Intel

Microchips and artificial Intel-ligence

What device are you reading this article on right now? Is it your smartphone, your tablet, or your computer after all? No matter which device you use, without powerful microchips and processors it wouldn't work even remotely. And of course, tech specialists have focused on exactly this important part. Including the world market leader of the semiconductor industry, Intel, which by the way turned a proud 51 years old last Thursday (July 18) - and no sign of old age!

But what exactly made Intel the world market leader? And where is the whole tech industry headed in the future? What's still to come & do artificial intelligence and the Internet of Things really play such a big and significant role? What can shareholders still expect, and how will the dividend develop? Lots of questions to answer today ...

The history and business model of Intel Corp.

Intel's founding goes back to July 18, 1968, when Gordon Moore and Robert Noyce decided together to go into business for themselves. But it wasn't the first time the two had been founding members - back in 1957 they had teamed up with 6 other engineers to found Fairchild Semiconductors. The seed capital of $1.5 million was provided back then by the industrialist Sherman Mills Fairchild, who had already made a fortune in the camera business. Fairchild Semiconductors thus became a subsidiary of Fairchild Camera.

Just a year later, Robert Noyce succeeded in producing the first integrated circuit, which was patented a little later. The invention was based on the planar process, which placed several transistors, diodes, and resistors on a silicon chip. By the way, Silicon Valley also owes its name to the semiconductor material silicon. When Fairchild saw the success of this circuit, he seized the opportunity to buy out the founders and become the sole owner. One by one, they all left the company and struck out on their own. Including Moore and Noyce, who were the last to turn their backs on Fairchild.

At first, the two wanted to call their company Moore Noyce, which in English sounds like "More Noice - more noise." In the end, though, they went with Integrated electronics, which was later shortened to Intel. In the early years, their clients were mostly government agencies that used their circuits for military purposes. Later they also supplied their microchips to industry and universities. Only with the breakthrough of the PC did Intel make the really big leap. The close partnerships with IBM and later also Microsoft demanded ever more powerful hardware - since more powerful software simply needed more energy.

Today Intel builds a lot more than just microchips for PCs. It's now very broadly positioned - besides processors and complete motherboards, it also successfully sells Wi-Fi cards. It's also very well represented in the server business, and with lucrative acquisitions it bought its way into the drone business of Ascending Technologies. The same goes for the sensor maker Mobile Eye, which is helping develop autonomous cars. And of course the Internet of Things currently offers enormous growth potential that it doesn't want to miss out on.

What's coming up at Intel in the future?

One thing is undisputed: digitalization will keep advancing unchecked in the future and will significantly shape our everyday lives. And for that, Intel's products and know-how will of course be urgently needed. The Internet of Things, or rather the networking of everyday objects, will grow enormously in the coming years and thus flush more money into Intel's coffers. Currently this division accounts for just 5 percent of annual revenue at $3.5 billion. Intel has also positioned itself really well in artificial intelligence and is considered one of the biggest investors in young start-ups. It also wants to get back into the graphics card business as early as 2020 and take on its competitors AMD and Nvidia well equipped.

And how will Intel's dividend develop?

Intel shareholders have received a share of the profits since 1992. However, the dot-com bubble in the early 2000s weighed heavily on the company, so the dividend had to be cut several times. Since 2004, though, the payout has been rising every year again, by around 9% (10-year average). So Intel has risen back into the ranks of dividend nobility. The dividend yield is currently 2.5 percent, which is quite decent with a payout ratio of around 26%.

Conclusion:
Intel is by far the world's leading manufacturer of computer chips and will remain so for the foreseeable future. It's very broadly positioned in the tech industry and benefits from ongoing digitalization. For me, Intel is a first-class investment and also a much less volatile one than some other competitors in the industry.