INTEL CORP (INTC) Business, 2013

We design and manufacture advanced integrated digital technology platforms. A platform consists of a microprocessor and chipset, and may be enhanced by additional hardware, software, and services. We sell these platforms primarily to original equipment manufacturers (OEMs), original design manufacturers (ODMs), and industrial and communications equipment manufacturers in the computing and communications industries. Our platforms are used in a wide range of computing applications, such as notebooks (including Ultrabook™ devices and 2 in 1 systems), desktops, servers, tablets, smartphones, automobile infotainment systems, automated factory systems, and medical devices. We also develop and sell software and services primarily focused on security and technology integration. We were incorporated in California in 1968 and reincorporated in Delaware in 1989.

Our goal is to be the preeminent computing solutions company that powers the worldwide digital economy. Over time, the number of devices connected to the Internet and each other has grown from hundreds of millions to billions, and the variety of devices also continues to increase. The combination of embedding computing into devices and connecting them to the Internet, known as the Internet of Things, as well as a build-out of the cloud infrastructure supporting these devices is driving fundamental changes in the computing industry. As a result, we are transforming our primary focus from the design and manufacture of semiconductor chips for personal computing (PC) and servers to the delivery of solutions consisting of hardware and software platforms and supporting services across a wide range of computing devices. Examples of these solutions can be seen across the computing continuum, from the teraflops of operations per second for high performance computing (HPC) to the milliwatts of energy consumed by an embedded application. Additionally, computing is becoming an increasingly mobile, personal, and ubiquitous experience. End users value consistency across devices that connect seamlessly and securely to the Internet and to each other. We enable this experience by innovating around energy-efficient performance, connectivity, and security.

To succeed in this changing computing environment, we have the following key objectives:

• strive to ensure that Intel® technology is the best choice for any computing device, including PCs, data centers, cloud computing, ultra-mobile devices, and wearables;

• be the platform of choice for any operating system;

• maximize and extend our manufacturing technology leadership;

• extend to adjacent services such as security, cloud, and foundry;

• expand platforms into adjacent market segments to bring compelling new System-on-Chip (SoC) solutions and user experiences to ultra-mobile form factors including smartphones and tablets, as well as notebooks (including Ultrabook devices and 2 in 1 systems), embedded systems, and microserver applications;

• develop platforms to enable devices that connect to the Internet of Things and to each other to create a computing continuum offering consumers a set of secure, consistent, engaging, and personalized forms of computing; and

• strive to lower the footprint of our products and operations as well as be an asset to the communities we work in.

We use our core assets to meet these objectives. Our core assets include our silicon and manufacturing technology leadership, our architecture and platforms, our software and services, our security solutions, our customer orientation, our strategic investments, and our corporate stewardship. We believe that applying these core assets to our key objectives provides us with the scale, capacity, and global reach to establish new technologies and respond to customers’ needs quickly. Our core assets and key objectives include the following:

• Silicon and Manufacturing Technology Leadership. We have long been a leader in silicon process technology and manufacturing, and we aim to continue our lead through investment and innovation in this critical area. We drive a regular two-year upgrade cycle—introducing a new microarchitecture approximately every two years and ramping the next generation of silicon process technology in the intervening years. We refer to this as our “tick-tock” technology development cadence. With our continued focus on silicon and manufacturing technology leadership, we are collaborating on the development of 450-millimeter (mm) wafer technology and extreme ultraviolet lithography (EUV). We expect larger silicon wafers and enhanced lithography technologies with EUV to allow Moore’s Law to continue. Moore’s Law predicted that transistor density on integrated circuits would double about every two years. We aim to have the best process technology, and unlike many semiconductor companies, we primarily manufacture our products in our own facilities. This in-house manufacturing capability allows us to optimize performance, shorten our time to market, and scale new products more rapidly. We believe this competitive advantage will be extended in the future as the costs to build leading-edge fabrication facilities increase, and as fewer semiconductor companies will be able to combine platform design and manufacturing.

• Architecture and Platforms. We are developing a wide range of solutions for devices that span the computing continuum and allow for computing experiences from notebooks (including Ultrabook devices and 2 in 1 systems), desktops, tablets, and smartphones to in-vehicle infotainment systems and beyond. We believe that users want consistent computing experiences and interoperable devices and that users and developers value consistency of architecture. This provides a common framework that results in shortened time to market, and the ability to leverage technologies across multiple form factors. We believe that we can meet the needs of users and developers to offer computing solutions across the computing continuum through our partnership with the industry on open, standards-based platform innovation around Intel® architecture. We continue to invest in improving Intel architecture to deliver increased value to our customers and expand the capabilities of the architecture in adjacent market segments. For example, we focus on delivering improved energy-efficient performance, which involves balancing higher performance with lower power consumption. In addition, we are focusing on perceptual computing, which brings exciting user experiences through devices that sense and perceive the user’s actions.

• Software and Services. We offer software and services that provide solutions through a combination of hardware and software for consumer, ultra-mobile, and corporate environments. Additionally, we seek to enable and advance the computing ecosystem by providing development tools and support to help software developers create software applications and operating systems that take advantage of our platforms. We seek to expedite growth in various market segments, such as the embedded market segment, through our software offerings. We continue to collaborate with companies to develop software platforms optimized for our Intel processors and that support multiple hardware architectures and operating systems.

• Security. Through our expertise in hardware and software, we are able to embed security into many facets of computing. We expect to bring unique hardware, software, and end-to-end security solutions to the market in order to offer increased protection against security risks for consumers and businesses worldwide.

• Customer Orientation. Our strategy focuses on developing our next generation of products based on the needs and expectations of our customers. In turn, our products help enable the design and development of new user experiences, form factors, and usage models for businesses and consumers. We offer platforms that incorporate various components and capabilities designed and configured to work together to provide an optimized solution that customers can easily integrate into their end products. Additionally, we promote industry standards that we believe will yield innovation and improved technologies for users.

• Strategic Investments. We make investments in companies around the world that we believe will further our strategic objectives, support our key business initiatives, and generate financial returns. Our investments—including those made through our Intel Capital program—generally focus on investing in companies and initiatives that we believe will stimulate growth in the digital economy, create new business opportunities for Intel, and expand global markets for our products. Additionally, we plan to continue to purchase and license intellectual property to support our current and expanding business.

• Corporate Stewardship. We are committed to developing energy-efficient technology solutions that can be used to address major global problems while reducing our environmental impact. We are also committed to empowering people and expanding economic opportunity through education and technology, driven by our corporate and Intel Foundation programs, policy leadership, and collaborative engagements. In addition, we strive to cultivate a work environment in which engaged, energized employees can thrive in their jobs and in their communities.

Our continued investment in developing our assets and execution in key focus areas is intended to help strengthen our competitive position as we enter and expand into adjacent market segments, such as smartphones and tablets. These market segments change rapidly, and we need to adapt to this environment. A key characteristic of these adjacent market segments is low-power consumption based on SoC products. We are making significant investments in this area with the accelerated development of our SoC solutions based on the 64-bit Intel® Atom™ microarchitecture. We are also optimizing our server products for energy-efficient performance as we believe that increased Internet traffic and the use of ultra-mobile devices, the Internet of Things, and cloud computing has created the need for an improved server infrastructure.

At the 2013 Intel Developer Forum, we introduced the Intel® Quark SoC family of products. Designed for applications where low power and size take priority over high performance, the Intel Quark SoC offers extremely low power consumption and a high level of integration in a low-cost package to be used in the next wave of intelligent connected devices. In addition, we also announced the Arduino*-compatible Intel® Galileo microcontroller board and the Intel® Edison development board at the Maker Faire* in Rome and the International Consumer Electronics Show, respectively. When combined with Intel Quark SoC, these systems provide an open-source platform for customers to design products such as, but not limited to, automation for home appliances or industrial manufacturing, home media centers, and robots. In combination with the continued build out of the cloud and the announcement of the Intel Quark technologies, we expect to be on the forefront of the acceleration and proliferation of the Internet of Things.

As of December 28, 2013, we managed our business through the following operating segments:

For a description of our operating segments, see “Note 27: Operating Segments and Geographic Information,” in Part II, Item 8 of this Form 10-K.

We offer platforms that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or multichip package. Additionally, a platform may be enhanced by additional hardware, software, and services.

A microprocessor—the central processing unit (CPU) of a computer system—processes system data and controls other devices in the system. We offer microprocessors with one or multiple processor cores. Multi-core microprocessors can enable improved multitasking and energy-efficient performance by distributing computing tasks across two or more cores. Our 2nd, 3rd, 4th, and expected-to-be-released 5th generation Intel® Core™ (code-named "Broadwell") processor families integrate graphics functionality onto the processor die. In contrast, some of our previous-generation processors incorporated a separate graphics chip inside the processor package. Processor packages may also integrate a memory controller.

A chipset sends data between the microprocessor and input, display, and storage devices, such as the keyboard, mouse, monitor, hard drive or solid-state drive, and optical disc drives. Chipsets extend the audio, video, and other capabilities of many systems and perform essential logic functions, such as balancing the performance of the system and removing bottlenecks.

We offer and continue to develop SoC products that integrate our core processing functions with other system components, such as graphics, audio, and video, onto a single chip. SoC products are designed to reduce total cost of ownership, provide improved performance due to higher integration and lower power consumption, and enable ultra-mobile form factors such as smartphones, tablets, Ultrabook devices, and 2 in 1 systems, as well as notebooks, desktops, embedded systems and microserver applications.

With the release of our 4th generation Intel Core processor in 2013, we introduced a multichip package that integrates the chipset on one die with the CPU and graphics on another die, connected via a lower power on-package interface. Similar to a SoC, the multichip package can provide improved performance due to higher integration coupled with lower power consumption, which enables smaller form factors.

We also offer features designed to improve our platform capabilities. For example, Intel® vPro™ technology is a computer hardware-based security technology for the notebook and desktop market segments. Intel vPro is designed to provide businesses with increased manageability, upgradeability, energy-efficient performance, and security while lowering the total cost of ownership. We also offer Intel® Iris™ technology, which provides graphics enhancements for 4th and expected-to-be-released 5th generation Intel Core processors.

We offer a range of platforms based upon the following microprocessors:

McAfee, Inc.

McAfee, Inc. (McAfee) has the objective of improving the overall security of our platforms. McAfee offers software products that provide security solutions designed to protect systems in consumer, mobile, and corporate environments from malicious virus attacks as well as loss of data. McAfee’s products include software solutions for end-point security, network and content security, risk and compliance, and consumer and mobile security.

We offer components for smartphones, tablets, and connected devices which include baseband processors, radio frequency transceivers, and power management integrated circuits. We also offer comprehensive smartphone and tablet platforms, including multimode Long Term Evolution (LTE*) modems, Bluetooth® wireless technology and Global Positioning System (GPS) receivers, software solutions, customization, and essential interoperability tests. Our mobile phone solutions, which are based on multiple industry standards, help enable mobile voice and high-speed data communications for a broad range of devices around the world.

We offer NAND flash memory products primarily used in solid-state drives. Our NAND flash memory products are manufactured by IM Flash Technologies, LLC (IMFT). We also purchase NAND flash components from Micron Technology, Inc. (Micron).

We offer our silicon and manufacturing technology leadership as a service for our customers. Our foundry offerings include semi-custom services (using Intel architecture and silicon with our customer's intellectual property) and fully custom foundry services.

Our PC Client Group operating segment offers products that are incorporated in notebook (including Ultrabook devices and 2 in 1 systems) and desktop computers for consumers and businesses. In 2013, we introduced the 4th generation Intel Core processor family for use in notebooks, desktops, 2 in 1 systems, and tablets. These processors use 22-nanometer (nm) transistors and our Tri-Gate transistor processor technology. Our Tri-Gate transistor technology extends Moore’s Law and is the world’s first 3-D Tri-Gate transistor on a production technology. In combination, these enhancements can provide significant power savings and performance gains when compared to previous-generation technologies.

Notebook

Our strategy for the notebook computing market segment is to offer notebook technologies designed to bring exciting new user experiences to life and improve performance, battery life, wireless connectivity, manageability and security. In addition, we are designing for smaller, lighter, and thinner form factors. In the second half of 2014, we expect to introduce our 5th generation Intel Core processor family. We believe these processors will continue to deliver increasing levels of battery life and graphics performance, as well as provide OEMs and end users with more choice in operating system compatibility, energy efficiency, processor cores, and graphics performance.

In addition to offering notebooks, we have worked with our customers to help them develop a new class of personal computing devices that includes Ultrabook devices and 2 in 1 systems. These computers combine the energy-efficient performance and capabilities of today’s notebooks and tablets with enhanced graphics and improved user interfaces such as touch and voice in a thin, light form factor that is highly responsive and secure, and that can seamlessly connect to the Internet. We believe the renewed innovation in the PC industry that we fostered with Ultrabook devices and expanded to 2 in 1 systems will continue.

Desktop

Our strategy for the desktop computing market segment is to offer exciting new user experiences and products that provide increased manageability, security, and energy-efficient performance. We are also focused on lowering the total cost of ownership for businesses. The desktop computing market segment includes all-in-one desktop products, which combine traditionally separate desktop components into one form factor. Additionally, all-in-one computers have transformed into portable and flexible form factors that offer users increased portability and new multi-user applications and uses. For desktop consumers, we also focus on the design of products for high-end enthusiast PCs and mainstream PCs with rapidly increasing audio and media capabilities.

Our Data Center Group operating segment offers products designed to provide leading energy-efficient performance for all compute, network and storage platforms. In addition, the Data Center Group (DCG) focuses on specific optimizations for the Enterprise, Cloud, Communications Infrastructure and Technical Computing segments. DCG is continuing to ramp the many-core Intel® Xeon Phi™ coprocessor with 60 or more high-performance, low-power Intel processor cores. The Intel Xeon Phi coprocessors are positioned to boost the power of the world’s most advanced supercomputers, allowing for trillions of calculations per second. We recently introduced new Intel® Xeon®

processors incorporating Intel’s industry leading 22nm process technology. The 22nm Intel Xeon processors provide improved performance and better power consumption across the compute, network and storage portfolio. We also announced the second generation 64-bit Intel Atom microarchitecture-based SoC solutions to focus on storage, networking and highly dense, low-power server configurations.

Our other Intel architecture operating segments offer products designed to be used in the Internet of Things, mobile communications, tablet, smartphone, service provider, netbook, and ultra-low power market segments.

• Our strategy for the mobile communications market segment is to offer a portfolio of products that covers a broad range of wireless connectivity options by combining Intel WiFi technology with our 2G, 3G, and 4G LTE technologies. These products feature low power consumption, innovative designs, and multi-standard platform solutions.

• Our strategy for the embedded market segment, addressed by our Intelligent Systems Group (ISG), is to lead the Internet of Things evolution by delivering new user experiences, business efficiencies, and productivity utilizing Intel architecture based solutions that provide long life-cycle support, software and architectural scalability, and platform integration.

• Our strategy for the tablet market segment is to offer Intel architecture solutions optimized for multiple operating systems and application ecosystems. We are accelerating the process technology development for our Intel Atom processor product line to deliver increased battery life, performance, and feature integration.

• Our strategy for the smartphone device market segment is to offer Intel Atom microarchitecture-based products that enable smartphones to deliver innovative content and services. These products are designed to deliver increased performance and system responsiveness while also enabling longer battery life.

• Our strategy for the ultra-low power market segment is to offer Intel Quark SoCs designed for wearable and other emerging compute devices.

Our software and services operating segments seek to create differentiated user experiences on Intel-based platforms. We differentiate by combining Intel platform features and enhanced software and services. Our three primary initiatives are:

• enabling platforms that can be used across multiple operating systems, applications, and services across all Intel products;

• optimizing features and performance by enabling the software ecosystem to quickly take advantage of new platform features and capabilities; and

• delivering comprehensive solutions by using software, services, and hardware to enable a more secure online experience, such as our McAfee LiveSAFE* technology platform, which provides a comprehensive security suite that offers consumer protection across a range of devices such as PCs, tablets, and smartphones.

Net revenue for the PC Client Group (PCCG) operating segment, the DCG operating segment, the other Intel architecture (Other IA) operating segments, and the software and services (SSG) operating segments is presented as a percentage of our consolidated net revenue. Other IA includes ISG, Multi-Comm, the Phone Group, the Service Provider Group, the Tablet Group, the Netbook Group, and the New Devices Group operating segments. SSG includes McAfee, the Wind River Software Group, and the Software and Services Group operating segments. All other consists primarily of revenue from the Non-Volatile Memory Solutions Group.

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The computing industry continuously evolves with new and enhanced technologies and products from existing and new providers. The markets for current and planned technologies can change quickly in response to the introduction of such technologies and products and other factors such as changes in consumer tastes.

Intel faces significant competition in the development and market acceptance of technologies and products in this environment. Our platforms, based on Intel architecture, are positioned to compete across the spectrum of Internet-connected computing devices, from the lowest-power portable devices to the most powerful data center servers.

We are a leading provider in the PC and server segments, where we face existing and emerging competition. In the PC segment, smaller mobile devices, such as tablets and smartphones, offered by numerous vendors have become significant competitors to PCs for many usages. Most of these small devices currently use applications processors based on the ARM* architecture; feature low-power, long battery-life operation; and are built in SoC formats which integrate numerous functions on one chip. In the server segment, our data center products and platforms face emerging competition from many new entrants using ARM architecture or other technologies.

We are a relatively new entrant to the segments for tablets, smartphones and similar mobile devices. We have adjusted our product roadmaps to emphasize the development of low-power SoC chips for these and other devices. The boundaries between the various segments are changing as the industry evolves and new segments emerge.

We have a long-standing position as a supplier of components and software for embedded products and this marketplace is significantly expanding with increasing types and numbers of Internet-connected devices for industrial, commercial and consumer uses, which we refer to as the Internet of Things. We face numerous large and small incumbent competitors as well as new entrants in this growing market segment that use ARM architecture as well as other operating systems and software.

Our products primarily compete based on performance, energy efficiency, integration, innovative design, features, price, quality, reliability, brand recognition and availability. The importance of these items will vary by the type of end system for the products. For example, performance might be among the most important factors for our products for servers, while price and integration might be among the most important factors for our products for tablets and smartphones.

We are the owner of McAfee, a major provider of digital security products and services to businesses and consumers. There are numerous competitors offering security products and services, and we seek to offer competitive differentiation by integrating hardware and software security features in many of our offerings and to have security offerings in numerous market segments including mobile and embedded devices and for data centers.

The ability of our products to operate on multiple operating systems in end-user products and platforms operated or sold by third parties, including OEMs, is a key competitive advantage. We seek to optimize our products for multiple operating systems and invest substantial resources working with third parties to do so, but such investments are risky given that it is not clear which products will succeed in the market.

We have competitors in each of the market segments including other companies that make and sell microprocessors, SoCs, other silicon components, software and platforms to businesses which build and sell computing and communications devices to end-users. We also compete against others selling these goods and services to businesses that utilize the products for their internal processes (e.g., businesses running large data centers). We also face competition from OEMs that, to some degree, choose to vertically integrate their own proprietary semiconductor and software assets. By doing so, these OEMs may be attempting to offer greater differentiation in their products and to increase their share of the profits for each finished product they sell.

Continuing changes in the industry such as acquisitions, business collaborations or licensing scenarios (such as injunctions or other litigation outcomes), could have a significant impact on our competitive position.

One of our important competitive advantages is the combination of our network of manufacturing, assembly and test facilities with our global architecture design teams. We have made significant capital and research and development (R&D) investments into this integrated manufacturing network, which enables us to have more direct control over our processes, quality control, product cost, production timing, performance, power consumption, and manufacturing yield. The increased cost of constructing new fabrication facilities supporting smaller transistor geometries and larger wafers has led to a smaller pool of companies that can afford to build and equip leading-edge manufacturing facilities. Most of our competitors rely on third-party foundries and subcontractors such as Taiwan Semiconductor Manufacturing Company, Ltd. and GlobalFoundries Inc. for manufacturing and assembly and test needs. We have recently started providing foundry services as an alternative to such foundries.

As of December 28, 2013, 46% of our wafer fabrication, including microprocessors and chipsets, was conducted within the U.S. at our facilities in New Mexico, Arizona, Oregon, and Massachusetts. The remaining 54% of our wafer fabrication was conducted outside the U.S. at our facilities in Israel and China. Our fabrication facility in Ireland is currently transitioning to a newer process technology node, with manufacturing expected to recommence in 2015. Wafer fabrication conducted within and outside the U.S. may be impacted by the timing of a facility’s transition to a newer process technology, as well as a facility’s capacity utilization.

As of December 28, 2013, we primarily manufactured our products in wafer fabrication facilities at the following locations:

Products Wafer Size Process Technology Locations Microprocessors 300mm 22nm Israel, Arizona, Oregon Microprocessors and chipsets 300mm 32nm New Mexico Microprocessors 300mm 45nm New Mexico Chipsets 300mm 65nm China Chipsets and other products 300mm 90nm China Chipsets 200mm 130nm Massachusetts

As of December 28, 2013, most of our microprocessors were manufactured on 300mm wafers using our 22nm and 32nm process technology. Our Massachusetts fabrication facility is our last manufacturing on 200mm wafers and is expected to cease production by the end of 2014. As we move to each succeeding generation of manufacturing process technology, we incur significant start-up costs to prepare each factory for manufacturing. However, continuing to advance our process technology provides benefits that we believe justify these costs. The benefits of moving to each succeeding generation of manufacturing process technology can include using less space per transistor, reducing heat output from each transistor, and increasing the number of integrated features on each chip. These advancements can result in microprocessors that are higher performing, consume less power, and cost less to manufacture. In addition, with each shift to a new process technology, we are able to produce more microprocessors per square foot of our wafer fabrication facilities. The costs to develop our process technology are significantly less than adding capacity by building additional wafer fabrication facilities using older process technology.

We use third-party foundries to manufacture wafers for certain components, including networking and communications products. In addition, we primarily use subcontractors to manufacture board-level products and systems. We purchase certain communications networking products and mobile phone components from external vendors primarily in the Asia-Pacific region.

Following the manufacturing process, the majority of our components are subject to assembly and test. We perform our components assembly and test at facilities in Malaysia, China, Costa Rica, and Vietnam. To augment capacity, we use subcontractors to perform assembly of certain products, primarily chipsets and networking and communications products. In addition, we use subcontractors to perform assembly and test of our mobile phone components.

Our NAND flash memory products are manufactured by IMFT and Micron using 20nm, 25nm, or 34nm process technology, and assembly and test of these products is performed by Micron and other external subcontractors. For further information, see “Note 5: Cash and Investments” in Part II, Item 8 of this Form 10-K.

Our employment practices are consistent with, and we expect our suppliers and subcontractors to abide by, local country law. In addition, we impose a minimum employee age requirement as well as progressive Environmental, Health, and Safety (EHS) requirements, regardless of local law.

We have thousands of suppliers, including subcontractors, providing our various materials and service needs. We set expectations for supplier performance and reinforce those expectations with periodic assessments. We communicate those expectations to our suppliers regularly and work with them to implement improvements when necessary. Where possible, we seek to have several sources of supply for all of these materials and resources, but we may rely on a single or limited number of suppliers, or upon suppliers in a single country. In those cases, we develop and implement plans and actions to reduce the exposure that would result from a disruption in supply. We have entered into long-term contracts with certain suppliers to ensure a portion of our silicon supply.

Our products are typically manufactured at multiple Intel facilities around the world or by subcontractors. However, some products are manufactured in only one Intel or subcontractor facility, and we seek to implement action plans to reduce the exposure that would result from a disruption at any such facility. See “Risk Factors” in Part I, Item 1A of this Form 10-K.

We are committed to investing in world-class technology development, particularly in the design and manufacture of integrated circuits. R&D expenditures were $10.6 billion in 2013 ($10.1 billion in 2012 and $8.4 billion in 2011).

Our R&D activities are directed toward the delivery of solutions consisting of hardware and software platforms and supporting services across a wide range of computing devices. We are focused on developing the technology innovations that we believe will deliver our next generation of products, which will in turn enable new form factors and usage models for businesses and consumers. We focus our R&D efforts on advanced computing technologies, developing new microarchitectures, advancing our silicon manufacturing process technology, delivering the next generation of platforms, improving our platform initiatives, developing new solutions in emerging technologies including wearable devices and embedded applications, and developing software solutions and tools. Our R&D efforts are intended to enable new levels of performance and address areas such as energy efficiency, security, scalability for multi-core architectures, system manageability, and ease of use.

As part of our R&D efforts, we plan to introduce a new Intel Core microarchitecture for desktops, notebooks (including Ultrabook devices and 2 in 1 systems), and Intel Xeon processors approximately every two years and ramp the next generation of silicon process technology in the intervening years. We refer to this as our “tick-tock” technology development cadence as subsequently illustrated.

Advances in our silicon technology have enabled us to continue making Moore’s Law a reality. We expect to begin manufacturing products using our 14nm process technology in Q1 2014. We are currently developing our 5th generation Intel Core processor family (code-named “Broadwell”) using our 14nm process technology, expected to be released in the second half of 2014. We are also developing 10nm manufacturing process technology, our next-generation process technology.

We have continued expanding on the advances anticipated by Moore’s Law by bringing new capabilities into silicon and producing new products optimized for a wider variety of applications. We have accelerated the Intel Atom processor-based SoC roadmap for ultra-mobile form factors, including smartphones and tablets, as well as notebooks (including Ultrabook devices and 2 in 1 systems), embedded systems, and microserver applications, from 32nm through 22nm to 14nm. We intend that Intel Atom processors for ultra-mobile form factors will eventually be on the same process technology as our leading-edge products. We expect that this acceleration will result in a significant reduction in transistor leakage, lower active power, and an increase in transistor density to enable more powerful, feature-rich smartphones and tablets with longer battery life. Intel Quark SoC, our newest technology announced in Q3 2013, is an ultra-low power and low-cost architecture designed for the Internet of Things, from industrial machines to wearable devices.

With our continued focus on silicon and manufacturing technology leadership, we entered into a series of agreements with ASML Holding N.V. (ASML) in 2012. These agreements, in which Intel purchased ASML securities and agreed to provide R&D funding over five years, are intended to accelerate the development of 450mm wafer technology and EUV lithography.

Our R&D activities range from designing and developing new products and manufacturing processes to researching future technologies and products. We continue to make significant R&D investments in the development of SoCs to enable growth in ultra-mobile form factors. In addition, we continue to make significant investments in wireless technologies including our work to develop a high-speed LTE solution for smartphones. Our second generation VoLTE product with LTE-advanced features, such as carrier aggregation, is expected to be available in the first half of 2014. We also continue to invest in graphics and HPC.

Our R&D model is based on a global organization that emphasizes a collaborative approach to identifying and developing new technologies, leading standards initiatives, and influencing regulatory policies to accelerate the adoption of new technologies, including joint pathfinding conducted between researchers at Intel Labs and our business groups. We centrally manage key cross-business group product initiatives to align and prioritize our R&D activities across these groups. In addition, we may augment our R&D activities by investing in companies or entering into agreements with companies that have similar R&D focus areas, as well as directly purchasing or licensing technology applicable to our R&D initiatives.

As of December 28, 2013, we had 107,600 employees worldwide (105,000 as of December 29, 2012), with approximately 51% of those employees located in the U.S. (51% as of December 29, 2012).

We sell our products primarily to OEMs and ODMs. ODMs provide design and manufacturing services to branded and unbranded private-label resellers. In addition, we sell our products to other manufacturers, including makers of a wide range of industrial and communications equipment. Our customers also include those who buy PC components and our other products through distributor, reseller, retail, and OEM channels throughout the world.

Our worldwide reseller sales channel consists of thousands of indirect customers—systems builders that purchase Intel microprocessors and other products from our distributors. We have a boxed processor program that allows distributors to sell our microprocessors in small quantities to customers of systems builders; boxed processors are also available in direct retail outlets.

In 2013, Hewlett-Packard Company accounted for 17% of our net revenue (18% in 2012 and 19% in 2011), Dell Inc. accounted for 15% of our net revenue (14% in 2012 and 15% in 2011), and Lenovo Group Limited accounted for 12% of our net revenue (11% in 2012 and 9% in 2011). No other customer accounted for more than 10% of our net revenue during such periods. For information about net revenue and operating income by operating segment, and net revenue from unaffiliated customers by country, see “Note 27: Operating Segments and Geographic Information” in Part II, Item 8 of this Form 10-K.

Our products are sold through sales offices throughout the world. Sales of our products are typically made via purchase order acknowledgments that contain standard terms and conditions covering matters such as pricing, payment terms, and warranties, as well as indemnities for issues specific to our products, such as patent and copyright indemnities. From time to time, we may enter into additional agreements with customers covering, for example, changes from our standard terms and conditions, new product development and marketing, private-label branding, and other matters. Most of our sales are made using electronic and web-based processes that allow the customer to review inventory availability and track the progress of specific goods ordered. Pricing on particular products may vary based on volumes ordered and other factors. We also offer discounts, rebates, and other incentives to customers to increase acceptance of our products and technology.

Our products are typically shipped under terms that transfer title to the customer, even in arrangements for which the recognition of revenue and related cost of sales is deferred. Our standard terms and conditions of sale typically provide that payment is due at a later date, generally 30 days after shipment or delivery. Our credit department sets accounts receivable and shipping limits for individual customers to control credit risk to Intel arising from outstanding account balances. We assess credit risk through quantitative and qualitative analysis, and from this analysis, we establish credit limits and determine whether we will use one or more credit support devices, such as a parent guarantee or standby letter of credit, or credit insurance. Credit losses may still be incurred due to bankruptcy, fraud, or other failure of the customer to pay. For information about our allowance for doubtful receivables, see “Schedule II—Valuation and Qualifying Accounts” in Part IV of this Form 10-K.

Most of our sales to distributors are made under agreements allowing for price protection on unsold merchandise and a right of return on stipulated quantities of unsold merchandise. Under the price protection program, we give distributors credits for the difference between the original price paid and the current price that we offer. On most products, there is no contractual limit on the amount of price protection, nor is there a limit on the time horizon under which price protection is granted. The right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified purchases made by the distributor. We have the option to grant credit for, repair, or replace defective products, and there is no contractual limit on the amount of credit that may be granted to a distributor for defective products.

Distributors typically handle a wide variety of products, including those that compete with our products, and fill orders for many customers. We also utilize third-party sales representatives who generally do not offer directly competitive products but may carry complementary items manufactured by others. Sales representatives do not maintain a product inventory; instead, their customers place orders directly with us or through distributors. We have several distribution warehouses that are located in proximity to key customers.

Over time, our larger customers have generally moved to lean-inventory or just-in-time operations rather than maintaining larger inventories of our products. As our customers continue to lower their inventories, our processes to fulfill their orders have evolved to meet their needs. As a result, our manufacturing production is based on estimates and advance non-binding commitments from customers as to future purchases. Our order backlog as of any particular date is a mix of these commitments and specific firm orders that are primarily made pursuant to standard purchase orders for delivery of products. Only a small portion of our orders is non-cancelable, and the dollar amount associated with the non-cancelable portion is not significant.

Historically, our platform sales have generally been higher in the second half of the year than in the first half of the year, accelerating in the third quarter and peaking in the fourth quarter.

Our corporate marketing objectives are to build a strong, well-known Intel corporate brand that connects with businesses and consumers, and to offer a limited number of meaningful and valuable brands in our portfolio to aid businesses and consumers in making informed choices about technology purchases. The Intel Core processor family and the Intel Atom, Intel® Pentium®, Intel Xeon, Intel Xeon Phi and Intel® Itanium® trademarks make up our processor brands.

We promote brand awareness and generate demand through our own direct marketing as well as through co-marketing programs. Our direct marketing activities include television, print, and Internet advertising, as well as press relations and social media, consumer and trade events, and industry and consumer communications. We market to consumer and business audiences, and focus on building awareness and generating demand for new form factors such as Ultrabook and 2 in 1 systems, and for increased performance, improved energy efficiency, and other capabilities such as Internet connectivity and security.

Purchases by customers often allow them to participate in cooperative advertising and marketing programs such as the Intel Inside® Program. This program broadens the reach of our brands beyond the scope of our own direct marketing. Through the Intel Inside Program, certain customers are licensed to place Intel logos on computing devices containing our microprocessors and processor technologies, and to use our brands in their marketing activities. The program includes a market development component that accrues funds based on purchases and partially reimburses the OEMs for marketing activities for products featuring Intel brands, subject to the OEMs meeting defined criteria. These marketing activities primarily include television, print, and Internet marketing. We have also entered into joint marketing arrangements with certain customers.

Intel owns significant intellectual property (IP) around the world that relates to our products, services, research and development, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, trade dress rights, and maskwork rights. We actively seek to protect our global IP rights and to deter unauthorized use of our IP and other assets. Such efforts can be difficult, however, particularly in countries that provide less protection to IP rights and in the absence of harmonized international IP standards. See “Risk Factors” in Part I, Item 1A, and “Note 26: Contingencies” in Part II, Item 8 of this Form 10-K.

We have obtained patents in the U.S. and other countries. While our patents are an important element of our success, our business as a whole is not significantly dependent on any one patent. Because of the fast pace of innovation and product development, and the comparative pace of governments’ patenting processes, our products are often obsolete before the patents related to them expire; in some cases, our products may be obsolete before the patents related to them are granted. As we expand our products into new industries, we also seek to extend our patent development efforts to patent such products. In addition to developing patents based on our own research and development efforts, we purchase patents from third parties to supplement our patent portfolio. Established competitors in existing and new industries, as well as companies that purchase and enforce patents and other IP, may already have patents covering similar products. There is no assurance that we will be able to obtain patents covering our own products, or that we will be able to obtain licenses from other companies on favorable terms or at all.

The software that we distribute, including software embedded in our component-level and platform products, is entitled to copyright and other IP protection. To distinguish our products from our competitors’ products, we have obtained trademarks and trade names for our products, and we maintain cooperative advertising programs with customers to promote our brands and to identify products containing genuine Intel components. We also protect details about our processes, products, and strategies as trade secrets, keeping confidential the information that we believe provides us with a competitive advantage.

Our compliance efforts focus on monitoring regulatory and resource trends and setting company-wide performance targets for key resources and emissions. These targets address several parameters, including product design; chemical, energy, and water use; waste recycling; the source of certain minerals used in our products; climate change; and emissions.

As a company, we focus on reducing natural resource use, the solid and chemical waste by-products of our manufacturing processes, and the environmental impact of our products. We currently use a variety of materials in our manufacturing process that have the potential to adversely impact the environment and are subject to a variety of EHS laws and regulations. Over the past several years, we have significantly reduced the use of lead and halogenated flame retardants in our products and manufacturing processes.

We work with the U.S. Environmental Protection Agency (EPA), non-governmental organizations (NGOs), OEMs, and retailers to help manage e-waste (including electronic products nearing the end of their useful lives) and to promote recycling. The European Union requires producers of certain electrical and electronic equipment to develop programs that let consumers return products for recycling. Many states in the U.S. have similar e-waste take-back laws. Although these laws are typically targeted at the end electronic product and not the component products that we manufacture, the inconsistency of many e-waste take-back laws and the lack of local e-waste management options in many areas pose a challenge for our compliance efforts.

We are an industry leader in our efforts to build ethical sourcing of minerals for our products, including “conflict minerals” from the Democratic Republic of the Congo (DRC) and adjoining countries. In 2013, we accomplished our goal to manufacture microprocessors that are DRC conflict free for tantalum, tin, tungsten, and gold. In 2014, we will continue our work to establish DRC conflict free supply chains for these minerals for our company and our industry.

We seek to reduce our global greenhouse gas emissions by investing in energy conservation projects in our factories and working with suppliers to improve energy efficiency. We take a holistic approach to power management, addressing the challenge at the silicon, package, circuit, micro-architecture, macro architecture, platform, and software levels. We recognize that climate change may cause general economic risk. For further information on the risks of climate change, see “Risk Factors” in Part I, Item 1A of this Form 10-K. We see a potential for higher energy costs driven by climate change regulations. This could include items applied to utility companies that are passed along to customers, such as carbon taxes or costs associated with obtaining permits for our manufacturing operations, emission cap and trade programs, or renewable portfolio standards.

We are committed to sustainability and take a leadership position in promoting voluntary environmental initiatives and working proactively with governments, environmental groups, and industry to promote global environmental sustainability. We believe that technology will be fundamental to finding solutions to the world’s environmental challenges, and we are joining forces with industry, business, and governments to find and promote ways that technology can be used as a tool to combat climate change.

We have been purchasing wind power and other forms of renewable energy at some of our major sites for several years. We purchase renewable energy certificates under a multi-year contract. This purchase has placed Intel at the top of the EPA’s Green Power Partnership for the past four years and is intended to help stimulate the market for green power, leading to additional generating capacity and, ultimately, lower costs.

Our Internet address is www.intel.com. We publish voluntary reports on our web site that outline our performance with respect to corporate responsibility, including EHS compliance.

We use our Investor Relations web site, www.intc.com, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information. We post filings on our web site the same day they are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC), including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K; our proxy statements; and any amendments to those reports or statements. We post our quarterly and annual earnings results on our Investor Relations website, at www.intc.com/results.cfm, and do not distribute our financial results via a news wire service. All such postings and filings are available on our Investor Relations web site free of charge. In addition, our Investor Relations web site allows interested persons to sign up to automatically receive e-mail alerts when we post news releases and financial information. The SEC’s web site, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The content on any web site referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.

The following sets forth certain information with regard to our executive officers as of February 14, 2014 (ages are as of December 28, 2013):

Andy D. Bryant, age 63 Brian M. Krzanich, age 53 • 2012 – present, Chairman of the Board • 2013 – present, Chief Executive Officer • 2011 – 2012, Vice Chairman of the Board, Executive VP, Technology, Manufacturing and Enterprise Services, Chief Administrative Officer • 2012 – 2013, Executive VP, Chief Operating Officer • 2010 – 2012, Senior VP, GM, Manufacturing and Supply Chain • 2009 – 2011, Executive VP, Technology, Manufacturing, and Enterprise Services, Chief Administrative Officer • 2006 – 2010, VP, GM, Assembly and Test • Joined Intel in 1982 • 2007 – 2009, Executive VP, Finance and Enterprise Services, Chief Administrative Officer A. Douglas Melamed, age 68 • 2009 – present, Senior VP, General Counsel • 2001 – 2007, Executive VP, Chief Financial and Enterprise Services Officer • 2001 – 2009, Partner, Wilmer Cutler Pickering Hale and Dorr LLP • Member of Intel Corporation Board of Directors • Joined Intel in 2009 • Member of Columbia Sportswear Company Board of Directors Stacy J. Smith, age 51 • Member of McKesson Corporation Board of Directors • 2012 – present, Executive VP, Chief Financial Officer • Joined Intel in 1981 • 2010 – 2012, Senior VP, Chief Financial Officer • 2007 – 2010, VP, Chief Financial Officer William M. Holt, age 61 • 2006 – 2007, VP, Assistant Chief Financial Officer • 2013 – present, Executive VP, GM, Technology and Manufacturing Group • 2004 – 2006, VP, Finance and Enterprise Services, Chief Information Officer • 2006 – 2013, Senior VP, GM, Technology and Manufacturing Group • Member of Autodesk, Inc. Board of Directors • Member of Gevo, Inc. Board of Directors • 2005 – 2006, VP, Co-GM, Technology and Manufacturing Group • Joined Intel in 1988 • Joined Intel in 1974 Arvind Sodhani, age 59 • 2007 – present, Executive VP, President of Intel Capital Renee J. James, age 49 • 2005 – 2007, Senior VP, President of Intel Capital • 2013 – present, President • Joined Intel in 1981 • 2012 – 2013, Executive VP, GM, Software and Services Group • 2005 – 2012, Senior VP, GM, Software and Services Group • 2002 – 2005, VP, Developer Programs • Member of Vodafone Group plc Board of Directors • Joined Intel in 1988 Thomas M. Kilroy, age 56 • 2013 – present, Executive VP, GM, Sales and Marketing Group • 2010 – 2013, Senior VP, GM, Sales and Marketing Group • 2009 – 2010, VP, GM, Sales and Marketing Group • 2005 – 2009, VP, GM, Digital Enterprise Group • Joined Intel in 1990