundamentally important, an extraordinary rate of innovation is required across a combination of foundational building blocks, including architecture, memory, interconnect, security, and software, to take full advantage of the opportunities created by the explosion of data." —Dr. Venkata (Murthy) M. Renduchintala, Group President of the Technology, Systems Architecture and Client Group and Chief Engineering Officer

~~WE ARE PROUD OF OUR HERITAGE~~

Fifty years ago, Robert Noyce and Gordon Moore founded Intel. In honor of our golden anniversary, we are embracing Noyce’s inspiring challenge, "Don't be encumbered by history. Go off and do something wonderful.” We celebrated our heritage and the wonderful things we are doing to create a bright future for Intel and the world. Two years ahead of schedule, we announced that we have achieved our goal of a U.S. workforce that reflects the diversity of the available skilled labor market.



FUNDAMENTALS OF OUR BUSINESS	~~A Year In Review~~	5

Table of Contents

OUR STRATEGY

~~We are~~Data has become a driving force in the midst of one of the most significant transformations in our corporate history. Over the last five years, we’ve made key investments and decisions to enter data-rich markets and deploy our IP and manufacturing technologies to redefine and expand our target market. We have evolved from a PC-centric company with a server business, to a data-centric company with an expanding portfolio of technology solutions that address customer needs across platform, storage, connectivity, and software. This transformation is evidenced by our 2018 revenue, of which roughly half was earned from data-centric businesses, and the expansion of our TAM, which we last estimated at more than $300 billion¹.

society. Our customers are ~~looking~~asking for solutions ~~that can process, analyze, store, and transfer data—turning it~~to turn data into actionable insights, amazing experiences, and ~~competitive advantages. The~~operational efficiencies. Intel^® ~~architecture platform provides~~ platforms provide the foundation for ~~new~~these solutions because we have developed a portfolio of data-centric technologies that ~~take advantage~~span the data center to the edge, enabling us to play a differentiated and growing role in the success of ~~this growth of data.~~

our customers.



MAKE THE WORLD'S BEST SEMICONDUCTORS

Moore’s Law, a law of economics predicted by Intel’s co-founder Gordon Moore more than 50 years ago, continues to be a strategic priority and differentiator. We make significant investments and innovations in our silicon manufacturing technologies and platforms. Our proprietary technologies make it possible to integrate products and platforms that address evolving customer needs and expand the markets we serve. ~~Our innovation strategy includes investments in advanced~~However, making the best semiconductors requires more than just the best manufacturing ~~processes and packaging, architecture, interconnects, and embedded security features, as part~~process technologies.



Product leadership is defined by our ability to optimize across six engineering pillars: process technology and packaging, architecture, memory, interconnect, security, and software. With these six pillars, we are accelerating product innovation with a focus on xPU platforms uniquely able to serve diverse new workload opportunities (e.g., CPU, GPU, AI accelerator and FPGA). These innovation efforts will extend Intel’s opportunities to deliver products beyond the CPU that will contribute to the success of our customers.

We manufacture a majority of ~~our efforts to be the leading end-to-end platform provider.~~

Realizing the economics of Moore’s Law has been and will continue to be a strategic priority, making possible the innovation of new high-performance products and improving user experience at exponential rates while balancing performance, cost, and power to meet our customers' needs. Unlike many semiconductor companies, we primarily develop and manufacture our products in our own facilities ~~using~~and make significant investments in silicon manufacturing technologies and platforms as an IDM. We are focused on strengthening our ~~proprietary process technologies. We have~~IDM position by collaborating with the ~~scale~~broader silicon manufacturing and ~~expertise necessary~~design ecosystem to ~~enable deep engagement with~~improve our ~~customers, which provides us with a competitive advantage. Our manufacturing capital enables~~design efficiency, including increased strategic use of third-party design IP and foundries for certain components to allow us to ~~optimize performance, shorten time-to-market~~focus on differentiating technology. We are also pursuing design simplification to accelerate innovation, including a significant reduction of design rules for ~~new product introduction, and control essential elements of our supply chain. Sharing architectural innovation and IP enables~~future process nodes, to allow us to ~~spread~~deliver the best solutions for our ~~investments over a large manufacturing base of products, which reduces our costs and increases our return on capital.~~

customer.

LEAD ~~THE AI AND AUTONOMOUS REVOLUTION~~TECHNOLOGY INFLECTIONS



~~EXECUTIVE OFFICERS OF THE REGISTRANT~~		~~AGE~~		~~OFFICE(S)~~
~~Andy D. Bryant~~	68		~~Chairman of the Board~~
~~Dr. Venkata S.M. Renduchintala~~	53		~~Group President, Technology, Systems Architecture and Client Group; Chief Engineering Officer~~
~~Steven R. Rodgers~~	53		~~Executive Vice President; General Counsel~~
~~Navin Shenoy~~	45		~~Executive Vice President; General Manager, Data Center Group~~
~~Robert H. Swan~~	58		~~Chief Executive Officer~~
~~Todd M. Underwood~~	49		~~Interim Chief Financial Officer; Vice President of Finance and Director, Corporate Planning and Reporting~~WE HAVE A BROAD PRODUCT PORTFOLIO

~~Andy D. Bryanthas been Chairman~~From processing to transferring, storing, and analyzing data, our broad product portfolio offers innovative solutions to a wide array of customers. These products, such as our ~~Board~~gaming CPUs, may be sold directly to end consumers, or they may be further integrated by our customers into end products such as notebooks and storage servers. Combining some of ~~Directors since May 2012. Mr. Bryant served as Vice Chairman of the Board of Directors of~~these products—for example, integrating FPGAs and memory with Intel ~~from July 2011 to May 2012. From 2007 to 2012, Mr. Bryant served as Chief Administrative Officer. Mr. Bryant joined Intel in 1981 and served~~^® Xeon^® processors in a ~~number~~data-center solution—enables incremental synergistic value and performance. We introduced new products in 2019 such as 10nm-based 10th generation Intel^® Core^TM processors, Intel^® Agilex^TMFPGAs, 2nd generation Intel^® Xeon^® Scalable processors, and Intel^® Optane™ DC persistent memory.

Platform products: Our platform products can be a CPU and chipset, an SoC, or a multichip package, based on Intel^® architecture that processes data and controls other devices in a system. These products are primarily used in solutions sold through CCG, DCG, and IOTG.

Adjacent products: Our non-platform, or adjacent products, can be combined with platform products to form comprehensive platform solutions to meet customer needs. These products are used in solutions sold through each of executive roles at the company. He was Executive Vice President, Technology, Manufacturing, and Enterprise Services from 2009 to 2012. Mr. Bryant previously served as Executive Vice President, Finance and Enterprise Services from 2007 to 2009; Executive Vice President, Chief Financial and Enterprise Services Officer from 2001 to 2007; Senior Vice President, Chief Financial and Enterprise Services Officer from 1999 to 2001; Senior Vice President, Chief Financial Officer from January 1999 to December 1999; and Vice President, Chief Financial Officer from 1994 to 1999. Mr. Bryant also serves on the board of directors of Columbia Sportswear Company and McKesson Corporation.

~~Dr. Venkata S.M. (“Murthy”) Renduchintala~~ joined Intel in November 2015 and serves as Group President of our Technology, Systems Architecture and Client Group (TCSG) and Chief Engineering Officer. In this role, Dr. Renduchintala oversees Intel's labs, technology development, manufacturing, and systems architecture engineering teams, as well as our client computing and connectivity business. His TCSG organization is responsible for aligning technology, engineering, product design, and process development across all our businesses and for providing business and strategic direction for our client and connectivity offerings. Dr. Renduchintala joined Intel as Executive Vice President and President, Client and Internet of Things Businesses and System Architecture Group, which expanded intoinclude the TSCG organization in 2018, and was named Group President and Chief Engineering Officer in April 2017. From 2004 to 2015, Dr. Renduchintala held various senior positions at Qualcomm Incorporated, most recently as Co-President of Qualcomm CDMA Technologies from June 2012 to November 2015 and Executive Vice President of Qualcomm Technologies Inc. from October 2012 to November 2015. Before joining Qualcomm, Dr. Renduchintala served as Vice President and General Manager of the Cellular Systems Division of Skyworks Solutions Inc./Conexant Systems Inc. and he spent a decade with Philips Electronics, where he held various positions, including Vice President of Engineering for its consumer communications business. Dr. Renduchintala also serves on the board of directors of Accenture plc.following:


•	Accelerators - Silicon products that can operate alone or accompany our processors in a system, such as FPGAs, VPUs, and Mobileye EyeQ* SoC


•	Boards and systems - Server boards and small form factor systems such as Intel^® NUCs


•	Connectivity products - Cellular modems, Ethernet controllers, silicon photonics, Wi-Fi, and Bluetooth^®


•	Memory and storage products - SSD, persistent memory, and memory components

~~Steven R. Rodgers~~has been our Executive Vice President and General Counsel since January 2017 and oversees our legal, government, human resources, 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.

~~Navin Shenoy~~has been Executive Vice President and General Manager of the Data Center Group since May 2017. In this role, he oversees our Data Center Group, Internet of Things Group, and Programmable Solutions Group and leads strategy and product development for many 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. From May 2016 to May 2017, Mr. Shenoy was Senior Vice President and General Manager of the Client Computing Group. From April 2012 to April 2016, he served as General Manager of the Mobility Client Platform Division, as Vice President from April 2012 until December 2014 and Corporate Vice President from January 2015 to May 2016. From October 2007 to April 2012, Mr. Shenoy served as Vice President and General Manager of our Asia-Pacific business. Mr. Shenoy joined Intel in 1995.

~~Robert ("Bob") H. Swan~~ was appointed our Chief Executive Officer and a member of our Board of Directors on January 30, 2019. Mr. Swan had served as our interim Chief Executive Officer since June 2018 and has been our Executive Vice President, Chief Financial Officer since joining Intel in October 2016. As CFO, he oversees Intel’s global finance organization—including finance, accounting and reporting, tax, treasury, internal audit, and investor relations—IT, Intel Capital, and our corporate strategy office. From September 2015 to September 2016, Mr. Swan served as an Operating Partner at General Atlantic LLC, a private equity firm. He served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc. from March 2006 to July 2015. Previously, Mr. Swan served as Executive Vice President, Chief Financial Officer of Electronic Data Systems Corporation, Executive Vice President, Chief Financial Officer of TRW Inc., as well as Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving for 15 years in numerous senior finance roles. Mr. Swan also serves on the board of directors of eBay.

~~Todd M. Underwood~~ was appointed our interim Chief Financial Officer as of January 31, 2019. Since August 2016, Mr. Underwood has been our Vice President of Finance and Director, Corporate Planning and Reporting, with responsibility for leading our financial planning processes, management reporting, and quarterly earnings process. From June 2015 to August 2016, he served as Vice President of Finance and Co-Executive-in-Residence with responsibility for integration activities of Intel’s acquisition of Altera. Mr. Underwood served as Vice President of Finance for the Mobile and Communications Group from January 2012 to June 2015. Prior to that, he served as Director of Finance for Intel Capital from June 2008 to January 2012. Mr. Underwood joined Intel in 1992.



~~FUNDAMENTALS OF OUR BUSINESS~~MD&A	~~Who Manages Our Business~~	1817

Table of Contents

~~MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)~~

Five years ago, we set out a strategy to transform from a PC-centric to a data-centric company. Our 2018 results serve as a strong proof point that our strategy is working and our transformation is well underway. We achieved record revenue and earnings per share (EPS), driven by strong business performance, continued operating leverage, and a lower tax rate. Revenue from our data-centric businesses collectively increased by double digits. Our PC-centric business grew above our expectations and continued to be a source of profit, cash flow, scale, and intellectual property (IP). While we have had delays in implementing our 10 nanometer (nm) manufacturing process technology, we have continued to innovate in our 14nm products, introducing leadership products that deliver more value to our customers. We've expanded beyond PC and server businesses with significant growth in adjacent products, and gained share in an expanded $300 billion TAM¹. Our employees are executing to our strategy by developing compelling technology and delivering innovative products to our customers, enabling strong financial growth. For key highlights of the results of our operations, see "A Year in Review" within Fundamentals of Our Business.

Years Ended
(In Millions, Except Per Share Amounts) December 29, 2018 December 30, 2017 December 31, 2016
Amount
% of Net
Revenue
Amount
% of Net
Revenue
Amount
% of Net
Revenue
Net revenue $ 70,848
100.0 % $ 62,761
100.0 % $ 59,387
100.0 %
Cost of sales 27,111
38.3 % 23,663
37.7 % 23,154
39.0 %
Gross margin 43,737
61.7 % 39,098
62.3 % 36,233
61.0 %
Research and development 13,543
19.1 % 13,035
20.8 % 12,685
21.4 %
Marketing, general and administrative 6,750
9.5 % 7,452
11.9 % 8,377
14.1 %
Restructuring and other charges (72 ) (0.1 )% 384
0.6 % 1,744
2.9 %
Amortization of acquisition-related intangibles 200
0.3 % 177
0.3 % 294
0.5 %
Operating income 23,316
32.9 % 18,050
28.8 % 13,133
22.1 %
Gains (losses) on equity investments, net (125 ) (0.2 )% 2,651
4.2 % 506
0.9 %
Interest and other, net 126
0.2 % (349 ) (0.6 )% (703 ) (1.2 )%
Income before taxes 23,317
32.9 % 20,352
32.4 % 12,936
21.8 %
Provision for taxes 2,264
3.2 % 10,751
17.1 % 2,620
4.4 %
Net income $ 21,053
29.7 % $ 9,601
15.3 % $ 10,316
17.4 %
Earnings per share - Diluted $ 4.48
$ 1.99
$ 2.12


¹	~~Source: Intel calculated 2022 TAM derived from industry analyst reports.~~



~~MD&A~~	~~Consolidated Results and Analysis~~	19

~~Table of Contents~~

~~REVENUE~~

We have achieved our third year in a row of record revenue, demonstrating that our strategy and transformation from a PC to a data-centric company is paying off. Our total revenue grew from $55.9 billion in 2014 to $70.8 billion in 2018, representing 6% compound annual growth rate (CAGR). Data-centric businesses collectively grew faster than Intel as a whole at 13% CAGR over the last five years and are approaching 50% of our revenue.

~~PC TO DATA-CENTRIC TRANSFORMATION OVER THE LAST 5 YEARS~~



OVERVIEW	■ ~~PC-centric $B~~	■ ~~Data-centric $B~~	— ~~Data-centric as a % of total Intel revenue~~

~~SEGMENT REVENUE WALK $B~~

~~2018 – 2017~~

In 2018, revenue was $70.8 billion, up $8.1 billion, or 13%, from 2017. The increase in revenue was primarily driven by strong performance across our data-centric businesses, which collectively grew 18% year over year and made up nearly half of our total revenue in 2018. Our recently acquired Mobileye business had revenue of $698 million. Our PC-centric business grew 9%, above our expectations, due to PC TAM¹ growth and demand for our leadership products. The increase in 2018 revenue was partially offset by the loss of revenue from businesses that were divested, specifically $534 million from the divestiture of the Intel Security Group (ISecG) and approximately $165 million from the divestiture of Wind River.

~~2017 – 2016~~

2017 revenue of $62.8 billion was up $3.4 billion, or 6%, from 2016. After adjusting for the Q2 2017 divestiture of ISecG, revenue grew 9% from 2016. The increase in revenue was primarily driven by strong performance across our data-centric businesses, which collectively grew 16% year over year after adjusting for ISecG. We saw revenue growth across our DCG, IOTG, NSG, and PSG businesses, and 2017 revenue included $210 million from our Mobileye business. The increase in 2017 revenue was partially offset by $1.6 billion from the divestiture of ISecG and by approximately $500 million from a change to the Intel Inside^® ~~program.~~


¹		~~Source: Intel calculated PC TAM derived from industry analyst reports.~~



~~MD&A~~	~~Consolidated Results and Analysis~~	20

~~Table of Contents~~

~~GROSS MARGIN~~

We derived most of our overall gross margin dollars from the sale of platform products in the CCG and DCG operating segments. Our overall gross margin dollars in 2018 increased by $4.6 billion, or 12%, compared to 2017, and in 2017 increased by $2.9 billion, or 8%, compared to 2016. In 2018, our adjacent products continued to grow, primarily due to memory and modem products, which have a lower gross margin percentage than our overall average. Adjacent products represented a larger proportion of our overall business in 2018, which positively impacted our gross margin dollars but substantially offset the increase in gross margin percentage from platform products.

~~GROSS MARGIN $B~~

~~(Percentages in chart indicate gross margin as a percentage of total revenue)~~

(In Millions)
$ 43,737
2018 Gross Margin
5,810
Higher gross margin from platform revenue
(1,085 ) Higher platform unit cost, primarily from increased mix of performance products
(86 ) Other, primarily due to impact from divestitures, offset by higher gross margin from adjacent businesses
$ 39,098
2017 Gross Margin
2,380
Higher gross margin from platform revenue
1,010
Lower platform unit cost, primarily on 14nm cost improvement
420
Lower Altera and other acquisition-related charges
315
Lower period charges associated with product warranty and IP agreements incurred in 2016
(535 ) Higher factory start-up costs, primarily driven by the ramp of our 10nm process technology
(390 ) Impact of the ISecG divestiture, offset by higher gross margin from adjacent businesses
(275 ) Period charges primarily associated with engineering samples and higher initial production costs from our 10nm products
(60 ) Other
$ 36,233
2016 Gross Margin



~~MD&A~~	~~Consolidated Results and Analysis~~	21

~~Table of Contents~~

~~OPERATING EXPENSES~~

Total R&D and marketing, general and administrative (MG&A) expenses for 2018 were $20.3 billion, down 1% from 2017. These expenses represented 28.6% of revenue for 2018 and 32.6% of revenue for 2017. In 2018, we met our goal to have annual R&D and MG&A be 30% of revenue, two years ahead of our 2020 target.

~~We continue to invest in R&D to accelerate our growth and profitability while driving operational efficiencies to reduce our MG&A spending.~~



~~RESEARCH AND DEVELOPMENT $B~~		~~MARKETING, GENERAL AND ADMINISTRATIVE $B~~
~~(Percentages indicate expenses as a percentage of total revenue)~~

~~RESEARCH AND DEVELOPMENT~~

~~2018 – 2017~~

~~R&D spending increased by $508 million, or 4%, driven by the following:~~


+	~~Investments in data-centric businesses~~

+~~Investments in 10nm process technology~~


+	~~Profit-dependent compensation due to an increase in net income~~


-	~~Lack of expenses due to the divestitures of ISecG in Q2 2017 and Wind River in Q2 2018~~

~~2017 – 2016~~

~~R&D spending increased by $350 million, or 3%, driven by the following:~~


+	~~Investments in data-centric businesses, including the addition of Mobileye~~

+~~Process development costs for our 7nm process technology~~


+	~~Profit-dependent compensation due to an increase in net income, excluding Tax Reform impacts~~


-	~~Lack of expenses due to the 2017 divestiture of ISecG~~


-	~~Cost savings from gained efficiencies~~

~~MARKETING, GENERAL AND ADMINISTRATIVE~~

~~2018 – 2017~~

~~MG&A expenses decreased by $702 million, or 9%, driven by the following:~~


-	~~Reduction in marketing programs in 2018~~


-	~~Lack of acquisition costs due to our 2017 acquisition of Mobileye~~


-	~~Lack of expenses due to the divestitures of ISecG in Q2 2017 and Wind River in Q2 2018~~


-	~~Change to the Intel Inside program in 2017~~


+	~~Olympics sponsorship in 2018~~


+	~~Profit-dependent compensation due to an increase in net income~~

~~2017 – 2016~~

~~MG&A expenses decreased by $925 million, or 11%, driven by the following:~~


-	~~Lack of expenses due to the 2017 divestiture of ISecG~~


-	~~Change to the Intel Inside program in 2017~~


+	~~Profit-dependent compensation due to an increase in net income, excluding Tax Reform impacts~~



~~MD&A~~	~~Consolidated Results and Analysis~~	22



~~OVERVIEW~~
CCG is our largest business unit, delivering 52% of our revenue. The PC market remains a critical facet of our business, providing an important source of IP, scale, and cash flow. CCG is dedicated to delivering client computing end-user solutions, focusing on higher growth segments of 2-in-1, thin-and-light, commercial, and gaming, as well as growing adjacencies such as WiFi and modem. CCG is the human touchpoint in a data-centric world. We deploy platforms that connect people to data and analytics, allowing each person to focus, create, and connect in ways that unlock their individual potential.



~~HIGHLIGHTS AND SEGMENT IMPERATIVES~~

•	~~Since 2014, the PC TAM has decreased by approximately 16%~~¹~~, while CCG profitability has improved by over 37%, with focus on higher growth segments and innovative form factors.~~	~~"The PC is the human touchpoint of our data-centric strategy. We are committed to making the PC the platform that powers everyone’s greatest contribution."~~ ~~—Gregory Bryant,~~ ~~CCG General Manager~~
•	Delivering an annual cadence of leadership products is foundational to our business. In 2019 we will begin transitioning to 10nm products, which are expected to be on shelves for the 2019 holiday season.
•	Leveraging our engineering capabilities and working with our customers and partners, we drive innovation across key vectors of performance, battery life, connectivity (e.g., WiFi, 5G), graphics, form factors, and AI.
•	As a critical facet of Intel's business, CCG is transforming the PC into the platform that powers every person’s greatest contribution and fundamentally supports Intel's data-centric vision of the future.

~~5-YEAR TRENDS~~



■ ~~Revenue $B~~	— ~~Year over Year Growth~~	■ ~~Op Income $B~~	— ~~Year over Year Growth~~


¹	~~Source: Intel calculated TAM derived from industry analyst reports~~



~~MD&A~~	~~Segment Trends and Results~~	23

~~Table of Contents~~

~~MARKET AND BUSINESS OVERVIEW~~

~~Market trends and strategy~~

~~Overall market conditions have improved and we saw a modest growth in the PC TAM~~¹ this year for the first time since 2011. Our revenue in 2018 increased due to strong demand in commercial and gaming market segments, and higher demand for our high-performance processors, which more than offset declines in desktop volume. We are operating in an increasingly competitive market, particularly in desktop. We continue to invest in product and process technology and in partnerships with our customers to deliver platform innovation and an annual cadence of leadership products. As we move to being a data-centric company, the PC is the connection between people, data, and analytics. It is the bridge between people and the cloud, allowing individuals to focus, create, and connect in new ways.

~~Products and competitiveness~~

With a focus on an annual cadence of leadership products, we seek to deliver security-enhanced solutions that continue to open the doors for new technologies, new use cases, and new categories. We expanded our 8th generation Intel^® ~~Core~~^™ mobile processor U-series and Y-series families, which are optimized for mobility. These new processors have integrated Gigabit WiFi and enable faster connectivity speeds, better performance, more intuitive voice experiences, and longer battery life for 2-in-1s and thin-and-light laptops.

~~We introduced the first Intel~~^® ~~Core~~^™ ~~i9 processor for laptops, an Intel Core platform extension that brings together the benefits of 8th generation Intel Core processors with Intel~~^® ~~Optane™ memory, and high-performance desktop CPUs and chipsets that deliver modern standby and ambient computing capabilities. We also announced the first 9th generation Intel~~^® ~~Core~~^™ desktop processors, including the i9-9900K gaming processor, which significantly improves performance and platform features to meet a range of consumer needs. Additionally, we are investing in AI usages to make the client smarter, more adaptable, and more responsive.

~~Our platform products continue to be enhanced by new adjacent technologies. We introduced our 6th generation LTE* modem, the Intel~~^® ~~XMM~~^™7660 modem, built on Intel's 14nm process technology. We also announced our first 5G NR multi-mode product, the Intel XMM 8160 modem, in our Intel XMM 8000 series product family. In addition, we introduced an Intel^® ~~NUC family of products based on 8th generation Intel~~^®~~Core~~^™~~processors. These mainstream products can power home theater systems, drive content creation solutions, and serve as personal voice assistants. We also launched new Thunderbolt~~^™ ~~products, increasing the presence of fast and simple connectivity in premium PCs and universal docking solutions.~~


¹	~~Source: Intel calculated PC shipment estimate derived from industry analyst reports.~~



~~MD&A~~	~~Segment Trends and Results~~	24

~~Table of Contents~~

~~FINANCIAL PERFORMANCE~~



	~~CCG REVENUE $B~~		~~CCG OPERATING INCOME $B~~



	■~~Platform~~	■~~Adjacent~~

~~REVENUE SUMMARY~~


•	~~First year over year PC TAM~~¹ ~~growth since 2011 drove an increase in notebook platform volume in 2018. We are operating in an increasingly competitive environment, especially in desktop.~~

~~Increased demand for performance products, and segmentation drove strong product mix and higher ASP.~~

~~Strong demand for commercial, 2-in-1, and gaming market segments, along with higher modem share.~~

2018 – 2017 2017 – 2016
(Dollars in millions) % $ Impact % $ Impact

Desktop platform volume down (6)% $ (608 ) down (5)% $ (686 )
Desktop platform ASP up 11% 1,181
flat —% (38 )
Notebook platform volume up 4% 839
up 5% 885
Notebook platform ASP up 3% 677
up 2% 326
Adjacent products and other 912
608

Total change in revenue $ 3,001
$ 1,095

~~OPERATING INCOME SUMMARY~~

Operating income increased 10% from 2017 to 2018, primarily due to higher gross margin from platform products. CCG achieved better operating efficiency with lower spending while continuing to invest in growth areas.

(In Millions)
$ 14,222
2018 Operating Income
2,080
Higher gross margin from CCG platform revenue
235
Lower operating expenses
(690 ) Higher platform unit cost due to increased mix to performance products
(225 ) Higher period charges, primarily due to reserved non-qualified platform product as we ramp 10nm
(97 ) Other
$ 12,919
2017 Operating Income
1,135
Lower platform unit cost, primarily on 14nm cost improvement
635
Higher gross margin from platform revenue
630
Lower operating expenses and share of technology development and MG&A costs
(430 ) Period charges primarily associated with engineering samples and higher initial production costs from 10nm products
303
Other
$ 10,646
2016 Operating Income

¹~~Source: Intel calculated PC TAM derived from industry analyst reports and internal estimates.~~



~~MD&A~~	~~Segment Trends and Results~~	25



~~OVERVIEW~~
DCG develops workload-optimized platforms for compute, storage, and network functions. ~~Customers~~Market segments include cloud service providers, enterprise and government, and communications service providers. In ~~2018,~~the first half of 2019, DCG ~~continued to grow faster than Intel as a whole, generating over 30% of our total revenue. Growth was fueled by strong demand in key workloads like AI and network function virtualization in~~customers, specifically the cloud service ~~provider~~providers and ~~communications service provider~~enterprise and government market ~~segments.~~

segments absorbed capacity and worked through inventory after a historic customer-driven platform refresh in 2018. As consumption picked back up in the second half of 2019, DCG returned to growth. Continued demand for cloud computing and solutions built for the network and edge fueled growth.



HIGHLIGHTS AND SEGMENT IMPERATIVES

●	~~DCG had record revenue and operating income in 2018. Customer transition to Intel~~^® ~~Xeon~~^® ~~Scalable processors and higher demand across cloud and communication service providers contributed to the growth.~~		"Our workload-optimized, broad portfolio strategy uniquely ~~positions us to enable the global appetite~~enables our customers to move, store, and process the world's data." —Navin Shenoy, ~~DCG~~Data Platforms Group² General Manager
●	~~Adjacent products collectively grew revenue at double digits. Silicon photonics led~~ We delivered sweeping innovation across our data-centric product portfolio, including introduction of the ~~adjacencies with significant revenue growth year over year.~~	2nd generation Intel^®Xeon^® Scalable processor family for the data center, first market introduction of Intel^®Optane^TM DC persistent memory, new Intel^® Xeon^® D processors, and Intel^® 800 series Ethernet adapters.
●	~~We see~~Adjacent products saw double-digit revenue growth primarily due to Intel^®Silicon Photonics and Intel^®Optane^TM DC persistent memory.
●	DCG has significant opportunities in cloud, networking, AI, and data analytics. As we broadened our product offerings and continued to innovate, the data center market TAM¹ ~~expanded to over $70 billion in 2018 and~~ is expected to grow to ~~over~~approximately $90 billion by ~~2022.~~2024.
●	~~We shipped the second generation Intel~~^® ~~Xeon~~^® ~~Scalable processors and Intel~~^® ~~Optane~~^™ ~~DC persistent memory for the data center.~~

5-YEAR TRENDS



■ Revenue $B	— Year over Year Growth	■ Op Income $B	— Year over Year Growth

¹Source: Intel calculated ~~2018 and 2022~~2024 TAM derived from industry analyst reports.

²Our Data Platforms Group includes our DCG segment. See "Information About Our Executive Officers" within Other Key Information for more details.



MD&A	~~Segment Trends and Results~~	2618

Table of Contents

MARKET AND BUSINESS OVERVIEW

Market trends and strategy

Data is a significant force in society, and is being generated at an unprecedented pace. Data center customers want to work with partners who can deliver platforms to address their most important technology challenges. Additionally, as more data is generated, organizations are seeking to analyze data closer to point of origin, giving rise to a data-centric edge environment across industries and providers. We expect the massive growth of data worldwide will increase demand to move, store, and process data and extract value from data. We are one of the few companies that touches every part of the data-centric compute landscape, and we have invested both organically and through acquisitions to capitalize on these demands. We expect these trends to continue to fuel demand in DCG and other data-centric businesses in the long term.



	Data is a significant force in society today, and data is generated by intelligent and connected devices and infrastructures, such as phones and automated factories. Data is transmitted through network infrastructure, processed, and analyzed to become real-time information. This real-time information enables actionable insights and is the lifeblood for the future of technology innovation in areas such as AI. Our thesis is that the massive growth of data worldwide will increase demand to process, analyze, store, and move data. We are one of the few companies that touches every part of the data revolution, and we've invested both organically and acquisitively to capitalize on these demands. We expect the growth momentum in DCG and the other data-centric businesses to continue in the long term.

DCG focuses on three market segments: cloud service providers, enterprise and government, and ~~communication~~communications service providers. In ~~2018,~~2019, cloud revenue grew as service providers continued to invest in infrastructure to meet the explosive demand for digital services, AI, and data analytics. ~~Enterprise~~Cloud service provider revenue was down in the first half as customers absorbed capacity and worked through inventory after a historic 2018 platform refresh; this trend stabilized in the second half of 2019. In our enterprise and government ~~revenue was stable, driven by macro environment strength~~market segment, legacy architecture continues to decline on-premise, but enterprises are rapidly embracing cloud as an architecture, and ~~increased deployment of hybrid cloud solutions and data-intensive workloads. Compared~~we expect to ~~2017, where we saw workload migration as the main force of cloud~~continue to see growth ~~we now see new services as the primary drivers to public cloud demand while enterprise increased on-premises investments, including~~in hybrid and ~~private cloud~~multi-cloud deployments. In the ~~communication~~communications service provider market segment, we gained market segment share as customers chose to virtualize and transform their networks and prepare for the 5G transition using Intel^® architecture.

Products and competitiveness

We offer acustomers an unmatched, broad portfolio of platforms and technologies designed to provide workload-optimized performance across compute, storage, and network. These offerings span the full spectrum from the data center core to the network edge. In addition, DCG focuses on lowering the total cost of ownership and on other specific workload optimizations for the enterprise, cloud service provider, and communications service provider market segments, with hardware-enhanced performance ~~security features, and reliability.~~optimizations for AI workloads. DCG's platform value can be extended through Intel adjacent products such as FPGAs and SSDs. As a leading provider of data center platforms, we face competition from competitors such as Advanced Micro Devices, Inc. (AMD), providers of GPU products such as NVIDIA Corporation (NVIDIA), companies using ARM* architecture, new entrants developing products customized for specific data center workloads, and from internally developed solutions by cloud service providers and others. We expect an increasingly competitive environment in 2020.

With over 23 million units shipped to date, the Intel^® Xeon^® Scalable platform provides the foundation for the data-centric era. In ~~2018,~~2019, we ~~began shipping for revenue the second~~launched our 2nd generation Intel^® Xeon^®Scalable processors, formerly ~~code-named~~ Cascade Lake, which include Intel^® Deep Learning Boost. As the industry's only CPUs with built-in AI acceleration, Intel^® Xeon^® processors can help customers solve challenging problems and ~~they will launch~~gain insight for future opportunities. We also shipped new generations of our Intel^® Xeon^® D processor product family, designed to deliver improved performance in ~~2019. The new~~space- and power-constrained environments. Beyond processing everything, we are enhancing users' digital experiences through continued expansion of adjacent product ~~delivers performance improvement over the prior generation on popular workloads, includes hardware-based mitigations for certain side-channel vulnerabilities,~~offerings to store and ~~introduces new capabilities with support for~~move data more effectively, such as Intel^®Optane^TM DC persistent ~~memory. The combination of Intel Xeon processors~~memory and Intel ~~Optane memory significantly boosted overall system performance and reduced total cost of ownership compared to the prior generation.~~^® 800 series Ethernet adapters.



MD&A	~~Segment Trends and Results~~	2719

Table of Contents

FINANCIAL PERFORMANCE



	DCG REVENUE $B		DCG OPERATING INCOME $B



	■Platform	■Adjacent

REVENUE SUMMARY

Higher platform ASPs from stronger core mix was partially offset by platform volume decline primarily from TAM contraction in the enterprise and government market segment.


•	~~Platform volume~~Adjacent growth ~~primarily from cloud and communication service provider market segments, with higher platform ASPs from~~driven by the ~~adoption~~continued expansion of ~~14nm~~ Intel^® ~~Xeon~~^® ~~Scalable processors.~~Silicon Photonics in 2019.

~~Adjacent growth driven by the continued expansion of silicon photonics and Intel Optane memory technology in 2018.~~

~~When comparing~~Comparing 2019 to 2018, ~~to 2017,~~ revenue from cloud service providers was up ~~40%~~13%, enterprise and government was ~~up 2%~~down 14%, and ~~communication~~communications service providers was up ~~25%~~6% (up ~~28%~~40%, ~~down 3%~~up 2%, and up ~~15%~~25%, respectively, ~~when~~ comparing ~~2017~~2018 to ~~2016)~~2017). ~~In Q4 2018, we saw all DCG market segments were impacted by weakness in China demand and some cloud customers absorbing existing capacity.~~

2018 – 2017 2017 – 2016
(Dollars in millions) % Growth $ Impact % Growth $ Impact

Platform volume¹
up 13% $ 2,334
up 5% $ 801
Platform ASP up 7% 1,382
up 4% 743
Adjacent Products up 13% 211
up 21% 284

Total change in revenue $ 3,927
$ 1,828



	2019 – 2018					2018 – 2017
(Dollars in Millions)	% Growth		$ Impact			% Growth		$ Impact

Platform volume	down	(3)%	$	(654	)	up	13%	$	2,334
Platform ASP	up	5%	940			up	7%	1,382
Adjacent products	up	11%	204			up	13%	211

Total change in revenue			$	490				$	3,927

OPERATING INCOME SUMMARY

Operating income ~~increased 37%~~decreased 11% year over year, ~~reaching an~~and operating margin ~~of 50%~~was 44% in ~~2018.~~2019.



(In Millions)
$	10,227		2019 Operating Income
(805		)	Higher period charges, primarily associated with the initial ramp of 10nm
(510		)	Higher operating expenses primarily related to R&D
(140		)	Lower gross margin from adjacent businesses
(80		)	Higher platform unit cost
370			Higher gross margin from platform revenue
(84		)	Other
$	11,476		2018 Operating Income
3,445			Higher gross margin from platform revenue
(350		)	Higher platform unit cost
(14		)	Other
$	8,395		2017 Operating Income

(In Millions)
$ 11,476
2018 Operating Income
3,445
Higher gross margin from platform revenue
(350 ) Higher platform unit cost
(14 ) Other
$ 8,395
2017 Operating Income
1,450
Higher gross margin from DCG platform revenue
215
Lower period charges associated with product warranty and IP agreements incurred in 2016
(585 ) Higher factory start-up costs, primarily driven by the ramp of our 10nm process technology
(315 ) Higher DCG spending and share of technology development and MG&A costs
110
Other
$ 7,520
2016 Operating Income

¹~~DCG platform products are sold across the cloud service provider, communication service provider, and enterprise and government market segments.~~



MD&A	~~Segment Trends and Results~~	2820

Table of Contents

As more intelligence is moving to the edge, more industries are harnessing the power of data to create business value, to innovate, and to grow. We are using our architecture, accelerators, and software assets, combined with scale and partners, to develop a growing Internet of Things portfolio. Our Internet of Things portfolio is comprised of our IOTG and Mobileye businesses. IOTG develops high-performance compute for targeted verticals and embedded markets. Mobileye is the global leader in the development of computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ADAS and autonomous driving.

INTERNET OF THINGS GROUP



OVERVIEW
IOTG develops high-performance compute for targeted verticals and embedded markets. Our customers include retailers, manufacturers, ~~health care~~healthcare providers, energy companies, automakers, and governments. We facilitate our customers creating, storing, and processing data generated by connected devices to accelerate business transformations.



HIGHLIGHTS AND SEGMENT IMPERATIVES

●	IOTG achieved record revenue and operating income in ~~2018~~2019 on broad business strength and growing demand for edge computing and computer vision-based applications.			"Industries are undergoing data-driven digital transformations fueled by the Internet of Things. We work with our partners' ecosystems to build end-to-end solutions that provide solid business results today and lay the foundation for a more autonomous tomorrow." ~~—Tom Lantzsch,~~ ~~IOTG General Manager~~
●	Since ~~2014,~~2015, IOTG has had average revenue growth of 14% and operating income growth of ~~15%~~22% per year. ~~As we broaden~~	"Intel’s pioneering work in AI and proven data-centric strategy enabled us to predict the massive opportunity of edge computing—years ahead of the industry. Edge is not just a theoretical market opportunity. Together with our ~~product offerings to meet market demand for Internet of Things solutions, our TAM is expected to reach approximately $30 billion by 2022~~¹.ecosystem partners and developers, we’re delivering on this vision today and driving tangible financial results."			—Tom Lantzsch, IOTG General Manager
●	We see significant opportunity for growth driven by an architectural shift toward edge computing, which extends ~~applications, data, and~~ compute from centralized points to be closer to the source ~~inputs, enabling compute-hungry Internet of Things applications.~~				inputs.
●	~~In 2018, we launched hardware~~We continue to provide updated solutions ~~such as the Intel~~^® ~~Vision Accelerator Design Products and software solutions like the Intel~~^® ~~Distribution of OpenVINO™ toolkit~~ to accelerate market adoption of computer vision and AI applications. This includes advances in existing offerings such as the OpenVINO™ toolkit, development of the Edge AI Nanodegree* with Udacity to enrich and train the next generation of developers, and the release of Intel® AI DevCloud for the Edge, which allows customers to identify Edge AI solutions that deliver the best mix of performance, power, and price.
●			To deliver on the transformative promise of the Internet of Things, we are working with our ecosystem partners to continue to grow the portfolio of Intel^®IoT Market Ready Solutions (Intel^® IMRS)—scalable, end-to-end solutions that provide solid business results today and lay the foundation for the future. Currently, IOTG has over 170 Intel® IMRS supporting approximately 5,000 new end-to-end deployments in more than 100 countries.

~~5-YEAR TRENDS~~



■ ~~Revenue $B~~	— ~~Year over Year Growth~~	■ ~~Op Income $B~~	— ~~Year over Year Growth~~


¹	~~Source: Intel calculated TAM derived from industry analyst reports.~~



MD&A	~~Segment Trends and Results~~	2921

Table of Contents

5-YEAR TRENDS



■ Revenue $B	— Year over Year Growth	■ Op Income $B	— Year over Year Growth

MARKET AND BUSINESS OVERVIEW

Market trends and strategy

The ~~world is becoming smarter, more connected, and more data driven, and the~~ Internet of Things market sits at the center of ~~this~~a global digital transformation. Through a robust network of devices, software, ~~networks,~~ and sensors, the Internet of Things is transforming the way businesses create products, deliver services, and conduct operations—from schools and hospitals, to retailers and smart factories. Internet of Things-based solutions represent one of the fastest growing segments within the semiconductor ~~industry, with 10% CAGR forecast from 2018 to 2022~~¹.industry. However, the Internet of Things is a highly fragmented market with a diverse collection of competitors, products, and vertical segments. ~~As such, IOTG specifically focuses on market sectors such as retail, industrial, and smart infrastructure/cities that align well with Intel’s ability to provide high-performance computing solutions.~~




~~Retailers~~	Many retailers are ~~under tremendous pressure~~sitting on mountains of data that can be used to ~~compete~~proactively address evolving customer demands. IOTG provides solutions that enable retailers to extract the right insights from their data, in the ~~age~~right place, at the right time, allowing them to use intelligence to transform their businesses to achieve their full potential. The result is greater efficiency, reduced complexity, increased sales, and a more personalized customer experience.



	As a result of ~~accelerated digital disruption brought on~~consumer preference for more customization and higher-quality manufactured goods, a new kind of factory is emerging—one that is cloud connected and data driven. It is an “intelligent factory” marked by ~~connected consumers~~hyper-agility, autonomous production, and ~~online shopping.~~ the use of data as a transformative force for the business.




	We ~~are helping retailers~~help cities and infrastructure providers turn ~~their~~ data into ~~powerful new insights. The results are highly curated experiences, improved inventory~~actionable insights to enable smarter, safer, and ~~supply chain efficiencies, and precision marketing.~~	~~The industrial Internet of Things involves making operations smarter,~~ more connected, and, ultimately, autonomous. We enhance collaboration between humans, machines, and enterprise systems from the supply chain to the factory floor. Example use cases include predictive maintenance, machine vision, robotics, quality control, and defect detection.	efficient solutions. Infrastructure providers and cities are seeking the best ways to use Internet of Things technology to enhance the quality of services, improve public safety, reduce congestion, and achieve new levels of efficiency. ~~We help cities and service providers turn data into actionable insights to enable smarter, safer and more efficient solutions.~~






		By ~~2021,~~2022, we expect approximately ~~80%~~82% of data traffic will be ~~video²~~video¹. Processing high-quality video requires the ability to rapidly analyze vast streams of data near the source and to respond to that data in real time, moving only relevant insights to the cloud. ~~To process video data efficiently, our customers need~~Rather than a one-size-fits-all solution, Intel offers a powerful portfolio of scalable hardware and software solutions, including the ~~right solution for~~OpenVINO™ toolkit and the ~~job. We offer a broad range~~new Intel^® Vision Accelerator Design products, to move into an intelligent, data-powered future and to meet the various performance, power, and price requirements of hardware, software tools, and ecosystem programs to help scale vision technology across Internet of Things verticals and match specific needs with the right performance, cost, and power efficiency at every pointany business, in ~~an Internet of Things architecture. Use cases include machine vision, industrial automation, and intelligent traffic management and pedestrian safety.~~any industry.

Products and competitiveness

We have a long-standing position as a supplier of components and software for embedded products. This marketplace continues to expand significantly, with increasing types and numbers of smart and connected devices for retail, industrial, and consumer uses, including smart video. As this market segment evolves, we face numerous large and small incumbent processor competitors, as well as new entrants that use the ARM* architecture and other operating systems and software. In addition, the Internet of Things requires a broad range of connectivity solutions and we face competition from semiconductor companies providing traditional wireless solutions such as cellular, Wi-Fi, and Bluetooth^®, as well as several new entrants who are taking advantage of new focused communications protocols.

IOTG utilizes platform and adjacent products across Intel while making the investments needed to adapt products to the specific requirements for our vertical segments. We offer end-to-end solutions with our wide spectrum of products, including Intel^®Atom^®, Intel^® Core^®, and Intel^® Xeon^® processor-based computing, wireless connectivity, FPGAs, Movidius VPUs, and developer tools such as the OpenVINO™ software toolkit. IOTG product development focuses on addressing the key challenges businesses face when implementing Internet of Things solutions, including interoperability, connectivity, safety, security, industrial use conditions, and ~~long life~~long-life support.

~~IOTG enables a global ecosystem of industry partners, developers,~~¹Source: Cisco Visual Networking Index: Forecast and ~~innovators to create solutions based on our products that accelerate return on investment and time-to-value for end customers. These Intel~~^® Internet of Things Market Ready Solutions are vetted and tested in the market, scalable, repeatable, commercially available, and fully supported through our ecosystem partners. These solutions can help streamline operations, automate manual tasks, provide insights from data, and more.Trends, 2017-2022, updated February 27, 2019.


¹	~~Source:Intel calculated Internet of Things TAM CAGR derived from industry analyst reports.~~


²	~~Source: Cisco Visual Networking Index: Forecast and Trends, 2017-2022, updated November 26, 2018.~~



MD&A	~~Segment Trends and Results~~	3022

Table of Contents

MOBILEYE



OVERVIEW
Mobileye is the global leader in driving assistance and automation solutions. Our product portfolio employs a broad set of technologies, covering computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ADAS and autonomous driving. Mobileye’s ADAS products form the building blocks for higher levels of autonomy. Our customers and strategic partners include major global OEMs and Tier 1 automotive system integrators.

HIGHLIGHTS AND SEGMENT IMPERATIVES

●	We achieved record revenue and operating income in 2019 primarily due to the increased adoption of ADAS. Our EyeQ* SoC volume grew approximately 43% and we expect to see additional growth in the adoption of enhanced ADAS technologies.	“Mobileye is fueling Intel’s entry into the Mobility-as-a-Service business and is fully committed to building on its leadership and know-how in the ADAS market in order to bring truly safe and scalable autonomous mobility to the market.” —Prof. Amnon Shashua, President and Chief Executive Officer, Mobileye
●	We had more than 30 new design wins, 47 active production programs¹ across 25 OEMs, and 16 program launches, including an industry-first 100-degree front-facing camera.
●	Production vehicles equipped with our EyeQ*4 SoC and REM^TM technology are deployed across the globe and by the end of 2019 were collecting up to approximately 6 million kilometers of data each day. This data is automatically aggregated with high update frequency into "Roadbook™, a high-definition map, which is an essential component for Robotaxi (autonomous taxis), consumer AV, and the fast-growing L2+ segment. The insights gained from this data enhance existing driver-assistance propositions and provide customers with superior driving experiences, performance, and additional safety.

MARKET AND BUSINESS OVERVIEW

Market trends and strategy

The adoption of ADAS is expanding as consumers increasingly consider ADAS a differentiating factor in their automotive purchasing decisions. The continued growth of ADAS is dependent on various factors, including regulation, market demand, and consumers' recognition of its value. Mobileye's ADAS solutions also serve as a qualification space for our autonomous technology, using vast experience and proliferation to validate and constantly improve AV technology. AV technologies, in turn, make their way into premium ADAS solutions, broadening monetization opportunities and value proposition. The AV-ADAS interplay allows Mobileye to sustain its technology leadership.

Car manufacturers are looking to enhance current L2+ solutions by improving system fidelity, availability, and performance. High-definition maps with constant updates, global coverage, and various semantic features are a prerequisite for L2+ applications and the future deployment of Robotaxi and passenger car autonomy (Consumer AV). Canonical mapping methods rely on extensive manual labor and dedicated mapping vehicles. Mobileye's disruptive REM crowdsource mapping technology provides automatic map creation and updates. REM mapping capabilities are also being leveraged to extend the value of static and dynamic data to businesses in new market segments such as smart cities and infrastructure surveys.



We believe the future of autonomous driving will unfold in two phases: commercial Robotaxi and series-production passenger car Consumer AV. We expect Consumer AV to materialize only after the Robotaxi industry deploys and matures. The main inhibitors of a mass market product offering of Consumer AV are the cost of AV technology, ability to scale at a low cost, regulation structure, and public acceptance. Thus, we see the Robotaxi phase as a necessary corridor to Consumer AV. Mobileye is well positioned to play a significant role in the broader MaaS market with the commercialization of Robotaxi and the future Consumer AV market. Our full-stack self-driving system—geared with our camera-centric backbone and vast experience in productizing cutting-edge technology in the automotive industry—is the foundation for developing an economically competitive AV solution. Proliferation of data-collection vehicles alongside REM technology will allow for low-cost geographic expansion and coverage. Thus, Mobileye is entering the MaaS market segment as an end-to-end service provider at scale.

¹Intel's definition is included in "Key Terms" within the Financial Statements and Supplemental Details.



MD&A		23

Table of Contents

Products and competitiveness

At its core, Mobileye's offering for ADAS and AV is propelled by our computer vision and AI expertise and software assets, deployed on our EyeQ* SoC family. The tight co-design of hardware and software gives the EyeQ* SoC the ability to support complex and computationally intense tasks and sets it apart from competition because it is purpose-fit for high-compute, low-power, automotive-compliant mission profiles. Mobileye’s 5th generation EyeQ*5 SoC is designed to act as the central computer for fully autonomous driving vehicles. Mobileye has been able to achieve power, performance, and cost targets by employing proprietary computational cores that are optimized for a wide variety of computer vision, signal processing, and machine learning tasks, including deep neural networks. Starting with EyeQ*5, Mobileye is supporting an automotive-grade standard operating system and providing a complete software development kit to allow customers to differentiate their solutions by deploying their algorithms on EyeQ*5. The EyeQ*5 SoC will be in final sampling stages in 2020 and is expected to be in commercial vehicles starting in 2021. The EyeQ*5 SoC is already operational in Mobileye’s autonomous test vehicles.

EyeQ*5 serves as the computational foundation for Mobileye’s scalable camera-only surround sensing system. The system consists of multiple independent computer vision engines and deep networks for algorithmic redundancy. The result is a robust and comprehensive model of the environment that allows end-to-end autonomous driving. The surround computer vision system is the backbone of Mobileye’s autonomous vehicle architecture and the flagship offering for next-generation ADAS.

The next significant building block in Mobileye’s complete offering is REM mapping technology, which compiles crowdsourced mapping data from EyeQ*SoC-equipped vehicles. Our REM Roadbook™ offering can enhance current ADAS applications through a variety of advanced features, including predictive adaptive cruise control, lane-level localization in all weather and road conditions, hands-free driving application, and real-time alerts, such as for construction activity and road hazards.

The third building block in Mobileye’s full stack offering is our unique formal model for AV safety (RSS). At its core, RSS is a pragmatic method to design and then to efficiently validate the safety of an AV, serving as the governing safety layer for the decision-making system. RSS formalizes human decision making for safe driving under two main principles: First, it acknowledges the need to balance safety with useful driving by making plausible worst-case scenario assumptions for other road users; and second, it provides a technology-neutral model and a transparent framework for the regulatory endeavor of building an industry standard for safety.



MD&A		24

Table of Contents

FINANCIAL PERFORMANCE



	~~IOTG~~INTERNET OF THINGS REVENUE $B		~~IOTG OPERATING~~INTERNET OF THINGS OP INCOME $B



	■~~Platform~~ IOTG	■~~Adjacent~~Mobileye¹

REVENUE SUMMARY

2019 – 2018

IOTG net revenue increased $366 million, or 11%, driven by $283 million higher ASPs from stronger core mix and $92 million higher IOTG platform unit sales, partially offset by lower revenue from our divestiture of Wind River in Q2 2018, which negatively impacted the revenue comparison by approximately $153 million in the first half of 2019. After adjusting for Wind River, IOTG revenue grew $519 million, or 16%, year over year.

Mobileye net revenue was $879 million, up $181 million due to increasing adoption of ADAS.

2018 – 2017

~~Net~~IOTG net revenue increased $286 million, or 9%, driven by $632 million higher IOTG platform unit sales, offset by $212 million mix of platform products sold and $134 million lower adjacent revenue due to the divestiture of Wind River in ~~June~~Q2 2018. After adjusting for Wind River, IOTG revenue grew $447 million, or 16%, year over year. Revenue grew due to strength across the retail, industrial, video, and other market segments.

~~2017 – 2016~~

Net revenue increased $531 million, driven by $329 million higher IOTG platform unit sales and $176 million growth in IOTG adjacent products, including $74 million from milestone-based revenue. Revenue grew across the retail, industrial, and smart video market segments.

OPERATING INCOME SUMMARY

2019 – 2018

IOTG operating income increased $117 million primarily due to higher platform revenue from stronger core mix offset by higher period charges related to reserves taken on legacy products.

Mobileye operating income was $245 million, up $102 million driven by growth in revenue partially offset by higher spending.

2018 – 2017

~~Operating~~IOTG operating income increased $330 million due to higher revenue and lower spending as we reprioritized investments within the automotive business and Wind River.

¹Mobileye was acquired in Q3 2017; 2017 ~~– 2016~~figures do not represent full-year results.

~~Operating income increased $65 million due to higher revenue offset by higher investment in growth areas such as automotive, and by increased share of technology development and MG&A costs.~~



MD&A	~~Segment Trends and Results~~	3125



OVERVIEW
~~NSG's core offerings include Intel~~^® ~~Optane™ and Intel~~^® ~~3D NAND technologies, driving innovation~~NSG is a technology leader in ~~SSDs and~~ next-generation memory and storage ~~products. Our customers include enterprise~~products based on breakthrough Intel^® Optane™ technology and ~~cloud-based data centers, users of business~~Intel^® 3D NAND technology. NSG is disrupting the memory and ~~consumer desktops~~storage hierarchy with new tiers that balance capacity, performance, and ~~laptops,~~cost. We offer 64-layer TLC and ~~a variety of Internet of Things application providers. We are ramping 64-layer (64L) triple-level cell (TLC)~~QLC NAND high-capacity SSDs, and ~~quad-level cell (QLC) NAND technologies,~~unparalleled low latency and high performance with Intel ~~Optane technology~~^® Optane™ technology—both available in innovative new form factors and densities to address the memory and storage challenges our customers face in a rapidly evolving technological landscape. Our customers include enterprise and cloud-based data centers, and users of business and consumer desktops and laptops.



HIGHLIGHTS AND SEGMENT IMPERATIVES		“The world is generating data at an accelerating rate, and businesses are increasingly becoming overwhelmed with how to efficiently process it. Harvesting value from all this data will be critical in separating the winners from losers. It will require cutting-edge innovation in the memory-and-storage hierarchy, which is what we are driving at Intel.” —Rob Crooke, NSG General Manager

●	~~Achieved more than 20%~~We achieved record revenue in 2019 driven by storage and memory bit TAM¹growth, ~~in 2018 and drove improvements in operating margins by approximately $250 million~~despite significant NAND market pricing pressure. We are taking steps to ~~approximately break even for 2018.~~		~~“Our Optane™ technology products are critical to helping our customers analyze valuable data in ways that allow real time business impact and our Intel QLC 3D~~improve NAND ~~products enable them to store more data for cost effective analysis.”~~ ~~—Rob Crooke,~~ ~~NSG General Manager~~profitability.
●	~~Introduced~~We launched Intel^® Optane™ memory H10 with Solid State Storage, the ~~industry's~~ first ~~PCIe*-based QLC SSD~~to deliver responsiveness and ~~grew our~~capacity for the PC with the combination of Intel^® Optane™ memory and Intel^® QLC 3D NAND ~~product lines with a focus on new densities~~technology for thin-and-light notebooks and ~~innovative form factors in 2018, resulting in 64L QLC products making up more than half of our sales volume.~~ space-constrained platforms.
●	~~Announced~~We launched the ~~release~~Intel^® Optane™ SSD DC D4800X, the first dual-port SSD with Intel^® Optane technology with redundant data paths for data availability, and industry-leading combination of ~~Intel~~^® ~~Optane™ DC Persistent memory, available on next-generation Intel~~^® ~~Xeon~~^® ~~processors~~high throughput and low latency for ~~datacenters—which is redefining the memory/~~mission-critical enterprise storage ~~hierarchy and bringing persistent, large-scale, memory closer to the processor.~~ solutions.
●	~~During 2018,~~ Our product roadmap includes our next generation of Intel^® Optane™ DC persistent memory and ~~Micron announced they will independently develop future generations~~our 2nd generation Intel^® Optane™ SSD, which are being developed in the new center of ~~3D NAND and 3D XPoint~~Intel^® Optane technology ~~and~~advancement at Intel’s Fab 11x in ~~January 2019, Micron called our interest in IMFT. The IMFT agreement provides for supply for up to one year after the close of the transaction.~~	New Mexico.

5-YEAR TRENDS



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

~~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.

•

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. 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.

•

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.


•	Equity method investmentsare 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 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.



FINANCIAL STATEMENTS	Notes to Financial Statements	7276

Table of Contents

~~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.

~~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.

•

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.


•	Equity method investmentsare 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

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 ~~other~~ assets and other long-term ~~other~~ assets with a corresponding liability. For presentation on our ~~consolidated balance sheets,~~Consolidated Balance Sheets, we do not offset fair value amounts recognized for derivative instruments under master netting arrangements. Our derivative financial instruments are presented at fair value on a gross basis and are included in other current assets, other long-term assets, other accrued liabilities, or other long-term liabilities.

Cash flow hedges use foreign currency contracts, such as currency forwards and currency interest rate swaps, to hedge exposures for the following items:

variability in the U.S.-dollar equivalent of non-U.S.-dollar-denominated cash flows associated with our forecasted operating and capital purchases spending; and

coupon and principal payments for our non-U.S.-dollar-denominated indebtedness.

The after-tax gains or losses from the effective portion of a cash flow hedge is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the ~~consolidated statements~~Consolidated Statements of ~~income~~Income as the impact of the hedge transaction. For foreign currency contracts hedging our capital purchases, forward points are excluded from the hedge effectiveness ~~assessment. Ineffective portions of cash flow hedges, as well as amounts excluded from the hedge effectiveness~~ assessment, and are recognized in earnings in interest and other, net. If the cash flow hedge transactions become ~~probable not to occur,~~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~~Consolidated Statements of ~~cash flows~~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~~Consolidated Statements of ~~cash flows~~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-denominated debt instruments classified as trading assets, and non-U.S.-dollar-denominated loans receivables recognized at fair value. We also use interest rate contracts to hedge interest rate risk related to our U.S.-dollar-denominated fixed-rate debt instruments classified as trading assets.

The change in fair value of these derivatives is recorded through earnings in the line item on the ~~consolidated statements~~Consolidated Statements of ~~income~~Income to which the derivatives most closely relate, primarily in interest and other, net. Changes in the fair value of the underlying assets and liabilities associated with the hedged risk are generally offset by the changes in the fair value of the related derivatives.

LOANS RECEIVABLE

We elect the fair value option when the interest rate or foreign currency exchange rate risk is economically hedged at the inception of the loan with a related derivative instrument. When the fair value option is not elected, the loans are carried at amortized cost. We measure interest income for all loans receivable using the interest method, which is based on the effective yield of the loans rather than the stated coupon rate. We classify our loans within other current and long-term assets.



FINANCIAL STATEMENTS	Notes to Financial Statements	7377

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CREDIT RISK

Financial instruments that potentially subject us to concentrations of credit risk consist principally of investments in debt instruments, derivative financial instruments, loans receivable, reverse repurchase agreements, and trade receivables. We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty.

We generally place investments with high-credit-quality counterparties and, by policy, we limit the amount of credit exposure to any one counterparty based on our analysis of that counterparty’s relative credit standing. As required per our investment policy, substantially all of our investments in debt instruments and financing receivables are in investment-grade instruments. Credit-rating criteria for derivative instruments are similar to those for other investments. Due to master netting arrangements, the amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligations with that counterparty. As of December ~~29, 2018,~~28, 2019, our total credit exposure to any single counterparty, excluding money market funds invested in U.S. treasury and U.S. agency securities and reverse repurchase agreements collateralized by treasury and agency securities, did not exceed ~~$750~~$800 million. To further reduce credit risk, we obtain and secure available collateral from counterparties against obligations, including securities lending transactions, when we deem it appropriate.

A substantial majorityof our trade receivables are derived from sales to ~~original equipment manufacturers (OEMs)~~OEMs and ~~original design manufacturers (ODMs).~~ODMs. We also have accounts receivable derived from sales to industrial and communications equipment manufacturers in the computing and communications industries. We believe ~~that~~ the net accounts receivable balances from our three largest customers ~~(45%~~(39% as of December ~~29, 2018)~~28, 2019) do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience. For more information about the customers that represent our accounts receivable balance, see "Note 4: Operating Segments."

We have adopted credit policies and standards intended to accommodate industry growth and inherent risk. We believe ~~that~~ credit risks are moderated by the financial stability of our major customers. We assess credit risk through quantitative and qualitative analysis. From this analysis, we establish shipping and credit limits, and determine whether we will seek to use one or more credit support protection devices, such as obtaining a parent guarantee, standby letter of credit, or credit insurance.

BUSINESS COMBINATIONS

We allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions based on their estimated fair values at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments ~~that could materially affect the timing or amounts recognized~~ in ~~our financial statements. The most subjective areas include~~ determining the fair value of the following:

intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, market segment growth rates, 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;

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.

GOODWILL

We perform an annual impairment assessment of goodwill at the reporting unit level in the fourth quarter of each year, or more frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. The reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt.

Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit’s fair value.

Our quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair value. Significant estimates include market segment growth rates, our assumed market segment share, estimated costs, and discount rates based on a reporting unit's weighted average cost of capital.

We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available market data. In the current year, the fair value for all of our reporting units substantially exceeds their carrying value, and our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary.



FINANCIAL STATEMENTS	Notes to Financial Statements	7478

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IDENTIFIED INTANGIBLE ASSETS

We amortize acquisition-related intangible assets that are subject to amortization over their estimated useful life. Acquisition-related in-process R&D assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as of the date of acquisition; initially, these are classified as in-process R&D and are not subject to amortization. Once these R&D projects are completed, the asset balances are transferred from in-process R&D to acquisition-related developed technology and are subject to amortization from this point forward. The asset balances relating to projects that are abandoned after acquisition are impaired and expensed to R&D.

We perform a quarterly review of significant finite-lived identified intangible assets to determine whether facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines.

EMPLOYEE EQUITY INCENTIVE PLANS

We use the straight-line amortization method to recognize share-based compensation 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 ~~restricted stock units (RSUs),~~RSUs, we eliminate deferred tax assets for options and RSUs with multiple vesting dates for each vesting period on a first-in, first-out basis as if each vesting period were a separate award.

INCOME TAXES

We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

We assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. We believe that we will ultimately recover the deferred tax assets recorded on our ~~consolidated balance sheets.~~Consolidated Balance Sheets. Recovery of a portion of our deferred tax assets is affected by management’s plans with respect to holding or disposing of certain investments; therefore, such changes could also affect our future provision for taxes.

We recognize tax benefits from uncertain tax positions only if (based on the technical merits of the position) it is more likely than not that the tax positions will be sustained on examination by the tax authority. The tax benefits recognized in the financial statements from such positions are measured based on the largest amount that is more than 50% likely to be realized upon ultimate settlement. We recognize interest and penalties related to unrecognized tax benefits within the provision for taxes on the ~~consolidated statements~~Consolidated Statements of ~~income.~~

We have completed the accounting associated with the December 22, 2017 enactment of the U.S. Tax Cuts and Jobs Act (Tax Reform). The U.S. Securities and Exchange Commission (SEC) had provided accounting and reporting guidance that allowed us to report provisional amounts within a measurement period up to one year from the enactment date. Complexities inherent in adopting the changes included additional guidance, interpretations of the law, and further analysis of data and tax positions. During 2018, as part of completing our accounting, we recognized approximately $300 million reduction to our one-time net tax charge related to the transition tax and the remeasurement of deferred income taxes. For more information about Tax Reform impacts, see “Note 9: Income Taxes.”

Income.

We recognize the tax impact of including certain foreign earnings in U.S. 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. 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. earnings are based on estimates and judgments of projected cash flow needs, as well as the working capital and investment requirements of our non-U.S. and U.S. operations. Material changes in our estimates of cash, working capital, and investment needs in various jurisdictions could require repatriation of indefinitely reinvested non-U.S. earnings, which could be subject to applicable non-U.S. income and withholding taxes.

LOSS CONTINGENCIES

We are subject to loss contingencies, including various legal and regulatory proceedings, asserted and potential claims, liabilities related to repair or replacement of parts in connection with product defects, as well as product warranties and potential asset impairments that arise in the ordinary course of business. An estimated loss from such contingencies is recognized as a charge to income if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	75

~~Table of Contents~~



NOTE 3 :	RECENT ACCOUNTING STANDARDS

ACCOUNTING STANDARDS ADOPTED

~~Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~

~~Standard/Description:~~This amended standard was issued to provide additional guidance on the presentation of net periodic benefit cost in the income statement and on the components eligible for capitalization in assets. In accordance with the revised standard, we have separated the different components of net periodic benefit cost, presenting service cost components within operating income and other non-service components separately outside of operating income on the income statement. In addition, only service costs are now eligible for inventory capitalization.

~~Effective Date and Adoption Considerations:~~Effective in the first quarter of 2018. Changes to the presentation of benefit costs were required to be adopted retrospectively, while changes to the capitalization of service costs into inventories were required to be adopted prospectively. The standard permits, as a practical expedient, use of the amounts disclosed in the Retirement Benefit Plans footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation requirement.

~~Effect on Financial Statements or Other Significant Matters:~~Adoption of the amended standard resulted in the reclassification of non-service net periodic benefit costs from line items within operating income to interest and other, net, of approximately $114 million for the year ended December 30, 2017 ($259 million for the year ended December 31, 2016).

~~Revenue Recognition - Contracts with Customers~~

~~Standard/Description:~~This standard was issued to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by all companies. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

~~Effective Date and Adoption Considerations:~~Effective in the first quarter of 2018. This standard was adopted using a modified retrospective approach through a cumulative adjustment to retained earnings for the fiscal year beginning December 31, 2017.

~~Effect on Financial Statements or Other Significant Matters:~~Our adoption assessments identified a change in revenue recognition timing on our component sales made to distributors. Under the new standard, we now recognize revenue when we deliver to the distributor rather than deferring recognition until the distributor sells the components.

On the date of initial application, we removed the deferred income and related receivables on component sales made to distributors through a cumulative adjustment to retained earnings. The revenue deferral that was historically recognized in the following period is expected to be primarily offset by the acceleration of revenue recognition in the current period as control of the product transfers to our customer.

Our assessment also identified a change in expense recognition timing related to payments we make to our customers for distinct services they perform as part of cooperative advertising programs, which were previously recorded as operating expenses. We now recognize the expense for cooperative advertising in the period the marketing activities occur. Previously we recognized the expense in the period the customer was entitled to participate in the program, which coincided with the period of sale. On the date of initial adoption, we capitalized the expense of cooperative advertising not performed through a cumulative adjustment to retained earnings.

We have completed our adoption and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. Refer to the tables below, which summarize the impacts of the changes discussed above to our financial statements recorded as an adjustment to opening balances for the fiscal year beginning December 31, 2017, and also provide comparative reporting of the impacts of adopting the standard.

~~Financial Instruments - Recognition and Measurement~~

~~Standard/Description:~~Requires changes to the accounting for financial instruments that primarily affect equity securities, financial liabilities measured using the fair value option, and the presentation and disclosure requirements for such instruments.

~~Effective Date and Adoption Considerations:~~Effective in the first quarter of 2018. Changes to our marketable equity securities were required to be adopted using a modified retrospective approach through a cumulative effect adjustment to retained earnings for the fiscal year beginning December 31, 2017. Since management has elected to apply the measurement alternative to non-marketable equity securities, changes to these securities were adopted prospectively.



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	76

~~Table of Contents~~

~~Effect on Financial Statements or Other Significant Matters:~~Marketable equity securities previously classified as available-for-sale equity investments are now measured and recorded at fair value with changes in fair value recorded through the income statement.

All non-marketable equity securities formerly classified as cost method investments are measured and recorded using the measurement alternative. Equity securities measured and recorded using the measurement alternative are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. Adjustments resulting from impairments and qualifying observable price changes are recorded in the income statement.

Beginning in the first quarter of 2018, in accordance with the standard, recurring fair value disclosures are no longer provided for equity securities measured using the measurement alternative. In addition, the previous impairment model has been replaced with a simplified qualitative impairment model. No initial adoption adjustment was recorded for these instruments since the standard was required to be applied prospectively for securities measured using the measurement alternative.

We have completed our adoption and implemented policies, processes, and controls to support the standard's measurement and disclosure requirements. Refer to the table below, which summarizes impacts, net of tax, of the changes discussed above to our financial statements. This reflects an adjustment to opening balances for the fiscal year beginning December 31, 2017.

~~Opening Balance Adjustments~~

~~The following table summarizes the effects of adopting~~ ~~Revenue Recognition - Contracts with Customers~~ ~~and~~ ~~Financial Instruments - Recognition and Measurement~~ ~~on our financial statements for the fiscal year beginning December 31, 2017 as an adjustment to the opening balance:~~

Adjustments from

(In Millions)
Balance as of Dec 30, 2017 Revenue Standard Financial Instruments Update
Other¹
Opening Balance as of Dec 31, 2017
Assets:
Accounts receivable, net $ 5,607
$ (530 ) $ —
$ —
$ 5,077
Inventories $ 6,983
$ 47
$ —
$ —
$ 7,030
Other current assets $ 2,908
$ 64
$ —
$ (8 ) $ 2,964
Equity investments $ —
$ —
$ 8,579
$ —
$ 8,579
Marketable equity securities $ 4,192
$ —
$ (4,192 ) $ —
$ —
Other long-term assets $ 7,602
$ —
$ (4,387 ) $ (43 ) $ 3,172

Liabilities:
Deferred income $ 1,656
$ (1,356 ) $ —
$ —
$ 300
Other accrued liabilities $ 7,535
$ 81
$ —
$ —
$ 7,616
Long-term deferred tax liabilities $ 3,046
$ 191
$ —
$ (20 ) $ 3,217

Stockholders' equity:
Accumulated other comprehensive income (loss) $ 862
$ —
$ (1,745 ) $ (45 ) $ (928 )
Retained earnings $ 42,083
$ 665
$ 1,745
$ 14
$ 44,507


¹	Includes adjustments from the adoption of "Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory" and "Income Statement—Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	77

~~Table of Contents~~

~~The following table summarizes the impacts of adopting the new revenue standard on our consolidated statements of income and balance sheets:~~

For the fiscal year ended December 29, 2018
(In Millions) As reported Adjustments Without new revenue standard

Net revenue $ 70,848
$ (616 ) $ 70,232
Cost of sales 27,111
(206 ) 26,905
Gross margin 43,737
(410 ) 43,327
Marketing, general and administrative 6,750
(70 ) 6,680
Operating income 23,316
(340 ) 22,976
Income before taxes 23,317
(340 ) 22,977
Provision for taxes 2,264
(64 ) 2,200
Net income $ 21,053
$ (276 ) $ 20,777

Assets:
Accounts receivable $ 6,722
$ 216
$ 6,938
Inventories $ 7,253
$ 62
$ 7,315
Other current assets $ 3,162
$ 4
$ 3,166

Liabilities:
Deferred income $ —
$ 1,846
$ 1,846
Other accrued liabilities $ 7,919
$ (514 ) $ 7,405
Deferred income taxes $ 1,665
$ (109 ) $ 1,556

Equity:
Retained earnings $ 50,172
$ (941 ) $ 49,231

~~ACCOUNTING STANDARDS NOT YET ADOPTED~~

Leases

Standard/Description:This new lease accounting standard requires that we recognize ~~operating~~ 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 ~~requires a~~was adopted applying the modified retrospective adoption. We can choose to apply the provisions at the beginning of the earliest comparative period presented in the financial statements or at the beginning of the period of adoption. We have elected to apply the guidanceapproach at the beginning of the period of adoption. Our leased assets and corresponding liabilities ~~will~~ exclude non-lease components.

~~Effect on Financial Statements or Other Significant Matters:We expect to record right-of-use leased assets and corresponding liabilities of approximately $625 million at the beginning of first quarter 2019.~~

~~Cloud Computing Implementation Costs~~

~~Standard/Description:~~The standard requires implementation costs incurred in cloud computing (i.e., hosting) arrangements that are service contracts to be assessed under existing guidance to determine which costs to capitalize as assets or expense as incurred.

~~Effective Date and Adoption Considerations:Effective in the first quarter of 2020. The standard requires adoption either retrospectively or prospectively.~~

~~Effect on Financial Statements or Other Significant Matters:We have not yet determined the impact of this standard on our financial statements.~~



FINANCIAL STATEMENTS	Notes to Financial Statements	7879

Table of Contents

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



FINANCIAL STATEMENTS	Notes to Financial Statements	80

Table of Contents



NOTE 4 :	OPERATING SEGMENTS

We manage our business through the following operating segments:

DCG

IOTG

Mobileye

NSG

PSG

CCG

• ~~Client Computing Group (CCG)~~

• ~~Data Center Group (DCG)~~

• ~~Internet of Things Group (IOTG)~~

• ~~Non-Volatile Memory Solutions Group (NSG)~~

• ~~Programmable Solutions Group (PSG)~~

• All other

We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone ~~System-on-Chip (SoC),~~SoC, or a multichip package. A platform product may be enhanced by additional hardware, software, and services offered by Intel. Platform products are used in various form factors across our ~~CCG,~~ DCG, IOTG, and ~~IOTG~~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.

~~CCG~~DCG and ~~DCG~~CCG 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.

We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.

The "all other" category includes revenue and expenses such as:

~~results of operations from non-reportable segments not otherwise presented, including Mobileye results;~~

~~historical results of operations from divested businesses, including Intel Security Group (ISecG) results;~~

~~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.~~


•	results of operations from non-reportable segments not otherwise presented;


•	historical results of operations from divested businesses;


•	results of operations of start-up businesses that support our initiatives, including our foundry business;


•	amounts included within restructuring and other charges;


•	a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and


•	acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.

The ~~Chief Operating Decision Maker (CODM), which~~CODM, who is our ~~Chief Executive Officer (CEO),~~CEO, allocates resources to and assesses the performance of each operating segment using information about ~~its~~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. AsBecause our products are then sold across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of each operating segment’s operating income (loss) results. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. Except for these differences, the accounting policies for segment reporting are the same as for Intel as a whole.



FINANCIAL STATEMENTS	Notes to Financial Statements	7981

Table of Contents

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 29,
2018 Dec 30,
2017 Dec 31,
2016
Net revenue:
Client Computing Group
Platform
$ 33,234

$ 31,226

$ 30,751
Adjacent
3,770

2,777

2,157
37,004
34,003
32,908
Data Center Group
Platform 21,155
17,439
15,895
Adjacent 1,836
1,625
1,341
22,991
19,064
17,236
Internet of Things Group
Platform 3,065
2,645
2,290
Adjacent 390
524
348
3,455
3,169
2,638
Non-Volatile Memory Solutions Group 4,307
3,520
2,576
Programmable Solutions Group 2,123
1,902
1,669
All other 968
1,103
2,360
Total net revenue $ 70,848
$ 62,761
$ 59,387

Operating income (loss):
Client Computing Group $ 14,222
$ 12,919
$ 10,646
Data Center Group 11,476
8,395
7,520
Internet of Things Group 980
650
585
Non-Volatile Memory Solutions Group (5 ) (260 ) (544 )
Programmable Solutions Group 466
458
(104 )
All other (3,823 ) (4,112 ) (4,970 )
Total operating income $ 23,316
$ 18,050
$ 13,133

Disaggregated net revenue for each period was as follows:


Years Ended (In Millions)	Dec 29, 2018		Dec 30, 2017		Dec 31, 2016		Dec 28, 2019		Dec 29, 2018		Dec 30, 2017
Platform revenue
Desktop platform	$	12,220	$	11,647	$	12,371
Notebook platform	20,930		19,414		18,203
DCG platform	21,155		17,439		15,895		$	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	3,149		2,810		2,467		80		84		165
	57,454		51,310		48,936		57,562		57,454		51,310

Adjacent revenue²	13,394		10,917		8,290		14,403		13,394		10,917
ISecG divested business	—		534		2,161		—		—		534
Total revenue	$	70,848	$	62,761	$	59,387	$	71,965	$	70,848	$	62,761


¹	Includes our tablet and service provider ~~and IOTG platform~~ revenue.


²	Includes all of our non-platform products for ~~CCG,~~ DCG, IOTG, and ~~IOTG,~~CCG, such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, ~~PSG,~~ and ~~Mobileye~~PSG products.



FINANCIAL STATEMENTS	Notes to Financial Statements	82

Table of Contents

In ~~2018,~~2019, our three largest customers accounted for ~~39%~~41% of our net revenue ~~(40%~~(39% in ~~2017, 38%~~2018, 40% in ~~2016)~~2017), with Dell Inc. accounting for ~~16%~~17% (16% in ~~2017, 15%~~2018, 16% in ~~2016)~~2017), Lenovo Group Limited accounting for ~~12% (13%~~13% (12% in ~~2017,~~2018, 13% in ~~2016)~~2017), and HP Inc. accounting for 11% (11% in ~~2017, 10%~~2018, 11% in ~~2016)~~2017). These three customers accounted for ~~45%~~39% of our accounts receivable as of December ~~29, 2018 (36%~~28, 2019 (45% as of December ~~30, 2017)~~29, 2018). Substantially all of the revenue from these customers was from the sale of platforms and other components by the CCG and DCG operating segments.



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	80

~~Table of Contents~~

Net revenue by country as presented below is based on the billing location of the customer. Revenue from unaffiliated customers for each period was as follows:



Years Ended (In Millions)	Dec 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 29,
2018 Dec 30,
2017 Dec 31,
2016
China (including Hong Kong) $ 18,824
$ 14,796
$ 13,977
Singapore 15,409
14,285
12,780
United States 14,303
12,543
12,957
Taiwan 10,646
10,518
9,953
Other countries 11,666
10,619
9,720
Total net revenue $ 70,848
$ 62,761
$ 59,387



NOTE 5 :	EARNINGS PER SHARE

We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.



Years Ended (In Millions, Except Per Share Amounts)	Dec 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

Years Ended
(In Millions, Except Per Share Amounts) Dec 29,
2018 Dec 30,
2017 Dec 31,
2016
Net income available to common stockholders $ 21,053
$ 9,601
$ 10,316
Weighted average shares of common stock outstanding—basic 4,611
4,701
4,730
Dilutive effect of employee incentive plans 50
47
53
Dilutive effect of convertible debt 40
87
92
Weighted average shares of common stock outstanding—diluted 4,701
4,835
4,875
Earnings per share - Basic $ 4.57
$ 2.04
$ 2.18
Earnings per share - Diluted $ 4.48
$ 1.99
$ 2.12

Potentially dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the ~~stock purchase plan.~~2006 ESPP. In December 2017, we paid cash to satisfy the conversion 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 ~~convertible debentures due 2039 (2009 debentures) require~~2009 Debentures required settlement of the principal amount of the debt in cash upon conversion. Since the conversion premium iswas paid in cash or stock at our option, we determined the potentially dilutive shares of common stock by applying the treasury stock method. ~~During 2018, we paid cash to satisfy the conversion of a portion of~~We included our 2009 ~~debentures. The potentially dilutive shares associated with~~Debentures in the ~~converted portion were excluded from our~~calculation of diluted earnings per share ~~computation~~of common stock in all periods presented because the ~~quarter when conversions were tendered.~~average market price was above the conversion price.

~~In all years presented, potentially dilutive securities~~Securities that would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per ~~share. In~~share in all years presented, we included our 2009 debentures in the calculation of diluted earnings per share of common stock because the average market price was above the conversion price. We could potentially exclude the 2009 debentures in the future if the average market price is below the conversion price.periods presented.



FINANCIAL STATEMENTS	Notes to Financial Statements	8183

Table of Contents



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

(In Millions) Dec 29,
2018 Opening Balance as of Dec 31, 2017
Prepaid supply agreements
$ 2,587
$ 105
Other 122
195
Total contract liabilities $ 2,709
$ 300

Contract liabilities are primarily related to ~~partial~~ prepayments received from customers on long-term prepaid supply agreements toward future NSG product delivery. The short-term portion of contract liabilities is reported on the Consolidated Balance Sheets within other accrued liabilities.

The following table shows the changes in contract liability balances relating to long-term prepaid supply agreements during 2019:



(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. ~~The short-term portion of prepayments from supply agreements is reported on the consolidated balance sheets within other accrued liabilities.~~

~~The following table shows the changes in~~We expect our remaining contract liability ~~balances relating to prepaid supply agreements during 2018:~~

(In Millions)
Prepaid supply agreements balance as of December 31, 2017 $ 105
Additions and adjustments
2,753
Prepaids utilized (271 )
Prepaid supply agreements balance as of December 29, 2018 $ 2,587

~~Additions and adjustments in 2018 include a$1.0~~balance of $1.8 billion ~~reclassification from customer deposits previously included in other long-term liabilities. The long-term supply agreements represent $4.6 billion in future anticipated revenues~~ to be recognized ~~ratably~~into revenue over the next ~~five~~4 years. The timing and amount of future anticipated revenue may vary from our expectations due to changes in supply, demand, and market pricing.



NOTE 7 :	OTHER FINANCIAL STATEMENT DETAILS

INVENTORIES



(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

(In Millions) Dec 29,
2018 Dec 30,
2017
Raw materials $ 813
$ 738
Work in process 4,511
4,213
Finished goods 1,929
2,032
Total inventories $ 7,253
$ 6,983



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	82

~~Table of Contents~~

PROPERTY, PLANT AND EQUIPMENT



(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

(In Millions) Dec 29,
2018 Dec 30,
2017
Land and buildings $ 30,954
$ 27,391
Machinery and equipment 66,721
57,192
Construction in progress 16,643
15,812
Total property, plant and equipment, gross 114,318
100,395
Less: accumulated depreciation
65,342
59,286
Total property, plant and equipment, net $ 48,976
$ 41,109

Substantially all of our depreciable property, plant and equipment assets ~~were~~are depreciated over the following estimated useful lives: machinery and equipment, 2 to 5 years, and buildings, 10 to 30 years.



FINANCIAL STATEMENTS	Notes to Financial Statements	84

Table of Contents

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 29,
2018 Dec 30,
2017 Dec 31,
2016
United States $ 27,512
$ 24,459
$ 23,598
Israel 8,861
6,501
3,923
China 6,417
4,275
2,306
Ireland 3,947
3,938
4,865
Other countries 2,239
1,936
1,479
Total property, plant and equipment, net $ 48,976
$ 41,109
$ 36,171

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 LIABILITIES

Other accrued liabilities include deferred compensation of ~~$1.7~~$2.1 billion as of December 28, 2019 ($1.7 billion as of December 29, ~~2018 ($1.7 billion as of December 30, 2017)~~2018).

ADVERTISING

Advertising costs, including direct marketing, recorded within ~~marketing, general and administrative (MG&A)~~MG&A expenses were ~~$1.2~~$832 million in 2019 ($1.2 billion in 2018 ~~($1.4~~and $1.4 billion in ~~2017 and $1.8 billion in 2016)~~2017).

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 29,
2018 Dec 30,
2017 Dec 31,
2016
Interest income $ 438
$ 441
$ 222
Interest expense (468 ) (646 ) (733 )
Other, net 156
(144 ) (192 )
Total interest and other, net $ 126

$ (349 )
$ (703 )

Interest expense in the preceding table is net of$~~496~~472 million of interest capitalized in ~~2018~~2019 ($~~313~~496 million in ~~2017~~2018 and ~~$135~~$313 million in ~~2016)~~2017).



FINANCIAL STATEMENTS	Notes to Financial Statements	8385

Table of Contents



NOTE 8 :	RESTRUCTURING 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

Years Ended
(In Millions) Dec 29,
2018 Dec 30,
2017 Dec 31,
2016
2016 Restructuring Program $ (72 ) $ 135
$ 1,681
ISecG separation costs and other charges —
249
63
Total restructuring and other charges $ (72 ) $ 384
$ 1,744

~~2016~~2019 RESTRUCTURING PROGRAM

InA restructuring program was approved in the second quarter of 2016, management approved and commenced the 2016 Restructuring Program to accelerate our transformation from a PC company to one that powers the cloud and billions of smart, connected computing devices. Under this program, we closed certain facilities and reduced headcount globally2019 to align our ~~operations~~workforce with ~~evolving business needs by investing~~the planned exit of the smartphone modem business. We expect these actions to be substantially complete in ~~our growth businesses and improving efficiencies. This program was completed in 2017.~~the second quarter of 2020.

Restructuring and other charges (benefits) by type for the ~~2016~~2019 Restructuring Program were as follows:


Years Ended (In Millions)	Dec 29, 2018			Dec 30, 2017		Dec 31, 2016		Dec 28, 2019
Employee severance and benefit arrangements	$	(72	)	$	70	$	1,652	$	280
Pension settlement charges	—			25		—
Asset impairment and other charges	—			40		29		113
Total restructuring and other charges	$	(72	)	$	135	$	1,681	$	393


Customers look to Intel for our end-to-end capability to deliver solutions that enable customers to move faster, store more, and process everything. We continue to make investments in optimizing our Intel^® Xeon^® processors in response to our customers’ need for high-performance computing. We continue to develop innovative memory and storage solutions, including Intel^® QLC 3D NAND Technology and Intel^® Optane^™memory, to provide data center products that are optimized to deliver world-class performance and drive lower total cost of ownership for cloud workloads. Our advancements in FPGAs enable efficient management of the changing demands of next-generation data centers and accelerate the performance of emerging applications.
RELENTLESS FOCUS ON OPERATIONAL EXCELLENCE AND EFFICIENCY
Underlying our transformation to a data-centric company is a relentless focus on operational excellence and efficiency. This focus includes the elimination of lower growth investments and activities, and the simplification and automation of routine processes and activities. These efforts also extend to our product design processes, where we are striving to reduce the complexity of our designs to improve our efficiency and enhance quality.
These improvements enable us to achieve scale in our core operations, providing a stable and cost-effective platform to support additional investments in the design, development, and delivery of new products. Operational excellence helps us fund the expansion of our TAM through big-bet investments.



CONTINUE TO HIRE, DEVELOP, AND RETAIN THE BEST, MOST DIVERSE AND INCLUSIVE TALENT
At the core of our organization are highly skilled, diverse, and talented people capable of accelerating as one team in everything we do. We are proud of our past and inspired by how our employees are rising to the challenge to evolve our culture. Inclusion is the foundation of this evolution and runs through each of our culture attributes. These attributes reinforce:
●	Customer Obsessed: Our customer’s success is our success. We listen, learn, and anticipate our customers’ needs to deliver on their ambitions.
●	One Intel: We are stronger together and commit to team over individual success.
●	Fearless: We are bold and innovative. We take risks, fail fast, and learn from mistakes.
●	Truth and Transparency: We are committed to being open and honest while bringing clarity to complex challenges.
●	Inclusion: We strive to build a culture of belonging and welcome differences, knowing it makes us better.
Our evolution is a multi-year journey, and one that requires new and different thinking, actions, systems, and processes to ensure that our employees are equipped to innovate for a world where all data needs to be processed, moved, stored, and analyzed.



~~DATA-CENTRIC BUSINESSES~~¹
	~~KEY PRODUCTS AND MARKETS~~		~~KEY PRODUCTS AND MARKETS~~
	~~Includes workload-optimized platforms and related products designed for cloud, enterprise, and communication infrastructure market segments.~~		~~Includes Intel~~^® ~~Optane~~^™ ~~technology and 3D NAND flash memory, primarily used in solid-state drives (SSDs).~~


		~~OF INTEL'S TOTAL REVENUE~~		~~OF INTEL'S TOTAL REVENUE~~

	~~KEY PRODUCTS AND MARKETS~~		~~KEY PRODUCTS AND MARKETS~~
	~~Includes high-performance compute solutions for targeted verticals and embedded applications in market segments such as retail, manufacturing, health care, energy, automotive, and government.~~		Includes programmable semiconductors, primarily field-programmable gate arrays (FPGAs), and related products for a broad range of markets, such as communications, data center, industrial, and military.


		~~OF INTEL'S TOTAL REVENUE~~		~~OF INTEL'S TOTAL REVENUE~~



~~PC-CENTRIC~~
	~~KEY PRODUCTS AND MARKETS~~		~~HIGHLIGHTS~~
	~~Includes platforms designed for end-user form factors, focusing on higher growth segments of 2-in-1, thin-and-light, commercial and gaming, and growing adjacencies such as WiFi and modem.~~		~~CCG had record revenue and operating income with three years of growth in a row by executing to our strategy. We announced additions to our 8th generation Intel~~^® ~~Core~~^™ ~~mobile processors, the first Intel~~^® ~~Core~~^™ ~~i9 processor for laptops, and the first 9th generation Intel~~^® ~~Core~~^™ ~~processor, i9-9900K, targeting the growing gaming market segment.~~
			~~OPPORTUNITIES~~
		~~OF INTEL'S TOTAL REVENUE~~	~~We are targeting an expanded $60 billion revenue TAM~~², which is $25 billion higher than our traditional CPU TAM. This expanded opportunity includes markets such as memory, graphics, and connectivity, and is in addition to a $40 billion modem market where we are gaining share.
			~~CHALLENGES~~
			We are operating in an increasingly competitive environment and are focused on executing an annual cadence of leadership products. Strong demand across our product lines has resulted in tight supply, particularly in the entry-level PC market. We are making additional investments in our 14nm factory network and working with customers to align demand with available supply.



~~DRIVERS~~CAPITAL	STRATEGY	VALUE

FINANCIAL
	~~Cash~~Leverage cash flow ~~and capital allocation strategy~~	~~Leverage financial capital~~ to invest in ~~the business, acquire~~ourselves and ~~integrate~~grow our capabilities, supplement and strengthen our capabilities through acquisitions and strategic investments, and provide returns to ~~stockholders in the forms of dividends and share repurchases.~~ stockholders.	We strategically invest financial capital to create long-term value ~~for~~and provide returns to our ~~stockholders. Over~~stockholders in the ~~last five years, we:~~ ~~- Generated $113 billion cash from operating activities~~ ~~- Generated $59 billion in free cash flow~~¹ ~~- Returned $55 billion to stockholders.~~ form of dividends and buybacks.

INTELLECTUAL
	~~Research and development (R&D) and IP rights~~	Invest significantly in R&D and IP to ensure our process and product technologies ~~compete successfully as we pursue~~are competitive in our ~~strategy to make~~strategic pursuit of making the world’s best semiconductors and ~~realize new~~realizing data-centric opportunities.	We develop IP for our platforms to enable next-generation products, create synergies across our businesses, provide a higher return as we expand into new markets, and establish and support our brands.

MANUFACTURING
	~~Capital assets and strategic supply chain investments~~	Invest timely and at a level sufficient to meet customer demand for current technologies and prepare for future technologies.	Our ~~world-wide~~ manufacturing scope and scale ~~enable~~enables innovations to provide our customers and consumers with a broad range of leading-edge ~~products in high volume.~~products.

HUMAN
	~~Employees and culture~~	Develop the talent needed to ~~keep the company~~remain at the forefront of innovation and create a diverse, inclusive, and safe workplace.	We attract and retain talented ~~and engaged~~ employees who ~~can deliver their workplace best every day~~enable the development of solutions and ~~who create~~enhance the intellectual and manufacturing capital ~~we rely on~~critical to ~~develop and advance~~helping our ~~technologies and manufacturing.~~customers win the technology inflections of the future.

SOCIAL AND RELATIONSHIP
	~~Supply chain responsibility and positive social impact~~	Build trusted relationships for both Intel and our stakeholders, including employees, suppliers, customers, local communities, ~~governments, suppliers, customers,~~ and ~~employees.~~ governments.	We collaborate with stakeholders on programs to empower underserved communities through education and technology, and on initiatives to advance accountability and capabilities across our global supply chain, including ~~advancing~~accountability for the respect ~~for~~of human rights.

NATURAL
	~~Resource efficiency~~	Continually strive to reduce our environmental footprint through efficient and responsible use of natural resources and materials used to create our products.	Our proactive efforts help us mitigate climate and water ~~risk,~~impacts, achieve efficiencies and lower costs, and position us to respond to the ~~needs and~~ expectations of our stakeholders.




$70.8B	$23.3B	$24.5B	$4.48	$4.58
$70.8B	$23.3B	$24.5B	$4.48	$4.58
GAAP	GAAP	non-GAAP²	GAAP	non-GAAP²
Revenue up $8.1B or 13% from 2017; data-centric up 18% and PC-centric up 9%	Operating income up $5.3B or 29% from 2017	Operating income up $4.9B or 25% from 2017	Diluted EPS up $2.49 or 126% from 2017	Diluted EPS up $1.11 or 32% from 2017

Strong growth with record revenue across the business.	Top-line growth and continued operating margin leverage while investing in key opportunities such as artificial intelligence (AI) and autonomous driving.		Demand for high-performance products, adjacency growth, disciplined spending focus, and lower tax rate from Tax Reform³.



BE THE LEADING END-TO-END PLATFORM PROVIDER FOR THE NEW DATA WORLD


¹	~~Data-centric businesses include DCG, IOTG, NSG, PSG, and all other businesses, including Mobileye.~~



~~FUNDAMENTALS OF OUR BUSINESS~~	~~How We Organize Our Business~~	8



~~PRODUCT LEADERSHIP CREATES ESSENTIAL VALUE FOR OUR CUSTOMERS~~



We deploy various forms of capital to execute our ~~transformation~~ strategy in a way that seeks to reflect our corporate values, ~~delight~~help our customers succeed, and create value for our ~~stockholders.~~ Our commitment to corporate responsibility creates value for Intel and our stockholders by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities. We set ambitious goals for our company and make strategic investments to advance progress in the areas of environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact that benefit the environment and society. We empower and invest in attracting and retaining talented employees who enable the development of solutions and enhance our intellectual and manufactured capital. Our effective utilization of natural resources and focus on corporate responsibility result in trusted relationships that support the growth of our business. Through these activities, we strive to develop the world's best semiconductors, deliver great customer experiences, efficiently manage our supply chain, improve the communities in which we operate, and, ultimately, generate financial capital that is reinvested in our business and returned to stockholders.		stakeholders.


¹	~~See "Non-GAAP Financial Measures" within Other Key Information.~~



INVEST IN THE BUSINESS	ACQUIRE AND INTEGRATE	RETURN CASH TO STOCKHOLDERS
Our first priority is to invest in R&D and capital spending to strengthen our competitive position. We shifted our R&D focus as we transformed to a data-centric company, while efficiently maintaining our investment at approximately 20% of revenue. Our capital investment in logic (silicon wafer manufacturing of our platform products) and memory both increased in 2018 as we looked to improve supply of platform products and continued to ramp production capacity in our memory fab (Fab 68). We obtained customer prepayments of over $1.6 billion in 2018 and $1.1 billion in 2017, which helped to offset our investment in memory.	Our second financial capital allocation priority is to invest in companies around the world that will complement our strategic objectives and stimulate growth of data-centric opportunities. We look for acquisitions that further leverage and strengthen our capital and R&D investments. In 2018, we completed various small acquisitions, while leveraging Altera and Movidius to partner with customers and expand the markets we serve. Mobileye achieved record revenue, various design wins, and announced the ability to retrofit existing vehicles to deliver full autonomy. Intel Capital investments also support our strategic objectives.	Our third financial capital allocation priority is to return cash to stockholders. We achieve this through our dividend and share repurchase programs. During 2018, we paid $5.5 billion in dividends and increased our quarterly cash dividends by 10% from 2017. We also repurchased $10.7 billion in shares, up from 2017, and have reduced the level of diluted shares outstanding over time.
		Dividends Per Share			Diluted Shares Outstanding (In Millions)

		2018	$1.20	7% CAGR	4,701
		2017	$1.0775		4,835
		2016	$1.04		4,875



R&D AND CAPITAL INVESTMENTS $B	ACQUISITIONS	CASH TO STOCKHOLDERS $B



■ R&D	■Logic	■ Memory	— # of Acquisitions	■ Total Spent $B	■ Buyback	■Dividend


¹	See "Non-GAAP Financial Measures" within ~~Other Key Information.~~MD&A.



~~PRODUCT TECHNOLOGY~~

~~We are focusing~~Every year we make significant investments in R&D and we have intensified our ~~R&D activities~~focus on six ~~areas of~~ engineering pillars to advance our product capabilities. Our ~~goal~~objective is to improve user experiences and value ~~at the pace of Moore's Law~~ through advances in performance, power, cost, connectivity, security, ~~features,~~ form factor, and other features with each new generation of products. We are also focused on reducing our design complexity to improve our efficiency, including a significant reduction of design rules for future process nodes.
~~Process technology.While development~~Process. Development of next-generation manufacturing processes remains a critical and fundamental ~~area of research,~~pillar. We announced that we are planning multiple waves of 10nm process, progressively increasing transistor performance. We also ~~pursuing innovations~~announced advances in our next-generation 2.5D (EMIB) and 3D (Foveros) packaging technology which will enable us to ~~enable new approaches to chip design. In 2018, we announced a new 3D packaging technology called "Foveros" that allows for stacking of logic~~mix and match chips enabling products where input/output (I/O), static random-access memory (SRAM), and power delivery circuits can be fabricated in a base die and high-performance logic "chiplets" can be stacked on top. Together with our Embedded Multi-die Interconnect Bridge (EMIB) technology, advanced packaging allows for new hybrid chip designs that can "mix and match" different technology IP blocks, which may be manufacturedmade on different ~~process nodes,~~processes into a single ~~system-in-package,~~SiP, enabling new design flexibility and new device form factors. The Intel 10nm product era is underway, as we began shipping our new 10th generation Intel^®Core^TMprocessors, previously referred to as Ice Lake.
		~~“Foveros” 3D packaging technology~~Six Pillars of Product Leadership



	We improved our 10nm factory production, yield, and volume during 2019, and launched 10th-generation Intel^® Core^TM processors, our first 10nm volume product, and Intel^® Agilex^TM, our first 10nm FPGA. We expect to deliver initial production shipments of our first 10nm-based Intel^® Xeon^® Scalable product, Ice Lake, in the latter part of 2020.		"Our technology and innovation pipeline is as full and as strong as it’s ever been. By embracing our ecosystems and delivering new capability on a predictable cadence, we will continue to drive Moore’s Law forward and create compelling products for our customers.” —Mike Mayberry, Senior Vice President, Chief Technology Officer and General Manager of Technology Development



We have nine manufacturing sites—six are wafer fabrication and three are assembly/test facilities. The map marks our manufacturing ~~facilities~~sites and ~~their primary functions, as well as~~ the countries where we have a significant R&D or sales and marketing presence. ~~Approximately half~~The majority of our logic wafer manufacturing is conducted ~~within~~in the U.S. We incur factory start-up costs as we ramp ~~our~~ facilities for new process technologies. We ~~continued to ramp~~ramped the 10nm process node in ~~our~~ Oregon and Israel ~~locations~~in 2019, and ~~to expand~~began production in Arizona in our 2020 fiscal year. We also expanded our memory ~~fab, Fab 68. Memory investments represented approximately 20% of total capital spending for 2018.~~facilities in Dalian, China.



~~Given the highly technical nature of~~Evolving our ~~business, our success depends~~culture is critical to delivering on our ~~ability~~growth strategy and for continuing to attract and retain ~~talented~~top talent needed to support our transformation to a data-centric company. We have an amazing legacy of innovation and ~~skilled employees~~a powerful culture, yet our ambitions have grown. Together, we are evolving our culture to ~~create the technology of the future and delight our customers.~~build an even brighter future. Our global workforce of ~~107,400~~110,800 is highly educated, with approximately ~~85%~~90% of our people working in technical roles. We invest in creating a diverse, inclusive, and safe work environment where our employees can deliver their workplace best every day. ~~This environment fosters a rich and powerful culture that allows us to make a profound impact on the world.~~		~~"In 2018, we met our U.S. diversity and inclusion goal~~—~~two years ahead of schedule. We are proud of our progress but not satisfied. We view diversity and inclusion as a business imperative that drives innovation and future growth. Every voice matters."~~ —~~Barbara Whye, Intel’s Chief Diversity and Inclusion Officer and Vice President of Human Resources~~
All employees are responsible for upholding the Intel Values, Intel Code of Conduct, and Intel Global Human Rights Principles, which form the foundation of our policies and practices. ~~We also place value on providing a wide range of opportunities to support the ongoing career development of employees.~~ For over a decade, we have tracked and publicly reported on key human capital metrics, including workforce demographics, diversity and inclusion data, turnover, and training data.	"Tapping into the richness of our diverse workforce is key to driving future growth. Intel will continue to be transparent about our progress and our challenges, so we can partner with our customers and ecosystem to find better solutions together." —Sandra Rivera, Executive Vice President and Chief People Officer



DIVERSITY AND INCLUSION
~~Building an~~To shape the future of technology, we must be representative of that future. A diverse and inclusive workforce ~~industry,~~is a business imperative and ~~ecosystem is critical~~key to ~~helping us drive~~ our ~~business forward.~~long-term success. We committed $300 million to advance diversity and inclusion in our workforce and in the technology ~~industry, and met~~industry. We achieved our goal ~~to achieve~~of full representation in our U.S. workforce two years ahead of schedule, meaning our workforce now reflects the percentage of women and underrepresented minorities available in the skilled labor market in the U.S. This achievement was the result of a comprehensive strategy that considered hiring, retention, and progression. Though we are proud of what we have accomplished to advance diversity in our workforce, we still have work to do, including beyond the walls of Intel. We took action by joining 11 other companies to fund an initiative to double the number of women of color graduating with computing degrees in the U.S. ~~workforce in 2018—two years ahead~~by 2025. We also continue to look for and implement partnerships and programs to increase retention and advancement of ~~schedule. We have a long-standing commitment to inclusive workplace policies. For example, to help ensure employee concerns are openly~~women and ~~transparently resolved, Intel does not seek arbitration~~underrepresented populations within our workplace. The breakout of ~~sexual harassment and other employment claims.~~employees by gender provides our current global gender diversity.



COMPENSATION AND BENEFITS
We strive to provide pay, benefits, and services that help meet the varying needs of our employees. Our generous total rewards package includes market-competitive pay, broad-based stock grants and bonuses, an Employee Stock Purchase Plan, healthcare and retirement benefits, paid time off and family leave, parent reintegration, fertility assistance, flexible work schedules, sabbaticals, and on-site services. In 2019, we announced that we achieved gender pay equity globally by closing the gap in average pay between employees of different genders in the same or similar roles after accounting for legitimate business factors that can explain differences, such as performance, time at grade level, and tenure. We also continued to advance transparency in our pay and representation data by publicly releasing our 2017 and 2018 EEO-1 survey pay data mandated by the U.S. Equal Employment Opportunity Commission. The results reflected representation gaps and point to work that lies ahead. However, due to our diversity and inclusion efforts, there is promising growth of our junior female and underrepresented talent from which our future leadership will be drawn. Our challenge now is to create an environment that better helps our female and underrepresented employees develop and progress in their careers, while also ensuring we are expanding our hiring and retention of diverse talent at more senior, higher-paying positions.


¹	Executives refers to salary grades 12+ and equivalent grades. While we present male and female, we acknowledge this is not fully encompassing of all gender identities.



GROWTH AND DEVELOPMENT
We invest significant resources to develop the talent needed to ~~keep the company~~remain at the forefront of innovation and make Intel an employer of choice. We deliver training annually and provide rotational assignment opportunities. ~~During 2017~~We launched a new performance management system to support our culture evolution and ~~2018, we trained our managers in inclusive management practices.~~increase focus on continuous learning and development. Over the past five years, our undesired voluntary turnover rate has been at or below 5%.
COMMUNICATION AND ENGAGEMENT
Our success depends on employees understanding how their work contributes to the company’s overall strategy. We use a variety of channels to facilitate open and direct communication, including open forums with executives; ~~quarterly Organizational Health Polls;~~employee experience surveys; and engagement through more than 30 different employee resource groups, including the Women at Intel Network, the Network of Intel African American Employees, the Intel Latino Network, and others.
~~COMPENSATION AND BENEFITS~~
We strive to provide pay, benefits, and services that help meet the varying needs of our employees. Our generous total rewards package includes market-competitive pay, broad-based stock grants and bonuses, a popular Employee Stock Purchase Plan, healthcare and retirement benefits, paid time off, flexible work schedules, sabbaticals, fertility assistance, and on-site services. For more than a decade, we’ve performed an annual compensation analysis in the U.S. to ensure pay equity by gender and race/ethnicity. In 2018, we began globalizing our analytics and recently announced that we’ve achieved gender pay equity globally.
HEALTH, SAFETY, AND WELLNESS
We are committed to the safety of our employees, customers, and communities, from operations to product development to supplier partnerships. Our ultimate goal is to achieve zero serious injuries through continued investment in and focus on our core safety programs and injury-reduction initiatives. We provide access to a variety of innovative, flexible, and convenient ~~employee~~ health and wellness programs, including on-site health centers.


The health of our company and local economies depend on continued investments in innovation. We provide high-skill, high-paying jobs at Intel sites around the world and also impact economies through our R&D ecosystem spending, sourcing activities, consumer spending by our employees, and tax revenue. Many of these are manufacturing and R&D jobs located in our own domestic and international factories. In addition, we make sizable capital investments and provide leadership in public-private partnerships to spur economic growth and innovation.
~~SOCIAL IMPACT~~
We are at the forefront of new technologies—such as AI, autonomous driving, and 5G wireless broadband—that are increasingly being used to empower individuals, companies, and governments around the world to solve major societal challenges. Simultaneously, we are empowering people through education and advancing social impact initiatives, helping us build trust with key external stakeholders and support the interests of our employees. Through the		"At Intel,^® ~~She Will Connect program,~~ we have ~~collaborated with global~~long believed that to truly be a leader in manufacturing, we must also advance environmental sustainability and local partners to empower millions of women and girls through technology skills training. Our employees actively share their expertise and skills through technology-related volunteer initiatives, and over the past 10 years have contributedcorporate responsibility. For more than ~~10 million hours of service in the communities where we operate. In celebration of~~two decades, our ~~50th anniversary, we set a goal~~sustainability practices have enabled us to ~~have 50,000 employees donate 1 million volunteer hours during 2018. We exceeded the goal with more than 68,000 employees contributing approximately 1.5 million hours.~~

	~~SUPPLY CHAIN RESPONSIBILITY~~
	~~Actively managing our supply chain creates business~~create significant value for ~~Intel and~~ our customers, ~~by helping us reduce risks, improve product quality, achieve environmental~~investors, employees, and ~~social goals,~~community stakeholders." —Ann Kelleher, Senior Vice President and ~~raise the overall performance~~General Manager of ~~our suppliers. Over the past five years, we have completed more than 500 supplier audits using the Responsible Business Alliance Code of Conduct standard~~Manufacturing and have expanded training and capacity-building programs with our suppliers. We actively collaborate with others and lead industry initiatives on key issues such as advancing responsible minerals sourcing, addressing risks of forced and bonded labor, and improving transparency around climate and water impacts in the global electronics supply chain. We also continue to work toward our goal of reaching $1 billion in annual spending with diverse-owned suppliers by 2020, and are investing in programs to create new career pathways into the technology industry. Operations



~~CLIMATE AND ENERGY~~ ¹
We focus on reducing our own direct climate “footprint” and over the past two decades have reduced our direct emissions and electricity generated emissions. We also continue to be one of the largest voluntary corporate purchasers of green power. Since 2012, we have invested more than $200 million in energy conservation projects in our global operations, resulting in cumulative savings of more than 4 billion kilowatt hours and cost savings of approximately $500 million through the end of 2018. We also focus on increasing our “handprint”—the ways in which Intel technologies can help others reduce their footprints, and collaborate on shaping public policy responses to climate change, both at the international level and in the countries and regions where we operate.
~~GREENER BUILDINGS~~
Our engineers have long incorporated green design standards and concepts into the new construction and renovation of our facilities. We continue to be on track to meet our goal to design all new buildings to a minimum Leadership in Energy and Environmental Design (LEED) Gold certification, and to date have achieved LEED certification for more than 17 million square feet, or approximately 26% of our total operational space. The Internet of Things is also expanding opportunities in the area of green buildings, including smart building energy management systems. Working with ecosystem partners, we are advancing solutions in this area, as well as incorporating these technologies into our own green building strategies. For example, one of our newest buildings, an office building in Bangalore, India that received LEED Platinum certification, is equipped with more than 9,000 sensors and has 50% lower energy demand compared to most traditional office buildings in the area.
~~WASTE MANAGEMENT AND RECYCLING~~
In each of the past five years, we have recycled more than 84% of the non-hazardous waste generated in our global operations and continue to work toward our 2020 goals of recycling 90% of our non-hazardous waste and sending zero hazardous waste to landfills. Our aim is to continue to invest in reducing the amount of waste we generate while increasing the amount recycled.
~~WATER STEWARDSHIP~~
Water is essential to the semiconductor manufacturing process. We use ultrapure water to remove impurities from our silicon wafers, and we use industrial and reclaimed water to run our manufacturing facility systems. Over the last two decades, our sustainable water management efforts and partnerships have enabled us to conserve billions of gallons of water and we return approximately 80% of our water back to our communities. In 2018, we continued to make progress toward our goal to restore 100% of our global water use by 2025 through funding collaborative community-based projects that will restore water in amounts equivalent to what our business consumes.
~~SUPPLIER ENVIRONMENTAL IMPACT~~
We also partner with our suppliers to manage their environmental impact, which in turn reduces our own environmental impact, lowers supply chain risk, and can decrease costs. In 2018, we again attained a Leadership “A” rating on Supplier Engagement from CDP (which evaluates global companies on their environmental disclosure) for our work to encourage our suppliers to increase the level of transparency on their climate and water footprints.
			See "Non-GAAP Financial Measures" within MD&A.



Years Ended	Dec 28, 2013		Dec 27, 2014		Dec 26, 2015		Dec 31, 2016		Dec 30, 2017		Dec 29, 2018
Intel Corporation	$	100	$	151	$	145	$	156	$	204	$	211
Dow Jones U.S. Technology Index	$	100	$	123	$	126	$	143	$	196	$	193
S&P 100 Index	$	100	$	114	$	117	$	129	$	157	$	150
S&P 500 Index	$	100	$	116	$	117	$	130	$	158	$	150
S&P 500 IT Index	$	100	$	123	$	128	$	145	$	201	$	199
SOX Index	$	100	$	133	$	131	$	179	$	252	$	235



% INTEL REVENUE			KEY PRODUCTS AND MARKETS	HIGHLIGHTS
DCG	¹	~~The graph~~	Includes workload-optimized platforms and ~~table assume that $100~~related products designed for cloud, enterprise, and communication infrastructure market segments.	Revenue for our data-centric businesses was ~~invested~~up 3% year over year. Growth in DCG, IOTG, Mobileye, and NSG was offset by decline in PSG. We introduced new data-centric products, such as the Intel^® Agilex^TMFPGA, 2nd generation Intel^® Xeon^® Scalable processor, and Intel^® Optane™ DC persistent memory. In addition, Mobileye continued to secure new design wins at major U.S. and global automakers and announced plans to commercialize MaaS.

IOTG			Includes high-performance compute solutions for targeted verticals and embedded applications in market segments such as retail, industrial, smart infrastructure, and vision.

				OPPORTUNITIES
MOBILEYE			Includes development of computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ADAS and autonomous driving.	We have expanded our data-centric TAM to approximately $230 billion¹ with acquisitions and product innovations. Our broadened portfolio enables new opportunities for us and creates better synergistic value for our customers. For example, our product offerings for AI workloads reach from the cloud to the edge, and we are developing CPU, GPU, FPGA, and AI accelerator products to span inference and training AI workloads, while also pursuing ongoing software optimizations for AI.
NSG			Includes memory and storage products like Intel^® Optane™ technology and Intel^® 3D NAND technology, primarily used in SSDs.
				CHALLENGES
				DCG growth slowed as major cloud service providers and enterprise OEMs worked through inventory after a historic platform refresh in 2018. As we enter 2020, we expect to face an increasingly competitive market. In addition, challenging market conditions resulted in margin compression on memory products.
PSG			Includes programmable semiconductors, primarily FPGAs and structured ASICs, and related products for communications, cloud and enterprise, and embedded market segments.



% INTEL REVENUE	KEY PRODUCTS AND MARKETS
CCG	Includes platforms designed for end-user form factors, focusing on higher growth segments of 2-in-1, thin-and-light, commercial and gaming, and growing adjacencies such as connectivity, graphics, and memory.

HIGHLIGHTS		OPPORTUNITIES	CHALLENGES
Our PC-centric business revenue remained flat year over year. We began shipping our 10nm-based 10th generation Intel^® Core^TM processors, previously referred to as Ice Lake. These processors feature a new core architecture and are expected to deliver increased graphics performance, AI, and new levels of integrated connectivity for thin-and-light laptops and 2-in-1s. We divested the majority of our 5G smartphone modem business to increase the focus of 5G efforts on the ~~last day~~broader opportunity to modernize network and edge infrastructure while retaining critical IP and modem technology.		We are targeting an approximately $70 billion PC-centric revenue TAM¹. This expanded portfolio includes markets such as connectivity, graphics, and memory, which enables new opportunities as we innovate through the platform. We launched Project Athena, a multi-year innovation program designed to deliver advanced laptops that meet ambitious key experience indicators in performance, responsiveness, battery life, form factor, and AI.	Our PC-centric business is operating in an increasingly competitive environment and we are focused on executing an annual cadence of ~~trading for~~leadership products. Strong demand across our product lines, combined with increased capacity consumed by offsetting factors, contributed to tight supply, particularly at the ~~fiscal year ended December 28, 2013~~value end of the PC market. We are making additional investments in ~~Intel's common stock, the Dow Jones U.S. Technology Index, S&P 100 Index, S&P 500 Index, S&P 500 IT Index,~~our manufacturing facilities and SOX Index, and that all dividends were reinvested. The Dow Jones U.S. Technology Index was presented as a comparison in the 2017 Form 10-K stock performance graph as a peer index. We have added three indices that we consider more representative than the Dow Jones U.S. Technology Index: the S&P 100 Index, which includes a more diversified group of companies across major industrial sectors; the S&P 500 IT Index, which represents large capitalization IT industry performance; and the SOX Index, which more precisely represents overall semiconductor industry performance.working with customers to align demand with available supply.



Years Ended (In Millions, Except Per Share Amounts)	December 29, 2018					December 30, 2017					December 31, 2016
Years Ended (In Millions, Except Per Share Amounts)	Amount			% of Net Revenue		Amount			% of Net Revenue		Amount			% of Net Revenue
Net revenue	$	70,848		100.0	%	$	62,761		100.0	%	$	59,387		100.0	%
Cost of sales	27,111			38.3	%	23,663			37.7	%	23,154			39.0	%
Gross margin	43,737			61.7	%	39,098			62.3	%	36,233			61.0	%
Research and development	13,543			19.1	%	13,035			20.8	%	12,685			21.4	%
Marketing, general and administrative	6,750			9.5	%	7,452			11.9	%	8,377			14.1	%
Restructuring and other charges	(72		)	(0.1	)%	384			0.6	%	1,744			2.9	%
Amortization of acquisition-related intangibles	200			0.3	%	177			0.3	%	294			0.5	%
Operating income	23,316			32.9	%	18,050			28.8	%	13,133			22.1	%
Gains (losses) on equity investments, net	(125		)	(0.2	)%	2,651			4.2	%	506			0.9	%
Interest and other, net	126			0.2	%	(349		)	(0.6	)%	(703		)	(1.2	)%
Income before taxes	23,317			32.9	%	20,352			32.4	%	12,936			21.8	%
Provision for taxes	2,264			3.2	%	10,751			17.1	%	2,620			4.4	%
Net income	$	21,053		29.7	%	$	9,601		15.3	%	$	10,316		17.4	%
Earnings per share - Diluted	$	4.48				$	1.99				$	2.12



(In Millions)
$	43,737		2018 Gross Margin
5,810			Higher gross margin from platform revenue
(1,085		)	Higher platform unit cost, primarily from increased mix of performance products
(86		)	Other, primarily due to impact from divestitures, offset by higher gross margin from adjacent businesses
$	39,098		2017 Gross Margin
2,380			Higher gross margin from platform revenue
1,010			Lower platform unit cost, primarily on 14nm cost improvement
420			Lower Altera and other acquisition-related charges
315			Lower period charges associated with product warranty and IP agreements incurred in 2016
(535		)	Higher factory start-up costs, primarily driven by the ramp of our 10nm process technology
(390		)	Impact of the ISecG divestiture, offset by higher gross margin from adjacent businesses
(275		)	Period charges primarily associated with engineering samples and higher initial production costs from our 10nm products
(60		)	Other
$	36,233		2016 Gross Margin



	2018 – 2017					2017 – 2016
(Dollars in millions)	%		$ Impact			%		$ Impact

Desktop platform volume	down	(6)%	$	(608	)	down	(5)%	$	(686	)
Desktop platform ASP	up	11%	1,181			flat	—%	(38		)
Notebook platform volume	up	4%	839			up	5%	885
Notebook platform ASP	up	3%	677			up	2%	326
Adjacent products and other			912					608

Total change in revenue			$	3,001				$	1,095



~~INTEL~~^®~~OPTANE~~^™ ~~TECHNOLOGY~~		~~INTEL~~^® ~~3D NAND TECHNOLOGY~~


¹	Source: Gartner, Inc., Forecast: DRAM Market Statistics, Worldwide, 2014-2021, 3Q18 Update, Gartner, Inc., Forecast: Hard-Disk Drives, Worldwide, 2014-2022, 2Q18 Update, Gartner, Inc., Forecast: NAND Flash Supply and Demand, Worldwide, 1Q16-4Q18, 2Q18 Update.



OVERVIEW
PSG offers programmable semiconductors, primarily FPGAs, structured ASICs, and related products, for a broad range of market segments, including communications, data center, industrial, and military. The PSG ~~collaborates with the other Intel businesses to deliver~~product portfolio delivers FPGA acceleration in tandem with Intel ~~microprocessors. This "better together" integration broadens the use of FPGAs~~microprocessors and ~~combines~~enables Intel to combine the benefits of ~~both~~its broad portfolio of technologies to allow more flexibility for systems to operate with increased efficiency and higher performance.

OPERATING INCOME

DILUTED EPS

CASH FLOWS

■PC-CENTRIC $B
■DATA-CENTRIC $B

■ GAAP $B■NON-GAAP $B

■ GAAP■NON-GAAP

■ OPERATING CASH FLOW $B
■FREE CASH FLOW¹ $B