Intel Confidential

Jim KellsoJim KellsoSenior Supply Chain MasterSenior Supply Chain Master

Intel CorporationIntel CorporationJanuary, 2008January, 2008

The Intel Supply Chain ChallengeThe Intel Supply Chain Challenge

Intel Confidential

To be an Unreasonable To be an Unreasonable Person?Person?

““The reasonable man adapts himself to the The reasonable man adapts himself to the world;world;

the unreasonable one persists in trying to the unreasonable one persists in trying to adapt the world to himselfadapt the world to himself

Therefore Therefore all progressall progress depends on the depends on the unreasonable man."unreasonable man."  

  - - George Bernard ShawGeorge Bernard Shaw

Intel Confidential

How and Why to be an How and Why to be an Unreasonable Person?Unreasonable Person?

Some assertions:Some assertions:–Progress comes from desire to create change—Progress comes from desire to create change—unreasonable peopleunreasonable people

–Improvement comes from Innovative change Improvement comes from Innovative change which is focused on real business problemswhich is focused on real business problems

–Innovation just doesn’t happen…it needs care, Innovation just doesn’t happen…it needs care, feeding and DIRECTIONfeeding and DIRECTION

Intel Confidential

An Insatiable Appetite for An Insatiable Appetite for InnovationInnovation

Throughout our history, we’ve transformed the Throughout our history, we’ve transformed the world:world:

Intel Confidential

AgendAgendaa

–A little more about Intel A little more about Intel

–Intel’s Supply Chain NetworkIntel’s Supply Chain Network

– “ “Changing” Environment and Strategy Changing” Environment and Strategy

–The process of Directed InnovationThe process of Directed Innovation

–The outcomes of the processThe outcomes of the process

–The Results The Results

–QuestionsQuestions

Intel Confidential

OEM/Disti/RetailOEM/Disti/Retail

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UnitsDieWafers Units

ContractContractManufacturerManufacturer

OEMOEMFabricatorFabricator

Capital EquipmentCapital EquipmentSupplierSupplier

Indirect MaterialIndirect MaterialSupplierSupplier

DistributorDistributor

Intel’s Supply NetworkIntel’s Supply Network

Intel Confidential

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Indirect MaterialIndirect MaterialSupplierSupplier

DistributorDistributor

Intel’s Supply NetworkIntel’s Supply Network

17 Fabs—soon to be 18 ( first fab in China/Asia)

6 Assembly / Test sites—soon to be 7 (Viet Nam)

100,000 Products

95,000 Unique Customers

70,000 Genuine Intel Dealers

60,000 Wafer starts / week

270 New Product Versions

Intel Confidential

IrelandIrelandIFO/F24IFO/F24

IsraelIsraelFab 8/18/28Fab 8/18/28OregonOregon

AFO, F20, D1CAFO, F20, D1CD1dD1dCaliforniaCalifornia

D2D2

ColoradoColoradoFab 23Fab 23

ArizonaArizonaFab12/22/32Fab12/22/32

New MexicoNew MexicoFab 11/11XFab 11/11X

Mass.Mass.Fab 17Fab 17

Costa RicaCosta RicaSan Jose A/TSan Jose A/T

MalaysiaMalaysiaPenang A/TPenang A/TKulim A/TKulim A/T

ChinaChinaShanghai A/TShanghai A/T

PhilippinesPhilippinesCavite A/TCavite A/T

ChinaChina Chengdu A/TChengdu A/T

Intel’s High Volume Intel’s High Volume Fabrication & Assembly/Test Fabrication & Assembly/Test

SitesSites

ChinaDalianFab 68

Viet NamHo Chi Minn CityViet Nam A/t

Intel Confidential

CPLG Vision / MissionCPLG Vision / Mission Customer Fulfillment, Planning and Logistics GroupCustomer Fulfillment, Planning and Logistics Group CPLG VisionCPLG Vision

– Agile fulfillment capability that is easy for customers and maximizes Agile fulfillment capability that is easy for customers and maximizes shareholder value.shareholder value.

CPLG MissionCPLG Mission – Increase customer and Intel success by optimizing supply and demand, Increase customer and Intel success by optimizing supply and demand,

and delivering valued supply chain solutions. and delivering valued supply chain solutions.

2007 focus areas2007 focus areas– CustomerCustomer:: Enable the field to win customer trust.Enable the field to win customer trust.– InventoryInventory: : Optimize Intel’s Inventory pipeline levels/mix to deliver Optimize Intel’s Inventory pipeline levels/mix to deliver

customer satisfaction and maximize Intel’s profitability. customer satisfaction and maximize Intel’s profitability. – ExecutionExecution: : Drive efficiency in all areas of the Supply Chain. Drive efficiency in all areas of the Supply Chain. – FoundationFoundation: Strengthen our foundation through increased knowledge, : Strengthen our foundation through increased knowledge,

skills and capabilities.skills and capabilities.

Intel Confidential

A little about CPLGA little about CPLG

– Approximately 3500 employees world wideApproximately 3500 employees world wide

– Includes customer service, planning and logistics operationsIncludes customer service, planning and logistics operations

– Responsible for ~3 billion dollars of inventoryResponsible for ~3 billion dollars of inventory

– 500 million dollars of transportation spending annually500 million dollars of transportation spending annually

– Major facilities in Penang, Manila, China,Major facilities in Penang, Manila, China,Costa Rica, Amsterdam, CaliforniaCosta Rica, Amsterdam, California and Arizona. and Arizona.

– Hubs in Shanghai, Shenzhen, Hong Kong, LA and Miami, Hubs in Shanghai, Shenzhen, Hong Kong, LA and Miami, TokyoTokyo

Intel Confidential

Our Supply Chain Strategy: Our Supply Chain Strategy:

Build a High Velocity Supply ChainBuild a High Velocity Supply Chain

Intel Confidential

Supply Chain MetricSupply Chain Metric

Say “Yes” to Customer's Upside, Pull-Ins, Swap requests in 1 Biz Day Say “Yes” to Customer's Upside, Pull-Ins, Swap requests in 1 Biz Day

Improve Customer Committed Dock Date (CDD) Improve Customer Committed Dock Date (CDD)

Order Fulfillment Quality DPMOrder Fulfillment Quality DPM

Percentage of CPU SKUs with 2-6 wks of Finished Goods InventoryPercentage of CPU SKUs with 2-6 wks of Finished Goods Inventory

Pipeline Inventory Pipeline Inventory

% Mix Forecast Variability Reduction per quarter on strategic, volume families. % Mix Forecast Variability Reduction per quarter on strategic, volume families.

% of CPUs & Chipsets SKUs on new Item and BOM Nomenclature% of CPUs & Chipsets SKUs on new Item and BOM Nomenclature

Metric Driven Supply Chain Metric Driven Supply Chain structurestructure

Helping Intel’s Customers Go Faster

Intel Confidential

Challenge: Meeting Challenge: Meeting Demand and Optimizing Demand and Optimizing

SupplySupply

Intel Confidential

Complexity Today – Simplification Critical for Complexity Today – Simplification Critical for FutureFuture

Intel Confidential

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UnitsDieWafers Units

ContractContractManufacturerManufacturer

OEMOEMFabricatorFabricator

Capital EquipmentCapital EquipmentSupplierSupplier

Indirect MaterialIndirect MaterialSupplierSupplier

DistributorDistributor

Long throughput cycle in semiconductor Long throughput cycle in semiconductor industryindustry

Semiconductor manufacturing TPT varies between 2-4 monthsSemiconductor manufacturing TPT varies between 2-4 months

Intel Confidential

Challenge: Fulfilling Demand while Challenge: Fulfilling Demand while Optimizing Inventory and Factory Optimizing Inventory and Factory

costscosts

Demand

Supply

FactoryCosts/Output

Intel Confidential

The key challengesThe key challengesComplexity driven by:Complexity driven by: CustomerCustomer ProductsProducts MarketMarket Platform strategyPlatform strategyMade more difficult by need for Made more difficult by need for affordability/profitabilityaffordability/profitability

Intel Confidential

Supply Network ResearchSupply Network ResearchVisionVision

–Supply Network becomes a competitive advantage.Supply Network becomes a competitive advantage.–Virtually connected with suppliers and customers.Virtually connected with suppliers and customers.–Meet aggressive goals to reduce cycle time and costs.Meet aggressive goals to reduce cycle time and costs.–Positive impact on bottom lines of Intel and its Positive impact on bottom lines of Intel and its customers.customers.

–Supply chain is HIGHLY RESPONSIVESupply chain is HIGHLY RESPONSIVE

Intel Confidential

Inventory vs Service LevelInventory vs Service LevelS

erv

ice L

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Inventory

Today’sEfficient Frontier

200619%

45%

65%

28woi22woi17woi

2007

2008 How Do you Get There:Productivity Improvement

AMB:Lead Time

Demand Forecast VarianceSupply Variance

Tomorrow’sEfficient Frontier

Intel Confidential

What’s next?What’s next?

Intel Confidential

Paul Said it in the Q2 07 Paul Said it in the Q2 07 BUM: BUM:

The Business StrategyThe Business Strategy Expand our business through proliferation of Expand our business through proliferation of what we do best:what we do best:–Keep leveraging the current market in CPU’s Keep leveraging the current market in CPU’s

–Develop and deploy to the new market of Develop and deploy to the new market of connected devicesconnected devices

All fueled by the continuous growth the All fueled by the continuous growth the internetinternet

Intel Confidential

Extending Intel Extending Intel Architecture …Architecture …

Notebook Desktop Server

PLATFORMS

PerformancePerformance/Watt

User Valued Features

Common Element: The Internet

MID

Ultra Low PowerSufficient Performance

Extreme Integration

CE Ultra Low-Cost PC

July 2007 BUSINESS UPDATE MEETING Q3 2007 INTEL CONFIDENTIAL – INTERNAL USE ONLY

~$10B ~$10B ~$10B

2011 Unit TAM > 900 Million Units

Intel Confidential

Common FactorsCommon Factors Increasing complexityIncreasing complexity Inability to predict—Inability to predict—

–DemandDemand–SupplySupply

Because we can’t really ever predict GREATBecause we can’t really ever predict GREAT–Need for speedNeed for speed–Need for later differentiationNeed for later differentiation–Have to be FAST and LEANHave to be FAST and LEAN

Need to satisfy customersNeed to satisfy customers Need to relate the capabilities together so that we align Need to relate the capabilities together so that we align inventory, planning and customer expectations togetherinventory, planning and customer expectations together

Intel Confidential

Characteristics of an Excellent Supply Characteristics of an Excellent Supply ChainChain

1.1. Supports, enhances, and is an integral part of a company’s competitive Supports, enhances, and is an integral part of a company’s competitive business strategybusiness strategy

2.2. Leverages a distinctive (not necessarily unique) supply chain operating Leverages a distinctive (not necessarily unique) supply chain operating model to sustain competitivenessmodel to sustain competitiveness

3.3. Executes well against a balanced set of operational performance Executes well against a balanced set of operational performance objectives/metricsobjectives/metrics

4.4. Focuses on a few business practices that reinforce each other to Focuses on a few business practices that reinforce each other to support the operating model and best achieve operational objectivessupport the operating model and best achieve operational objectives

An excellent supply chain:

* L. Lapide, “The Four Habits of Highly Effective Supply Chains”, Harvard Business Review Supply Chain Strategy Newsletter, HBSP and MIT-CLT

Intel Confidential

This is what we have to build to support the low This is what we have to build to support the low cost pc supply chain……cost pc supply chain……

Intel Confidential