Day on the Internet. We're excited to have you here today. We have a full agenda and I'll share the schedule for the day in just a minute. But before I do that, I want to tick through a couple of logistical details. First, if I can ask everyone to check their phones to make sure that they're set to silent, just so that we have uninterrupted presentations over the course of the day.
Also throughout the day, we'll have beverages available for anyone who needs to rehydrate. We'll just go outside the conference room doors here and you'll be able to grab something to drink. Also, we have charging stations here in the back of the auditorium if you need to recharge devices. We've also got them to in the back of the building here where you checked in at the registration desk this morning. And then finally, we do have Wi Fi.
I understand that some folks are having trouble. We have one zone that's working, one zone that doesn't. The registration information for the Wi Fi is in your welcome packet. We'll get information and get that other Wi Fi zone that's not working fixed we'll get that to you here shortly. All right.
With that out
of the way, I'll read the
risk factors and then we'll move on to the schedule for the day. Today's presentations contain forward looking statements. All statements made that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. To please refer to our most recent SEC filings, including Form 10Q, 10 ks and earnings release for more information on the risk factors that could cause actual results to differ. If we use any non GAAP financial measures during the presentations, you'll find on our website intc.com the required reconciliations to the appropriate and comparable GAAP financial measures.
Okay. Now moving on to the agenda. Andy Bryant, the Chairman of our Board of Directors is going to kick off the day with a welcome to all of you and an introduction of our CEO. BK will then take the stage for the 1st keynote. He'll discuss the 3 strategic vectors that underpin our approach to driving growth and shareholder value, he'll spend some time on each one of the business segments with a particular focus on the role of IP reuse and efficiency and synergy across the breadth of the product portfolio.
BK will then hand off to Bill Holt, who's a General Manager of our Technology and Manufacturing Group. Bill's going to share an update on our 14 nanometer process ramp, followed by a discussion of some of the material science and transistor innovations that he and his team have been working on. After Bill wraps up, we will take a short break. Out in the lobby, we'll have refreshments, people can recaffeinate and the executive team will be available at that point for informal networking. I will point out that lunch starts a little bit late this year, so you may want to grab a snack during that mid morning break.
When we return from the break, our CFO, Stacy Smith, will take the stage and Stacy's position immediately following Bill is no accident. You're going to see some explicit links between Stacy's material and Bill's material, specifically the discussion of our cost structure and our segmentation strategies. Stacy is going to begin with some observations about the evolution of our industry before he reviews the financials and our performance and outlook for next year. To then as Stacy finishes up, I'll invite BK and Bill to join me on the stage with Stacy and we'll have a Q and A session. I'll say a little bit more about the logistics of Q and A when that point in the morning comes.
We'll then transition to Diane Bryant. Diane is, of course, the General Manager of our data center business. She's going to spend some time describing the underlying trends driving data center demand with a specific tilt toward why Intel is positioned to win across a whole range of workloads in the data center. To Diane will hand things off to Kirk Skougan, the General Manager of the PC Client Group. He's going to talk about PC Innovation, the role of innovation and end the role of performance and new user experiences in catalyzing growth in that segment.
We'll wrap up the morning with another Q and A session, this time with Diane and Kirk. To at that point, we'll break for lunch. The lunch will be very informal. We're going to have at least 1 Intel executive, in some cases, 2 positioned at each table, which will be in the check-in area where you greeted or where we greeted you earlier this morning. You're guaranteed to be seated with at least 1 Intel executive.
Please feel free to grab any chair you coming back from lunch, we'll take a new approach to the structure of our afternoon. We've not done it this way previously. Our President, Renee James, is going to lead us through a discussion of a series of strategic platforms and then she's going to invite the general managers of several of those platforms up on stage to do deep dives on each of their businesses. We'll hear from Herman Oyle regarding multi comms, Doug Davis on the Internet of Things and then we'll wrap things up with Rob Crooke on nonvolatile memory. To as Rob concludes his presentation, we'll do one final Q and A with the last few presenters and that'll wrap up the day's formal presentations.
But we will invite you to join us for a reception. That reception will be held in the same place as lunch, which was also the same place you checked in earlier in the day. As we do every year, we'll have the executive team, a really wide swath of the executive team available for informal interaction and Q and A. And we'll also have a nice rich set up demos for you to check out, hardware and software demos. And that concludes the schedule for the day.
With that, I'd like to invite the Chairman of our Board, Andy Bryant up on stage to share some observations and to introduce BK. Andy?
Thanks, Mark. Good morning. I got a couple of good mornings back. I would like to also take the opportunity to welcome you to the Intel 2014 Analyst Meeting. I would like to begin to By introducing a couple of our independent board members who will eventually be sitting over in this area.
The first is Jim Plummer, Recently retired Dean of Engineering at Stanford University. The second is Frank Gehry, who is a principal at Darwin Capital Advisors, Frank will be here sometime towards the middle of the morning is what I've been told. So they will be here. To The foundation of Intel's business model is Silicon Technology, to Also known as Moore's Law. It's a lot more than of course Moore's Law, but that's how it's frequently referred to.
To This has defined Intel's past and quite frankly will shape our future for years to come. Moore's Law to Teaches us that capability, silicon computing, whatever you want to however you want to define it, will continually get smaller, lower cost, More capable, could be better power usage, could be better speed, and by inference, will also become more mobile. To And yet, many of you probably remember a year ago when I stood here and said I was embarrassed by the fact that we had not paid attention to For the lessons of Moore's Law. We had as Bobby, not only did we not pay attention to our heritage, We've not even looked around us. If we had looked around us, we would have seen that Moore's Law was driving new forms of compute capability, new forms of communication capability.
To and quite frankly, we had missed it and we were we had set on the sideline for far too long. Today, I'm actually proud to say much has changed. To In the last year, we've gotten ourselves on track to ship 40,000,000 units into the tablet marketplace, which should make us to by most accounts, the 2nd largest supplier of silicon into the tablet marketplace in terms of processing capability. To We also recently announced a modem deal in LTE with Samsung, a flagship company flagship product for us. To Beyond that, we've you've seen the company announced some strategic relationships like with Rockchip, like with to Spread term.
We've been in business in China for 29 years. This continues to evolve our presence there and our ability to work with Strategic partners like these 2 companies. So you see a company that's changing. You see a company that's listening to history again, to watching the world around us and making significant progress. There's a new energy in the company, a renewed commitment to To being successful in the marketplace, our new resolve to be willing to take informed business risks.
To This is much different than we saw, we'll say, a year ago. It's really heartening to see these changes. To Now by the way, it helps when your other businesses are performing well. We've seen the memory business, IoT, to PCs, data center, all have relatively good years. And when things are going well, it gives you the time to And the resolve to make the changes you need to make in other parts of your business.
Now, of course, all is not Well, we know that. I'm not I would be remiss to tell you, I'm not aware actually it's more than I'm not aware. We, the company, we, the management team, we, the Board to Are aware that we're losing a lot of money trying to regain our presence in the mobility space. When I look at that, I'm not going to tell you I'm proud of losing the kind of money we're losing, but I'm also going to tell you I'm not embarrassed by it like I was a year ago about where we were. This is the price to You pay for setting on the sidelines for a number of years and then fighting your way back into a market.
To We will improve this. We will not continue to accept a business with multibillion dollar losses, but this is the price you pay to get back in and we will get back in. To We are getting back in. The other thing that's interesting is in general, it's been a good year for Intel. You could easily stand up here and say, aren't things wonderful.
Many of you know me from the past, I'm kind of an Andy Grove disciple. To In Andy Grove world, you don't get victory laps. You may get a moment to be happy about what you've accomplished And then you have to move on. Every day we have new challenges. It doesn't stop.
We cannot become complacent. We have to continue to get a return on investments. We have to continue to be the best in the world at silicon technology. We have to continue to earn high returns on these innovations. If we don't do these things, we're not doing our jobs.
I also want the investors to know the Board listens to the investors. To What we've heard from investors are a variety of things, but what we are focusing on is making sure that we're comfortable with the strategic decisions and Plans of the company. We review and monitor those. We are listening to the investors on board composition And we're listening on cash. So as an example, we do monitor the mobile business unit.
We do monitor this, we approve the strategy. We do look at the losses. We do look at the plans to make those better, along with quite frankly, the data center and how it's going to continue to grow and be a profit driver for Intel. To We've added a new board member who brings new experience and capabilities to the board this year. And as Many of you have noticed we've increased the buyback pretty dramatically using our cash less on the balance sheet and more to return to shareholders.
So we think we're seeing real progress. We will continue to monitor and we will continue to expect to see the good results we've seen to be better in the future. Now the good news is I don't have to do all that.
So what I'd to I
could do now is bring up the person who will be leading the company and delivering everything I just promised on, our Chief Executive, Brian Krzanich.
Good morning. This is my second to Investor Day as the CEO of the company. So I'm excited and I was sitting down in my chair and I looked up and I was Kind of gauging at all the products I thought. About a year ago, I don't know if I'd have seen the diversity and some of the innovation that are on the stage to Aaron, I'm really proud of what we're going to show you this morning. So as we go through the day, as we as each one of us comes up and does a presentation, We do the demos.
You'll see the demos during the breakouts at lunch or this evening at the reception. Really take a look and ask questions about What's driving the innovation? How are we listening to the marketplace? How are we thinking about where the market is going to go with innovation? To but definitely this is a different field than a year ago.
I thought I'd start with to a little bit I didn't tell we're very good at grading ourselves. And I thought I'd start with what we said last year And then talk a little bit about how I felt we did. We put up this slide last year because we thought with the new leadership to With Renee and I, we should really talk about what will stay the same and what will change. What we said will not change are the fundamentals that Andy talked about, to The relentless pursuit of Moore's Law. I'll talk about that this morning and Bill Holt will talk about that as well.
And that we would develop products to That continue to make the best PCs in the world. And I think what you'll see up here today is PCs that are just dramatically transforming the way we think about PCs, the way we interact with PCs. To The things that we would do differently is really that market driven view of our industry. No longer would we say this is the way we'd like the industry to be. We've really been asking ourselves, to Okay.
But where is it going to go independent of what we do? Where do the customers want us to go? Where does the end user want us to go? To I thought another one that was really important here is that we create platforms, not just silicon. We're finding that as we drive this innovation, that's becoming much more important that you can no longer hand somebody a piece of silicon when you talk about Real sense.
So when you talk about a product like Sprout, you really have to work on a platform and then work with the software to And all of the integration that the customer requires in order to bring a product like that to market. There's innovation on both sides of that equation to bring a product like that. To And then drive a focus on bringing that innovation to market much more quickly. I think you've seen a lot of that. And one place I always like to kind of highlight that with because there's always the classic products that we've been able to do, PCs, data centers, was wearables.
A year ago, we talked about That we saw that market that we weren't going to be absent. But now you see products coming to market. You saw our SMS to headset. You see our Mica bracelet. All of those things are already in market and already setting trends and innovation.
So I
think for me, I graded this pretty high. Andy said in Grovian terms, you get your moment. So I thought I would take my one little moment and talk about Grading of 2014, I promise it will just be a moment. But it really was or is a record year of record so far, we're really setting up to be just really a year where the company is driving on all cylinders. We set a goal of hitting 40,000,000 tablets.
We said at the beginning of this quarter, we're well on target to that. To And this quarter, we felt like we would cross over that 40,000,000 unit number. As I said, we're still on that target as we move through the quarter. Q3 was very special to us because we crossed the 100,000,000 unit number for a quarter in CPU units. And that's a number that's kind of been out there for a long time for us to And for us to cross over that number, we were all really excited about that.
To me, that meant not only were we able to grow the top line through ASPs, which we've done in the past to mix and our great products, but there was true demand and increased demand coming for our products. To Andy talk to you about shareholder return that comes in both our buybacks, our stock price, our dividends, 45% shareholder return for the year. To And the last is we forecasted a $55,900,000,000 revenue for the year, which will be a record year. So I'll take my moment and I'll move on to what we still have to do, but I thought it was important to share with the investors that we're very proud of this year and that we really feel like, as Andy said, We're on a momentum to carry change throughout the company. So let's go now to the work that we have to deliver.
To as Mark said, we feel like the company is driven by 3 key vectors. The first being Moore's Law, to And I'll talk to you a little bit about that this morning, but Bill is going to give you a really fun in-depth discussion of Moore's Law for those who really enjoy it. To I do want to make a point, next year is the 50th anniversary of Moore's Law. To And I don't think a lot of people think about this being a law that's been around for 50 years. And through that time, to My 30 year engagement with that 50 years, myself personally as an engineer at Intel, I can tell you many times people have talked about The law ending.
Our job at Intel is to make sure it lives on for as long as possible. But 50 years is a momentous to milestone and we will be doing some things next year to recognize that. The next one is integration. And I think we've done a lot of work around integration. You see some really good products.
We'll talk about them a little bit this morning. Sofia is a great example where we've tried to really drive integration. To but you're seeing more and more integration with Broadwell, you'll see more next year with Skylake, we've got Cherry Trail, all of these products are driving more and more integration in. And then we'll spend a little bit of time showing you, giving you some examples of this shared IP. To And there are examples here on the stage that as you go through the day, you're going to see when you have an IP like RealSense, to have this very unique capability in the computing and the imaging coming together that you can really drive that IP across many, many products.
We'll talk to you a little bit about some of those and I'll tease out some that you'll see coming as well next year. So these are the 3 strategic vectors that we believe drive most of what we do. Our mission, vision strategy then is built on those vectors. To And it's really the mission to really utilize Moore's Law. We had it.
We believe we lead in it. We drive it. We define Moore's to Law, the company. And so our job now then is to really utilize the power that that could deliver in all different ways. And I'll show you later, to But there are 3 vectors that what we think of Moore's Law that you can use drive with Moore's Law.
Our vision is that it's no longer to Just that you want to provide a smart device, but almost every device that we talk about today will be both smart and connected. To And so the criticality of IPs like modems and Wi Fi and Bluetooth are obvious to us and important and we'll drive those across our products. To And then our growth strategy is that we believe the highest shareholder return comes from a strategy that uses these core assets to move into profitable adjacent businesses. So as we talk about the Internet of Things. We look at that as an adjacent business.
We look at it as how can we move IP to From those cores, from the Moore's Law work we do, from the innovation around connectivity that we have to for the PC and for other mobile products, for all of the things that we do, how can we move that IP into the Internet of Things space in profitable and efficient way. That gives us, we believe, real leverage to move into these markets. So to kind of demonstrate that, I thought what we would do is spend a little bit of time and first we'll talk about those core assets. I want to talk a little bit about cores, to a little bit about process technology and a little bit about shared IP. And then we'll go around and talk about some of those adjacent businesses this morning.
To And that'll be how we kind of have a discussion of what's the work that we're going to get done. To So as you look up here, let's talk about the cores first. And it's really the core is that to center of the PC. And Kirk will talk to you about this, this morning, but we believe that we've really driven stabilization into the PC market. And we'll talk about forecasts, but whether you consider it a flat forecast or slightly up forecast.
I think most people have said it's not in that steep decline that we were seeing a couple of years ago. To It can argue about why and what is driving that. But we believe that what's really been driving that is choice. We're across a lot more price points and we'll talk about that. OS, you can select almost any OS now.
A real innovation in form factor and usability and user interface, all of those things have driven. To what we're going to show you and I think this next chart really kind of highlights it best to Is it the lines of what makes up a PC? As you look across here, if you can tell me where the PC line ends to And where the tablet line begins, it becomes hard. It becomes hard because we've driven innovation, to Right. And as we move to Broadwell, we brought out the Core M, devices are getting thinner.
That's also driven a lot of what's driven the stabilization. It also is what we believe kind of drives Why we see large distributions in forecasts for PCs? A part of that is disagreement, debate, discussion about what is a PC. To Is the Surface a PC or a tablet? Is this a PC or a tablet?
We can each pick our devices out there and ask ourselves, Are these truly PCs or tablets? We're very comfortable with that. We believe it actually plays to our strength that allows us to move that IP to Ian that innovation across the spectrum. This also gives us a clear opportunity to be successful in forecasting because to We can guarantee that somewhere in that range, our forecast will lie. And that's a good thing too.
To But the bottom line is that almost everybody is forecasting that this market has stabilized. And What Kirk is going to come up and talk to you about is he believes he can actually make this grow. And what Stacy will talk to you then about is, okay, Even with a stable forecast, how does 2015 look? So that's the stabilization of the PC. To The next thing I've been working on is real innovation around the PC.
And again, Kirk will talk to you about a lot of the devices here. To But I want to talk about RealSense because to me RealSense is a great example of IP that will go in many, many to Our real sense is a camera capability along with compute and software that allows the computer to really start to begin to see. To And if you step out of the just basic PC and start talking about devices with compute capability to be able to see to interact. Then you start thinking about all of the various applications. So, it'll start in the PC.
You'll see it first come out. You'll see it first be things like the Dell Venue 8, which is our first substantiation of this where you can do different focusing, right? We announced this. You can do measurements. But as we go through 2015, you'll see this one move into more and more capability as we drive this enter our products.
You'll see you facing and world facing. But as you watch this come out, think about the future. Don't just think about the PC that you see and am I comfortable with the fact that I'm using my hands. We're going to talk about how people are stepping away from the keyboard and stepping away from the 2 dimensional world into a 3 d world. But think about the usage to In phones, in the Internet of Things, right?
Think about robotics that can see, truly see with depth and perception. And you start to think about what you can do and what you can drive into the fields and segments of this business to that we can take this IP with very little additional R and D and carry it into new areas, to Right. That's one of the key strengths that we as Intel bring to these marketplaces. To we also have wireless charging, security. We've got efforts in to wideeye and widegig for displays and connectivity, all of these things you'll see transform and move across to the various segments of our business.
And then on the right, we call it the options for everybody. And I believe this is one of the other things that's really driven stabilization in to segment is that you've got price points from $199 to as high as you'd like. To And in fact, one of our fastest growing segments is the real high end gaming segment, right? To But that no longer does when somebody walks into the store and says, I want to buy a new PC, are they limited to some price points that are to $600 to $1200 They can come in for a low price point if they need to, dollars 199, dollars 2.99 Looking at different capabilities, often they come in with one expectation and they tend to buy up as they see the increments of performance that they can buy. To And then we have options for the real high end, as I said, for the gaming devices.
And then OS of choice, that's how we call it is to We want to provide platforms that really can go across every OS and are optimized and run best on to Sure. For every OS. And we're still the only supplier where an OEM can build a single platform And really choose amongst all these OSs at literally time of shipment or in the field. To That's a unique capability we bring to this marketplace that we feel has added a lot of stability, a lot of capability and a lot of choice for the customer. To So that's the PC.
The next area I want to talk about is the data center. To And I guess Diane was able to get a demo even with the data center. And it's It's
very exciting.
Yes, it's exciting. I've seen it. To for us, the data center is really Intel's next big business. To it's already a big business. We've said that we can continue to grow it at a 15% CAGR Through at least 2018.
It's got a broad customer base. We've got a good market position. We've got leadership products and leadership technologies. Diane is going to talk to you a lot about this. This is an area that we've really focused on well as a company and we have a plan to continue to focus on this And continue to move this at this fast growth rate.
We're talking about a $14,000,000,000 business that we're saying we're going to continue to grow at 15% rate to through several more years at least. We don't do that just by great products to And such, we're going to do that through real strategic planning. And you've seen this come out and play out a little bit this year. And we One of the focus areas we call software to silicon. The idea here is that Again, our Moore's Law capability gives us transistors that are highly capable and we're able to add at a fixed cost basically With each generation, more and more of those transistors.
And we believe there's a unique capability that if you move Certain segments of the software down into that silicon, you can provide a lot of either performance or feature. To Performance is obvious. It runs faster. It boots quicker. It goes the answer comes out sooner.
To but you can also provide features such as access into the encryption engine and so security of moving data around the system is much higher Because the software is in the silicon and it's able to access the encryption much easier, much more directly. It's not passing through buses. To A great example of that was our first kind of effort into that, which was our partnership with Caldera to that we started this year and you saw us do an investment in Cloudera and start to build a real strong partnership. The idea there was to We wanted to build a very strong relationship between the two companies, so that we would both open up the details of how our systems worked to allow the 2 to start building systems upon each other. You saw the first Intel optimized Cloudera release come out a few weeks ago.
To You're going to you saw Diane announced earlier this year, a custom integrated Xeon with an FPGA product for our customers. To That FPGA is designed to allow customers to bring that software down into the silicon. And then you'll see us to continue to work on software defined infrastructure using our OpenStack. And again, the same thing, the idea here is In each one of these cases, bring the software down into the silicon, provide performance, provide features, provide unique capabilities that We're able to do through Moore's Law and through IP that we've shared up into the data center that we believe nobody else can do. And that is going to be a driver of a lot of the strategy in this area moving forward.
You'll continue to see this effort of software to silicon and building out these capabilities across the data center. Diane will talk to you a lot about that as she comes up this morning. To move now to the next section, one of the core fundamentals is Moore's Law. And Bill is going to talk to you about this in great detail. To But I wanted to just talk about kind of my view of Moore's Law from this seat.
And I always remember that 1st, you have to have leading edge transistors. The real driver of Moore's Law is not only the scale function to The transistor, but the performance function of the transistors. You've got to really drive both variables. And that's really what's driven Moore's Law over the last few years and why you see It's not only scale, but it's architectural or the structure of the transistor changing as we went through strain silicon and high k metal gate and FinFETs, all of those things are driving not only the scale, but the performance of that to Transistor, the capability to drive the speeds and the leakage and all in one and Bill will talk to you about that. But I always remind people that Moore's Law It's not a single path.
It's not a single road as a company thinks about what you do with Moore's Law. There's really 3 vectors to That you can then utilize Moore's Law for. Those three vectors are price, cost, Performance and power. And you get all of those as you drive the Moore's Law equation. To But as an architect then, you choose among those and you balance those as you define your products.
And so you can actually go in and move along those vectors, trading off one for the other often, to But optimizing each of your products. And so I always remind people Moore's Law is not a single road, not a single path that you have to choose. To you really have options to go down multiple paths here and that's important. Okay. The last one of the key vectors I said was really pushing IP out.
We talked to you a little bit about I used RealSense as a good example. I thought we were talking to investors, I thought, well, okay, to They are always interested in how we spend our money and how is it in the hardware. And so we put the graph up on the left. To And the graph on the left is really our R and D spending. And what you see is about 75% of our R and D spending to is really shared R and D spending.
It's either the fundamental spending for Moore's Law, the basic architectures, to the validation and testing labs, all of those things that are simply required to build any product that you want to go do. To And then the shared platform IP as I call it, things like the connectivity, graphics, to modems, memory, memory control, all of those kinds of things that They're used broadly across a wide swath of products. So 75% of our spending is what we believe Could be used in any one of our businesses pretty much. The other 25% then is broken out into the various segments. And you can see The largest segment ends up being the PC, but a fair amount of that, even though it's PC specific and these are things like RealSense or WideEye or to Y gig or all of those things.
But they end up actually moving down into that orange segment down below Eventually, as they spread out across products. Any one of those things, wireless WAN, you could have said Was a PC R and D at one time, but over time they moved down. And that's really our process. To And then on the right is actual diagrams. We used actual products and what we're showing you is Haswell to By the way, I had to practice this a couple of times last night because I am color blind and I got this the colors wrong a couple of times yesterday.
So to hopefully get this right this morning. But the blue areas are the shared IPs. So as you look at Haswell to And you move over into the Xeon or the Baytrail. The blue areas are things that whether it was in Haswell or whether it's in Xeon or Baytrail, it's the same. And then we wanted to show you that it can work the other way as well.
And so the green area, yes, to Green area, they gave me my cheat sheet here, so I did the colors right. The green area is from the base rail back into the Haswell, right? To And so those are things like WAN and Bluetooth and some of the low power connectivity capabilities that we developed for Baytrail to that we've pushed back into the PC for certain segments. So these are really good examples. You can see how much of the die area to It is really shared amongst all of these products.
And to me, this was a great user example of to this is real. This isn't just foils. The IP has simply moved from one side to the other. That's why you see us to The work, the time is spent getting Haswell out and then boom, boom, boom, boom, boom, boom every 3 to 6 months all of these other products to kind of flow out as well as long as the SKUs as well as the SKUs of Haswell and things like that. And you're seeing the same thing on 14 nanometers.
To Broadwell has come out. We said Cherry Trail will be out by the end of the year. It's the same process. The IP is reused and moved over. To.
Okay. I want to move on now to the first of the adjacent businesses and I think we have to move to mobile first. To The first thing I wanted to talk about is, as Andy said, I think I remember a year ago to And I said, yes, I think we can let's set an aggressive goal and 40,000,000 tablets. And Andy said, no, no, no, no, you need to say you're going to do north of 40,000,000 tablets. So, I'm telling you still that we're on track to be north of 40,000,000 tablets this year.
To And as Andy said, you can't stand up here and talk about 40,000,000 tablets. And I am very proud of the innovation, the inform factors, how we've moved into the China ecosystem, all of these areas Without talking about the loss that we have, as Andy said, it's not we're proud of it, but we're not ashamed of it either. To When you come into a market that's that far along its maturity curve and you're fairly absent from it, to You've got to go get your way in and the products weren't really aligned to it. Our strategy wasn't to go there. We were shifting our strategy and you have to make a choice.
Do I wait until all my products are lined up? You know yourself, it takes a year at minimum, usually 2 or more to move a product alignment to To a market. And so you look at that and say, can I afford to be absent from a market for that period of time or do I need to make my move, take my losses, but establish my relationships, establish my footprint and start driving innovation and move my products? I believe that it actually helps us move our products at a faster rate too, right? To So we understand it.
We were very transparent about this was how we were doing and why we were doing it. And what Stacy will talk to you about is how we think we're going to move through 2015, what kind of improvements we think we can make and how we look at the future of this. To But we're in this business to win and we're in this business not to lose money, but to make money in the long run. To you see a similar strategy being driven into this of Cost optimization and differentiation, similar to what we do in the PC space. And actually, we think about this as an extension, as really a right arm of the PC space.
The first thing we've worked really hard on this year is good, better, best. To And that's our classic segmentation of our products, allows us to segment the price points, the costs to for us and this is how you drive a lot of that cost reduction and improvement in the P and L of the business. Sofia has been key to that. I remember roughly a little bit more than a year ago, Sofia wasn't even on our roadmap. But as we saw our need to get into mobile space and we were looking for what the right pragmatic solution to get into this space was the team came with the Sofia solution and We've acted very, very quickly.
When Andy talks to you about the kind of different atmosphere around the company and the different behavior and the way people feel, I think Sofia is a great example. The team came up with the option. We said that's great. We need it in market to by the end of next year, they gulped and said, okay. And I can tell you that for the first substantiation of it, the 3 gs version, We're on schedule to have it qualified for production by the end of this year.
And in the first half of next year, it will be shipping. To And then we have the LTE version ready to be qualified in the first half of next year and shipping towards the middle to latter half of the year. To That's a great improvement. So now we have a set of products that go from the low cost a good section with Sofia all the way up through Cherry Trail, which we said was also on schedule. And this as these move through the segments next year, provide us write product, write cost for the right segment of the business.
And then you see the Venue 8, as I said, was the first to substantiation of real sense moving into this space. But as we move through next year, you'll see more and more of that. And we've demoed Examples in a lot of places, whether it was CES or IDF or if you've come to Maker Faires, you've seen us demo it there. To The ability to use RealSense in a tablet and scan people real time, scan objects, all kinds of things. To And the Sprout is another good example of a RealSense application at the PC level.
To When you talk about the mobile space though, you have to talk about phones also. It's not just a tablet discussion. And a lot of people have said, what's Intel's tablet strategy? To And our catalyst strategy is to do it smartly. We feel like we can move into this space and we can do it in a way That allows us to go a little bit more controlled, a little bit smarter along this path.
And what we've done is we've taken the Sofia product to remember about a year and a half ago, we said that we had developed a synthesizable core, to An Adam core that was basically defined in software. And that was a big deal for us. That was the first time Intel had done that. And people don't I don't think as we announced that people grasped what that meant. But that was actually the first step in setting up these relationships, because you had to have a synthesizable core in order to go out to a partner and say, I'd like you to build your products now with Intel architecture.
And I can bring you a core that I can transfer to you in software And you can build with. And that was critical for us to be able to do this. So you saw us set up new partnerships to With Rockchip and Spreadtrum, why them? Well, China is going to be the world's largest phone market. To It's already the fastest growing phone market in the world.
And so why not partner with to 2 of the leading edge silicon providers in those segments. And Rockchip has more tablets, to But they have a desire to move into phones. Spectrum is very much phones. They're in China, but also worldwide to with a desire to move up as well. And we brought this synthesizable core along with other capabilities like our modems and things like that.
To And they will build Sofia like products of their own roadmap that we both will be able to sell. To But they have that relationship in China. They have the markets already in place and they can take this to market for us to In phones and tablets and other products. We believe this is a smart, efficient to wait to go into that market to have an IA presence and a large presence, to But using partners that are already there, already established. So That's what those mean.
And then you've seen that we've done long term agreements with some of our key OEM partners, ASUS and Lenovo are the 2 best examples. To You see ASUS already, you see the PhonePad or the Pad phone that's already out. That was the first to Intel modem phone in the U. S. So for those who've been wondering when we would break into the U.
S. Market, to you can go and you can buy an Intel modem driven phone today. To But those modems aren't just critical for phones and this is important. We believe the modems are critical For almost every product we'll build. And you can imagine in the Internet of Things not having a modem or having access to a modem It's going to be critical.
You're talking about monitoring a pump out in the middle of nowhere on a drilling platform, you're going to want to have some connectivity back, to Right. You can go all kinds of applications and you're going to want a modem, you're going to want Wi Fi, you're going to want various connectivities in the Internet of Things. To We chose two examples here, tablets and PCs, because we thought, okay, but these are areas that are critical to us today. To And these are the forecasts modem attach rates over time for each of these devices. To We're already seeing modems attaching at different levels in the PC space With a lot of them as aftermarket add ons, but a lot of the Chromebooks that are being sold today, because Chrome is really best when it's connected, Are already being sold with modems built into the system as is.
So modems will become more and more critical even in our core space. So we felt investment in modems was not just about being in phones, but it's being in those adjacent products like Internet of Things and tablets to And it's critical for our core business like PCs. So we believe an asset that over time will become more and more valuable, more and more critical to And one that we'll continue to invest in. I didn't think I to get through the day without talking about the organizational change we made. And we made it this week and we did decide to do this to prior to the investor meeting, so that we could spend some time talking about it.
To It really was driven by 2 vectors. On the platform side or basically the product side, to It's really driven by the fact that these are platform relationships. You're going into a customer. To these customers are oftentimes the same customers that are buying PCs and servers and IoT or other products with us. To And you're working on a platform, a whole board that is going to build a product and a software stack and everything.
To And one of the big feedbacks we've gotten this year is they think about these products as a continuum, just like We've told you, as you look up on this stage, it's becoming a continuum. And so they don't separate out in their own organizations, PCs and tablets to and fablets and things like that. And so the feedback from the customers and even then within our own organization was These are really one continuum, one set of products. And so the first half of the reorganization was to move the organization the platform organization in so that it was a client view of the world from a platform. To It goes from PCs down to tablets.
The other side was the modem itself. And we do as Andy mentioned, there was Samsung to announcement of modems. There have been some other modem sales we've done as well. When you do those sales, those are very engineering focused sales. When you go to integrate a modem into somebody else's platform and then you go to get that modem qualified around the world, It's very much an engineering focused effort.
What this reorganization does is it allows us to provide 1 organization from top to bottom. To So within the same organization, no walls, no separation of leadership from the definition of the product through the engineering to An architecture of the product, building the product and taking it to the customer, it's one organization now. And again, our customers have given us feedback. Thank you. That's how we think about it.
We want to give you input on your roadmap. We want to have insight into how the products are coming out And we want help in integrating these into our products. I don't want to have to go to 3 different people to do that. Thank you for giving me one voice now that I can go to. To And so that's what drove this reorganization.
It's planning underway. It becomes effective in 2015 to and we'll talk some more about that as the day goes on. I thought we'd talk about some of the other to Complimentary markets that we're also moving into. I don't think we can go through the day without talking about Internet of Things and Wearables. Internet of Things, we broke out this year.
We believe it's one of the next to Big businesses behind the data center. It's already a $2,000,000,000 business. We said that we could grow this at 20% per year. You saw us break it out as a separate segment this year so that we could show you how big the business is. For us, this is a business we've been in for many, many years.
This is the embedded business. What's changing? Cost, the amount of compute we can put out at the edge, The connectivity that's being added and the usage models, but it's a business that we're very familiar with and is already a $2,000,000,000 business to And growing fast for us. The other one is wearables. And we told you that we weren't going to be absent from markets in the future.
To You've seen that we've already introduced products. We formed great partnerships. Our goal here is like most of our products not to have Intel branded products, to take key partnerships. So you saw us announce partnership with Fossil. As we go through next year, you'll see several other partnerships to announce the SMS audio for ears.
If you haven't used that product or gone and seen it, I personally use it almost every night on my runs. To It's a great product, great sound, gives you your heart rate. It's really fun. And then Mika, to Which if you've been reading the press, we really unwrapped all of the features that Mika has to And that'll be shipping starting really in the December timeframe. So I think great example of we're not going to be absent to And we've already started to build these great partnerships in the segments that we have here.
Next one is foundry. To foundry, you see us continue to work with our key foundry partners. We have signed up several other partners this year. The one that we've been public on is addition is Panasonic. But we continue to make good progress on our foundry business.
So we've tried to show you that we have a core set of businesses wrapped around Moore's Law, wrapped around the cores That we develop and then the IP that we share and how we take that into all of these businesses. I also started beginning with What was going to not change at the company and what would change, that was last year. That was last year when Renee and I were coming in and really starting to drive the change into the company. To me, it's no longer what it will stay the same and what will change, but really just How are we going to behave moving forward? If you take a look at moving forward, I think to The things that are carried over from that comment last year is the ones you'd expect.
We will continue to drive Moore's Law. To It's the 50th anniversary next year. We'll do some fun things next year to celebrate the 50th anniversary of Moore's Law. We'll continue to develop products that enable the best computing experience. We're going to talk to you about some of those today.
We're going to talk to you about the future of how we see those products to today. A market driven industry view, you saw even the reorg, I can tell you I went out and spent time with the customers. I I couldn't tell them what I was going to do, but I'd ask them questions. How do you view us? What would you improve?
How would you like us to interact with you differently if you could? How would you define Intel's organizational structure? Even that reorg was market driven. We're going to continue to open the foundry to all customers, to Create platforms for the enterprise, not just silicon. We no longer think about to Look and say, we think about what are we going to build with this.
It's very different. And then another key one is driving Innovation to the market quickly. My personal opinion is we were too slow in the past. Things sat on the shelf. We didn't know what to do.
I think this year, you've seen us go much, much quicker. The 2 we're going to add is to Continue growth in the data center. We believe that the data center is the next big business for Intel. It's already big and it's going to be bigger. And then really our focus on, it's no longer just a compute world, It's really a connected computing world.
You must provide connected capabilities. And so it's if it's smart and connected, it's going to work best with Intel. That is our mantra. That is what we drive through all of our products. Now, to I thought I would spend just my last couple of minutes talking about what has changed internally.
And I
thought As I was putting these foils together, what best way to do it than to show you actually the leadership team and how much that's changed and yet how much it's also the same. To And so many of these people are in this room this morning, but this is the leadership team That is driving. And many of them you'll hear from today or many of them you'll have lunch. So I thought one thing is about 25% of you in the room was my estimate I got to Are new to this meeting inside that? Okay, this will be good.
Let's show you the org structure. But all of those that are in yellow to Are either new to Intel in the last year since the last investor meeting or new to their role. So Kim to Stevenson is not new to Intel, but she's new as our CIO, for example, and on MCM, our management team. To Steve Rogers is not new to Intel, but he's our new General Counsel as an example. To roughly 17% of this population is new to Intel this year, 25% are new to Intel in the past 5 years to And 33% are new to the role in 2014.
So we're changing at all levels. What was interesting is we just about a month ago, we pulled the top 350 people, to 350 leaders at Intel together up in Oregon. And before the meeting, I was presenting a flow similar to this to that team. To I thought, let's click the data for the 350 that will be in the room. It almost mirrored this data set to Exactly.
It was off by 1% here or there. But what it told me is that these leaders are driving that same kind of change into their organizations. To No, I think that's good. You don't want wholesale change. We have very successful organization and we experience with Moore's Law is what Counts, you have to know how to do these things, how to architect and build teams.
There's an intimate relationship between the architect to And the silicon designer in that early stage. But also if you're trying to drive market driven, if you're trying to move into new markets, you do need a fresh point of view. To And so I really am very comfortable and very proud of the team and what they've done here, both bringing in new people, integrating them well. I think As you talk to some of the new people and new leaders here today, ask them how they've integrated it. They'll tell you it's a very positive experience and they're helping drive change into the company And the views that we have.
So that's my last foil. To I just wanted to kind of end with thank you for coming here today. I'm going to bring up on stage now a great friend of mine and also somebody who I think can explain Moore's Law in much, much more detail than I can. And that is Bill Holt, who will come up and talk about Moore's Law now. To.
Thank you, Brian. Well, thank you again for coming. Let me also add my thanks. I was here last year and I made a few statements and I show you some data. In the same spirit that Brian said of looking back, I'm also going to start by recounting what did I say last to hear and what is that today.
Now last year when I was talking about technology, I was making lots of predictions. That's because we were at a transition. This year, I'll also try to add a little bit of actual data to go along with those predictions and show you how things have really turned out. To make sure I'm synchronized here. So last year, I said this foil up.
I said, what are the things that are key that I wanted you to take away? 1 to is that we will continue to deliver the benefits of Moore's Law. The second one was that true cost reduction remains possible In a capital intensive environment, there was a lot of talk last year about the increasing cost of silicon wafers, about the amount of capital spending to And did that in fact eliminate the cost reduction? And I said no, and I'll show you that again. And finally, that the benefits that we can get from technology can be applied to all of our various product segments.
To It can be applied to all of our various product segments. So let me just go through and say that this year, None of those have changed. Those are all three of the same key things that we're driving as we look at technology. To Last year, I also showed you this as it related to 14 nanometers. And we said last year that we were having more difficulty to We would have liked.
It was harder than we had thought. And the fact is that we were somewhat behind. We said basically about 2.5 years and we've been consistent in saying that. So I think I should also update this for this year. So if I take this foil and now update it, let me start in the lower to right hand corner.
This is a reliability set status for the technology. And since we're in production, it had better be green, but it to All of the basic fundamental capabilities are all taken care of. If you look above that, We're on track delivering the performance that we had projected. The other lower left hand corner showed the matching of our factory parameters. To And that was pretty good last year and that remains on track.
And the one on top is yields. Now I had been somewhat more optimistic about how assume we would close that. This is yield at that time on our test chips and you can see that it has taken longer. It's continued to take longer, But you can see now it's converging and that in fact the yield is now in a healthy range. But you say what about your products?
So let's take a look add the yield that we're seeing on our lead product. This is the lead Broadwell SoC product that we're now beginning to ship. This is aligned to when we began shipping those products. And you can see it's safe to say that the yield is in a healthy range. Again, we're not quite recovered all the way, but you can see we're very close now and on track to put this in the same yield Category as our 22 nanometer technology.
I'll just add this footnote that our 22 nanometer technology is the highest yielding technology to We've ever had. And so the bar that we're trying to catch up to there is a very high bar. Now that's essential because if you're going to get cost reduction, you have to match yield, to match those other parameters to your previous generation. But what you can see from this is that we are catching up. If you look carefully in the Q3 and Q4, That's when we began to ramp this technology.
And our original projections had been that we would be aligned with the 22 nanometer yields. Obviously, we weren't and Stacy will give you some details on how that affects some of our costs going into the beginning of next year. The parts that we're building on this in Q4 are the parts that we will ship and sell next year. And so there is an impact of that. To There's no denying that.
But the good news is that as we progress through the year, you can see that the yields will match And then we will begin to see the cost benefit in the latter half of next year. Stacy will give you a lot more detail on that. So that's kind of a look back at what we had said. To now I want to actually give you a little bit of an overview of our 14 nanometer technology. Last year, I just told you We were going to do it.
This year earlier this year, we did a launch event and said what does it really consist of? To I'd like to review some of those foils and make a few key points. Let me start to say first, it's a true 14 nanometer technology. I will give some details on the next page. But this is a very important point because there's lots of 14 nanometer technologies around and they're not all created equal.
To The second key aspect is this is our 2nd generation of FinFET Triad devices. And what you'll see is we've made substantial changes and improvements in this Device. If you're going to drive performance, as Brian said, the transistor is the key to enabling performance improvement in our product, whether that's power reduction Or frequency improvement. Generally, that only comes if you have better transistors and we've made substantial changes to continue that progression. I'll show you some data on the interconnect.
This number is more esoteric to most of you, but to As you'll see, we're delivering in this technology through 52 nanometer pitch on the interconnect. That's what's necessary to to to actually do scaling and make the DIGA smaller. And finally, kind of an interesting first is that this is the first time that we will have included air gaps to In our technology in the interconnect system, I'll show you some pictures of that and explain to you why that's important. So let's go ahead and look at What a true 14 nanometer technology means. Historically, when you've changed the name and the names We can all admit have lost their significance.
There is really nothing that's 14 about this or 2020 or 2022 about anything else. To But what we have preserved or had preserved was the ratio of those names was generally the linear scaling of the dimensions, okay? There was a reason that we went from 45 to 22 or 45 to 32 or 32 to 20 or in our case from 22 to 14. That's roughly the ratio that it takes to In the linear dimension to get a 2x area scaling, okay? If you don't do that, you're really not going to get any to stantial area scaling and if you don't get area scaling, you will not get any cost reduction.
So for our 14 nanometer technology, we have in fact made those kind of scalings. To The pitch of the transistor Fin that I'll show you in a moment has gone down by exactly that amount. Now that's not just a coincidence. We know what it takes to get The scaling to happen, so that's kind of a targeted number. In the case of the gate pitch itself, we were not able to get to that goal.
It was a little harder. And So the number that we picked is slightly above, but it's still substantial in the amount of area reduction that it can drive. To To make up for that though in the interconnect pitch, we went the other direction and actually scaled more aggressively. That's where that 52 nanometer number is significant because that is a to. 0.65x scaling in the linear dimension for the wires at the bottom of the trend of bottom of the interconnect stack that will in fact enable to the basic building block to scale by approximately this 0.5 area.
So when you compare, these are easy numbers to get. People publish them as I'll show you in a little while. You can also easily find them in reverse engineering reports because people cross section our parts and everybody else's. These numbers are not hard to find. They're the fundamental building blocks that enables the rest of the technology to actually provide real density scaling.
To So another way
to look at that is to look at the memory cell. Memory cells also are common in almost all products these days, even in modems, a large portion to Of the modems has a very large portion of SRAM. So the scaling of the SRAM cell is another way to see if the technology is truly providing to scaling or being a real true technology here. You see the outline of what the SRAM cell would be for our 22 nanometer technology And then again for 14. And again, you see the number is close.
This also, we didn't quite get the desired 0.5, Well, we got a number that's very close to that range. And again, the interconnect pitch and what we can do in some of the graphics areas provides us even better scaling to make up for that. To But what you can do here is you also can find these numbers fairly easily and compare them and look and see what does it really mean when someone calls it 14 nanometers. To. So then I want to move on to transistors.
And I'm going to do a little build here and show you step by step some of the changes that were made to provide increased performance for our transistors. So on the left hand side is the 22 nanometer. Right now, it looks the same, the 14 nanometer and we'll go through a few changes. So the first thing we did was in fact reduce the pitch between the fins. To That's that number I showed you on the previous page.
If you're going to make things smaller, they have to get closer together. So the first step was in fact to reduce the pitch. To That's not that easy. Those numbers are getting very difficult. If I was to relate where the challenges that we've had to In our 14 nanometer ramp, they've all come from these areas where we've done aggressive pitch scaling.
Now that's the bad news. The good news is That we're actually making progress and we're able to make those work and those are the ones that deliver the actual cost reduction. To Now, if we want to make the area smaller, eventually the transistor is going to have less room. So if you want to get more performance out of it, One way with this device now is to make it taller. So we also made the fin taller and that provides more current carrying capability within the same area.
So first, you make them closer together. They're going to actually get smaller in the direction into the board. To make up for that, you make them taller. That combination allows us to make a higher performance device. To And while that may seem simple, making those kind of changes at these small dimensions is actually very difficult.
To So the other thing that we did is the transition from a standard planar device to the FinFET or tri gate devices to Results in a lack of flexibility for the circuit designer. In the case of the Planar device, they can as large as you control the size of that device. To There's X and Y dimensions that they can pick and choose from. With these devices, the only thing they can't change the height that's set by our technology. They can't really change the size.
So all they can do is add or subtract fins. So you've turned the design process into a quantization of Individual transistors that you could basically gang together. If you want to get down to the smallest area and you have Small device, you'd like to use as few fins as possible. But these fins are very small and the variability of them Is a key problem that the designer has to deal with. And so it's very common not to use the minimum number of fins or even to use 2.
So we put a substantial amount of effort in this technology to improve the process control and now we've enabled them to very often use 1 or 2 fins. To And that is a substantial benefit in terms of, again, the area scaling that you can get and that comes from driving process control. That also then allows you to use a device that is only as big as needed and that reduces the overall loading on your circuits that improves the power. To So finally, you finish up and put on the high k metal gate and the transistor is now finished and you can see kind of graphically that to It's now taller, fewer and closer together. And this is what that looks like In real life, these are cross sections, become baby pictures sometimes.
You can see on left, People are very proud of these pictures. On the left, you see to What was a leadership device as little as 2 years ago. And on the right is now what we think it takes to produce a truly leadership device today. And this has provided us with that fundamental improvement For the 14 nanometer technology that will lead to improved product performance. To Let's just take a look back at the timeline.
We have said that we have a lead and we think that lead is still a defendable statement. If you look at the first introduction of various technologies, I won't focus on the older ones, but let's look at the Tri Gate to Or FinFET device. We started shipping that device in the end of 2011 with our 22 nanometer technology. We are now shipping this 2nd generation device in volume in the end of 2014. The earliest statements for anybody to claim that they're going to ship production quantities or quality FinFET devices will be sometime early next year, maybe a little later.
We put it early next year. That still is 3.5 years that we have built in the experience and also shipping. I'm obviously not going to tell you what the next innovations are, but our roadmap is full because to continue to improve transistors, you have to make Substantial improvements. And we plan to do that while other people are working on perfecting their FinFET devices, We're going to be moving on to looking at what comes next. So last year, I also showed you this graph to And I used it to indicate that different segments of our business want different kinds of performance or power.
But in the end, it all comes down to What can you provide in a performance per watt improvement? And so the graph on the right hand side here shows and at the time the 14 nanometer was starred because we were projecting. We can now take and add what did we actually get out of the Broadwell product line. To And if we look at the performance improvement measured in performance per watt, the product almost delivered 2x. Now the line in the slope that we have been projecting and have for a long time to It's about 1.6.
That's the fundamental technology. The graphs that I showed were based on monitoring and analyzing transistors. When you get to the product level, clearly that's a factor. There's also all of the innovation that goes into the product, all of the improved power management and other things. So I'm not implying that the 2x Came from more technology improvement.
But what I am saying is that we were able to deliver better than the curve between the combination of our product development to And our technology and that line, which last year we were projecting would continue, truly has been delivered on. To As the year goes on and Brian indicated, you'll see products coming off of 14 nanometers in different segments. So for now, the statement that I made a year ago of enabling all to segments can only be validated with this first part, but I think it demonstrates clearly that the technology is able to provide the kinds of benefits we were looking for. To So let's look then at interconnects. This is the other critical part of a technology.
I showed you on that first page to The scaling that we are going to do for the lowest levels, the tiniest lines that were there. Here's a cross section of the 22 nanometer And the 14 nanometer, this particular picture we typically call the Gordon Moore foil. Years ago, he wanted to see cross to sections of the whole stack of the technology. And so there are specific little test structures put in the chip in the scribe line area to That you can cross section very easily to get this particular kind of a picture. Obviously, Gordon doesn't care about it anymore, but the to basic pretty picture still exists.
What you can see maybe you can see, but what you're going to see is that things are smaller, tie it together and that allows for the scaling that we're going to need to gain that cost reduction. What you can't see at this scale Is that if you look very carefully, those little black areas, those are the air gaps. Now the reason air gaps are important, can you see them? Well, let's help. To There you go.
All right. Every generation since probably 130 nanometer, to There's been substantial effort within the equipment and the material and the intel world to change the dielectric constant of the material that goes between the metal lines. Now, Why that's important is as these lines get closer together, they interact with each other and these lines are carrying signals that are going in multiple directions. To And what drives most of the power that as the ship consumes is moving these lines to transfer data across the chip. The closer the lines get together, to The harder it is to make them move independently.
That's caused by the capacitance between the two lines. And that's a to Function of 2 things, how far apart they are. Obviously, we're making them closer together. And then the dielectric constant or how the material Between them causes them to couple to each other. And we've done many things to try to reduce this.
In general, this was glass to As a particular dielectric concept, we've done many things and the equipment suppliers have helped dramatically to reduce that by probably 30% over the last decade. To The ultimate that you can get unless you make it a vacuum is air. It's actually 1 on that scale from 3 to 2 something to count to 1. So by adding little holes in here, we're actually reducing that coupling effect. But when you put holes in the middle of your technology, you to So make it a lot weaker.
So the process of putting these holes in and making sure they're not filled and they're only at certain places is actually quite complicated. But it has enabled us to scale these lines together and have less of an effect on the performance. So this is been talked about for a long time, Similar to, TriGator FinFET devices, the industry has talked about air gaps for a very long time. This is the first time that we'll be putting air gaps into to Our technology, we also think it's probably the first time that anybody is going to ship product that actually has intentional air gas. Sometimes You end up with air gaps when you don't want them, okay.
And that wouldn't be so bad except usually the technology is not prepared to have holes in it and it then falls apart. To in this case, these are intentional and they do provide a substantial benefit in the performance that we can extract. To So if I take transistors and Intertek and then I look at a very simple metric. On the side, you see a little picture and it shows a little rectangle. To In one direction, gate pitch decides the size of that box and then the other direction, metal pitch.
And And if you multiply those together, you will get an area and that area factor for that simple little structure, which basically allows you to make a transistor is the basic building block. Now, I'm choosing to use this this year because recently a number of people have published data on that. Samsung published data on their projected 10 nanometer technology at VLSI. TSMC published data last year in December at IADM. And for those parts that are already available on the market, You can easily cross section them and go measure these numbers.
So you can actually go extract this data for yourself. That's the vertical axis on this graph. To. On the horizontal axis, we've attempted to indicate where did a particular technology go into volume production. To This is obviously somewhat subjective, but I think it's a reasonable approximation of where most of these technologies went into production.
And then the white line to The Intel Technologies and in the green line are various best cases for competitors that we were able to extract data for. To The 14 nanometer point here makes the point that not all 14 nanometer technologies are equal. There It's publicly stated, no scaling going on. So while people will be shipping 14 nanometer technologies less than 2 or 3 years behind us, to But their shipping is actually more in line with the 22 nanometer generation. In their own case, it's exactly the same.
In fact, it's The sales pitch that it's going to be very easy to make that migration. That's a very reasonable thing to be doing because 20 nanometer technologies with planar devices have very serious transistor challenges. Generally speaking, higher leakage, higher power, very difficult to get those parts to enter the range that you would have liked to. We made that transition to 22. Our 14 nanometer technology clearly has that capability.
We were able then to move on and work on scaling in addition to improving the transistor. To help your eyeball, if you kind of draw a dotted line between these two points. You see it's basically following the trend line pretty clearly. This trend line is roughly that kind of Area scaling that you need to generate cost reduction in the product family lines. So we think that we have a substantial lead Both in transistors and in our ability to deliver scaling into the marketplace.
Now why is that important? To Well, I also showed you this graph last year. And in this graph, we're talking about the impact of capital cost to And wafer cost increase. And on the left hand side is in fact that chart. And while it's hard to see on this scale, the last two data points have a substantially Higher increase than the ones before them.
Prior to that period, we're looking at roughly 10% kinds of increases in wafer costs. More recently, those numbers are closer to 30% and that generates a lot of stress in the cost reduction. What we said to So we would continue to maintain the cost reduction by doing more scaling. That's why to emphasize you have to make the transistor smaller. You have to actually scale the interconnect.
You have to be able to make that little box get smaller so that everything gets on top build on top of it, in fact, can fit into a smaller die area because the little piece of area that you're going to build it on is actually getting more expensive. So we're continuing on that trend. This year, we've taken a little star off of 2014 because we are in production. Now this graph on the right to Is mature costs. We're not mature yet.
And clearly, the yields have to match for the costs to align. But we're well on track to that. And the fundamental built into the technology when we get yields matched and we're in full production will allow us to achieve this to data point, which is slightly below this historical trend line. Say, well, okay, that's a lot of data again. To take a look at it in terms of what does it actually deliver with the Broadwell product.
So here we're comparing the Haswell 2+2, which is The product that generally drives our I357 product line. And it shows the transition to Broadwell for the same 2 plus 2 configuration. To The Broadwell die is 37% smaller. That's pretty impressive. It's not 2x, but it's 30%.
However, it also has 35% more transistors than the corresponding Haswell Die. And that leads to this 2.2x increase in transistor density. Now that is better than our 2x or half area. Okay. So the combination of the technology actually does show itself in the actual product results.
You can see that the Broadwell part provides clear area scaling. To That area of scaling enables the cost reduction that we were showing. We will also have higher performance and probably most significantly to many of us, it's to Have lower power and actually enable many of these form factors to see fanless 2 in-one devices because the power reduction has been so substantial, to Driven and enabled by the product design and the new transistors that we've put in the technology. So one last little data point. To We're not ready to put a data point on for 7 nanometer, but we clearly are looking seriously at what that technology is going to look like.
To And we're very confident in saying it will be below the line. I've made the dotted line go out. I'm not ready to put a data point on it. I don't really want to set that target. To But this long term trend line, which is the fundamental economic driver of Moore's Law is what we are so committed to continue to extend.
And while it will be a while before you see data on 7 or even 10, we are quite confident that At least within this range, we can continue to deliver the promises of Moore's Law. So if I summarize, to We're still committed. Brian said it. It's one of our key corporate objectives that's really encouraging to the technology people that I represent. To And it's our job to continue to deliver on Moore's Law.
If we do that, we can continue to provide true cost reduction. That cost reduction enables to more expensive, more capable and therefore more valuable to the customer products. Without that cost reduction, you can build better products, to But someone's going to have to pay for them. And finally, because the technology is not just about cost, because we continue to innovate in the fundamental building blocks of the transistor, We believe that we can make real product improvements beyond cost and make that combination deliver truly compelling new devices. And with that, I think I'm done.
Please welcome Stacy Smith.
To Good morning, everybody. It's actually unusual to say
good morning. I'm usually saying good afternoon. To I also want to just share my welcome. It's great to have you all here. To After the fact that we've already done the guidance, I was afraid many of you wouldn't come back.
I was hoping that you'd at least come back for the haiku. I did do a haiku last year and I'm not going to even take the 60 seconds of Just reflecting on a great year. But if you go back to that haiku from a year ago, I would like to say it was incredibly insightful, came true almost exactly. To And it kept me out of trouble with the boss. If you remember, I sometimes share jokes and they sometimes get me in trouble with the boss.
So I'm going to stick with the haiku thing this year. To I also as I was reflecting on the 50th anniversary of Moore's Law, I realized that I have a little bit of law envy. To You have Moore's Law, you have Metcalfe's Law. We've shared with you in the past Simpson's Paradox. I don't want to I don't want to get ahead of anybody here, but you will hear a lot about Jevons paradox today.
You're going to be very well educated in it. So I couldn't come up with law that rhymed with Stacy. So I came up with Stacy Shroud, which is the art of using poetry to hide deep insight in plain sight. To It is a more creative form than the more convoluted greenspace garble. To So without further ado, let me share with you the haiku and after you see this, you can all leave because now you know everything that I'm going to say this plus the guidance.
To So the haiku, the guidance haiku for this year is that cloud forms, data shines, transistor density sprouts, Client growth blossoms, pretty majestic and insightful, if I do say so myself. And again, between that and to The fact that we released guidance already, I won't be disappointed if you want to take the hour off. But I do want to come back to To the law thing, because if you look at those laws, you realize that they all have a sense of something doubling over time. And so to There's a corollary to Stacy's Law, which is the number of haikus double every investor meeting. So you're going to get 2 haikus today.
To And the corollary to the corollary is it's the 2nd haiku that's likely to get me in trouble with BK. First, I want to tell a little story about him. I don't know if you know what to A true technology user he is. This man is deeply, deeply engaged in technology. As the people who run product divisions here know, He takes their pre beta stuff, tears it apart and then tells them everything that's wrong with the technology that's about to come to the market.
To He has implemented a Intel City Sensor at his house, which is a citywide air quality monitoring system to That's now running at his house. He builds stuff, he's big into the maker movement. He finds drones to And then send us videos of the drones doing cool stuff like cleaning out his gutters, which is this is true, pretty cool thing. So without further ado, I'm going to show you the 2nd haiku. This is the one that might have me spending more time with my family.
So to So the second haiku is in honor of BK. It's big drones, cool robots, intelligence on the edge, BK spawns Skynet. To And I'll also say that if you want to get the graphics department really excited and working on your stuff first, tell them you need a graphics from Terminator. Between that to And 5 hour energy drink, they get very, very excited. All right.
So I have 4 relatively simple key messages today, to all of which you should have gotten from the HYCU, not the Skynet one, the other HYCU. So first, we're growing again to In 2014, it's turning out to be a better year than we thought at the beginning. We're seeing broad growth in the data center, in PCs, In tablets and IoT, LTE and NAND. So really across our business, we're seeing growth. 2nd, our core competitive advantages, the leadership IP to Folio that you've heard a lot about today and leadership manufacturing that you just heard Bill talking about are becoming increasingly valuable competitive advantages to And they're also becoming increasingly rare competitive advantages and I'll build on that a little bit.
And third, we're in a great position to benefit from this build out of the to Cloud and data analytics, you're going to hear a lot about that from Diane later today. And last, we continue to execute to our strategy of both investing in our business to And in generating return for our shareholders via the dividend and the buyback and you saw at the break that we just announced the increase to the dividend, to Which I will talk about. So just a very quick retrospective back at 2014 or at least an in process retrospective. We're seeing strong financial growth. It's turning out to be stronger than we thought.
So we think we're on track for 6% revenue growth this year to And operating profit being up 25%. That's true both year to date and likely to end the year somewhere around there. To We are seeing broad based revenue growth. So PCCG is up about 5%, DCG is up about 16%, to IoT, g is up about 18%. So again, you're seeing that strength across different Intel businesses.
And as you heard from Brian and you'll hear more this afternoon, Our investments in mobility and comms are paying off with increases in share, increases in footprint and some really big important design wins that we're winning. To I just want to take a quick second look at the longer term revenue trend. So after 2 years of decline, we're growing again and we're on track For this to be our best revenue year ever. So today, I'm going to organize my talk to By talking about our 2 key competitive advantages that leadership IP portfolio and leadership in manufacturing. To I will, as usual, talk about the various segments of our business and then our strategy for returning cash to our shareholders.
I'm going to start today by talking about our leadership in IP. And just to build on what you heard this morning, to The highest performance highest performance, lowest power, least expensive way to bring A capability to the user is to integrate it into silicon. That has been true and it will continue to be true. When we do that, we can use Moore's Law to either double the performance to Or have the cost as we go from generation to generation. And as you saw from Bill, we invest in Moore's Law Benefit to do both.
We bring die size down and we bring performance up. But to integrate, you have to have those critical IP blocks. To And the thing is to have a deep and broad portfolio of IP takes very significant investment. This chart shows 5 years of R and D to investment for Intel versus other industry players. And you can see that we're investing at a multiple to everyone else.
And we're doing that to build a very broad range of leadership IP.
The reason we're doing that is simple. If you
have this broad range of leadership to IP. The reason we're doing that is simple. If you have this broad range of leadership IP, you can integrate. And that means that we can do products to That are better than others, products that are more competitive in the market. Looking at this chart, you can get a sense of the scale that's required to build a portfolio of leadership IP.
Remember, when we invest, we're one of the few IDMs left integrated design and manufacturing. So we're investing in our process technology And we're investing in IP. So if you really wanted to get a fair comparison, you might take the investment, say that a TSMC does and add it to somebody else and you can still see Even with that, we're investing at a multiple to others in the industry. This chart then shows the inverse. It shows what happens when companies no longer have that scale to invest.
And so what you're seeing here is you're seeing how we've seen a consolidation in critical IP blocks to over the last 8 or so years, if you start on the far left. So this is looking across wireless WAN, graphics and connectivity. We could do this across Other IP blocks as well, but these are the ones that we chose because they're really critical to the platform. If you start on the far left of the chart, What you see is that 18 companies had complete modem stacks in 2,006. Today, we're down to 7 companies that compete broadly in the modem business with only Intel, Qualcomm and 2 others currently shipping commercially available LTE.
In the middle chart, you see that there were 16 companies that were selling graphics IP blocks in some form or fashion in 2,006. To Today, it's down to only 7, again, with only Intel and 2 other companies that have the range of IP that span from low power to through high performance PC grade graphics. Similarly, on the right hand side, you see the wireless connectivity. There's only a handful of companies to That have that full suite of connectivity of Bluetooth, Wi Fi and GPS. Two observations from this chart that I think are important.
1st, you need broad IP to be competitive in any one market. You can be locked out of markets or much less competitive in a market if you don't have the right IP blocks. To And second, the investment that's required is significant. So you have to service large end markets to make the economics of this work. To So I'm going to build on something that Brian showed that is really showing the way that we get scale, Which is by using the IP that we developed for the PC to go across other segments of our business.
I'm going to take a minute and just build this out. And so again, what this shows is to The IP blocks that we developed for our PC products, by and large, you should think of Intel as everything that we develop supports our PC business in some fashion. To. This image then shows how that IP becomes the foundational building block for our server to Much, maybe even most of the IP that we use in servers is either developed or modified from our PC product line. To And let me give you a sense, a couple of examples of how this works.
The CPU core and server really is a direct pull from our PC products. I think many people don't really know that. Server would just have more cores to drive the performance that's required in the high performance compute segments of the server market. Audio display USB similarly are pretty much direct pools of IP that get reused across the product family and servers from stuff we develop in to In other cases, we modify the IP. The memory controller is a good example of that.
Some of the base technology is in the same, But in the case of server, we have a product that has more memory channels and uses a higher performance DRAM. So it's base IP that we developed for the PC and then modified for the server. So we both pull and modify IP as we go from PCs to server, to Which lowers the cost to be in the data center business. And it's one of the reasons that our data center business is so profitable. To And you see that across other verticals where we've been in the business for a long time.
As we drive the low power Across our product lines, you can now see that same dynamic as we're developing lower power IP for the PC. So think of this as like the Atom core. You can see that same dynamic play out to In our mobile products, again, much of the IP for our mobile products is either pulled or modified directly from what we do for PCs. To And now we're finding, as Brian said, that some of the low power and connectivity IP that we've developed specifically for the mobile segment is finding its way back into PCs and it's now becoming this virtuous cycle where IP developed for 1 platform finds its way into a different platform It makes that product better. This ability to share IP is really important for us.
It allows us to play in large markets. For example, building on what Brian said, we think that over the next few years, approximately 20% of the PC market and more than half of the tablet market to Is going to require wireless WAN connectivity. And we'd be locked out or much less competitive in those segments if we didn't have the IP to integrate. To So now looking at how this plays out, we invest about $11,000,000,000 in R and D. And as you can see from this chart, About 60% of that is in foundational capabilities.
More than half of that is spent on things like process technology to And developing the base course, like Xeon, Atom, Core, Core. The next block on the chart shows the investments to We're making these shared IP blocks, so Brian, take you through that. Examples are wireless connectivity, wireless WAN graphics. With those, you see that about 70% of our investment is common across our businesses. And the last 30% is investment that we make to develop specific products for our business.
So PCCG and DCG being the largest part, then MCG and then relatively limited investment Specific to the products that we're developing for things like IoT and some of the other businesses. An observation on this chart, the overall investment That's required to have a broad range of IP is enormous, but the specific investment to participate in a specific market segment is relatively modest. And our strategy is to take advantage of the IP that we develop for the PC to give us a lower cost of entry as we go after other market segments. A great example of this that you can see in our financials is the I talked about DCG before, but if you look at the IoT Group's profitability, you can really see this playing out. To We reuse a lot of IP in that business.
You'll hear some of this from Doug. In fact, most of the IP that we use in IoT to reuse from things that we're developing for the PC business and that has a direct impact on our profitability in that segment. To Okay. So I'm now going to talk through some of the key focus areas in our business. I really think of our business as two ends of the Internet.
We have the clients and IoT kind of at the edge and we see more and more intelligence moving out to the edge and they're all connecting back to the data center. In addition, we have large businesses in software and in memory. I'm going to go pretty fast through this section and in some places actually faster than others Because we have focused topics on these businesses later in the day. So I'm going to give you just a quick run through of some of the financials and then you'll hear a lot more from People like Kirk and Diane as they talk in great detail about their business. I'm going to start with the data center.
Just a quick retrospective on this year's performance. To we think this business is going to be over $14,000,000,000 in revenue this year. So we've seen really nice growth over the last several years. To That's up 16% year on year. We're on track for this business to be about $7,000,000,000 of operating profit, which is up 26% year on year.
So great growth going on here. The combination of the build out of the cloud and data analytics It's driving significant growth for us in the data center. The megatrend here is that there's this explosion of devices, a bunch of new applications, an enormous amount to Data that's being collected and analyzed. And all of this is driving the secular trend is computing capability and the associated storage and networking is being deployed to deal with those underlying growth drivers. I think we are uniquely well situated to benefit from those trends And you can see that playing out in our results.
The combination of cloud, telco, high performance computing, so kind of everything that sits above enterprise It's growing well over 20% year over year. But would you like that tagline of cloud plus big data equals big deal? And now to Diane is shaking her head. When she saw that, she said, I'm really glad you're CFO and not in marketing, but I did like it. So to It may not be a great slogan, I'll acknowledge that, but it actually is a really strong business driver for us.
And we expect the DCG growth rate as we go forward to to 2016 to be slightly above the 15% CAGR that Brian talked about, a little bit of a tick up from what we're seeing this year. And we expect that I'm sorry, consistent with what we're seeing this year. And we expect that operating profits to grow a bit faster than revenue next year. To Okay. So I'm now going to talk about our PC client group and our mobile and communications group.
As you've heard over the course of the morning, We think about this as a continuum of clients that spans from high end PCs down to tablets with a lot of fuzziness in between now to have the different form factors. In order to stay very transparent and specifically to be able to show you how we plan to reduce the loss in MCG, I'm going to talk about the financials today in the current reporting segment so that you have a clean baseline to work from. To. So here you see on the left hand side, the PC client group, on the right hand side, MCG. The PC client group has exceeded the expectations that we had at the beginning of the year.
They're on track to grow about 5% in revenue and operating profit growing 20 5%. As we've talked about over the course of the year, we've seen both the enterprise and mature markets growing relatively strongly to and we're achieving very good costs. MCG is down in revenue and with a larger loss than we saw last year. This is driven by the factors that we talked about a year ago. We're seeing a reduction in 2 gs and 3 gs volume and we're seeing that the Bill of material offset dollars that we've been providing to our customers as contra revenue is driving a bigger loss.
To I want to say upfront, this is a very large loss as Andy said, it's not something that makes us proud. I will talk about what we're doing to improve the profitability of this segment. To But that said, we're making very good progress in the strategy that we had of building our footprint in tablets and growing share And catching up to the market leader in LTE. So I'm going to talk more about all these business drivers over the next few slides. First, I just want to give you a sense of some of the high level trends in our PCCG business.
After an unprecedented 2 years of volume decline, to We're growing again and we're actually growing at a pretty robust rate. We think that the growth rate this year is on the order of 9%. To Switching to ASP, I love showing these kind of longer term trends. That's one of the things I really like about the investor meeting. To You see that our 2014 ASP trends are down slightly versus 2013.
But if you look at this on a longer to What you see is that it's been pretty flat. And if you looked at these curves going back in time, so up until about 4 or 5 years ago, What you'd see is that we would expect a normal ASP decline of about 5% down year on year. And you can see that that really has changed. To And the thing that has driven that to change is this combination of technology leadership and us segmenting our product line and I'll talk more about that. But that really has allowed us to bend the curve here.
So I'm now switching to cost per unit. Here is a long term cost per unit trend. To And you can see that Moore's Law results in our ability to lower costs over time. And you can see that this year, we're on track for a nice reduction to In costs, it's due to really a couple of things. One is, as Bill showed you, the 22 nanometer yields are as good as we've achieved or better than we've to achieve on any process.
And we're seeing a higher mix of some of the lower cost products like Baytrail this year. And I'll talk about that coming up as well. To And this chart now puts both the ASP and the cost on the same axis. And I have to say this is one of my favorite charts Because it really shows on one chart, the margin expansion that we're seeing as a company by achieving our segmentation and Via our manufacturing leadership. Okay.
So let's dive in a bit. Some of these are old favorites of yours, I know, and I'm going to update them In terms of how we're segmenting our costs over time across different segments of the PC market, What this chart shows is our average cost for performance mainstream and value. It shows actuals through 2013 And it shows what we expected for 2014 a year ago in the investor meeting. So just a quick refresh. You can see here a couple of trends.
Our costs come down over time, and that we're achieving a nicely segmented cost structure. To Specifically for 2014, you can see that in the performance in mainstream segments, we expected that costs would be pretty flat to And the phenomenon that we told you about last year that was driving that was as 14 nanometer based Broadwell products came into our product line, it to It would cause kind of a flattening out, maybe even a little bit of an uptick in that cost trend. So here's what we actually achieved in 2014. To you can see that across the board costs were better than we expected really as a result of the two factors that I've been talking about. Great cost on 22 nanometer to And our 14 nanometer products were a smaller mix.
So we had more of a mix to 22 nanometer in 2014. So a smaller mix of 14 to And here is the forecast for 2015. You can see that we expect an increase in costs to As we ramp 14 nanometer process technology and as those products become a bigger percentage of the mix, that's a pretty normal phenomenon for us to as we ramp a new process technology, but specific to 2015, the costs here are a bit higher than what we normally expect As a result of lower yields in the early part of that 14 nanometer ramp and Bill showed you to The yield curves and how we're catching up as we get into the back part of this year, first half of next year. So it's very consistent with what you showed you. To I do want to dive in a bit on the 14 nanometer cost curve.
So what this shows is it shows Broadwell And it shows the cost trend by quarter or so. It kind of starts it in the quarter after we achieve 1,000,000 units, which happens to be Q1 And it shows how that cost trend comes down over time. And it didn't just come down, it comes down actually at a pretty steep rate. Again, that phenomenon is pretty common to For the first product on a new process technology. Now I've added to the chart the comparison to Ivy Bridge to And to Haswell at the same point of their respective brands.
As a reminder, Ivy Bridge was the first 22 nanometer product to And so that's the one that's synonymous with Broadwell. And then Haswell was the new core that came later on the 22 nanometer process Technology and that's the product that's in high volume manufacturing today. Bill showed you that the yield curve on 14 nanometer and this cost to The yield curve on 14 nanometer as we're catching up and this cost trend reflects that. The Broadwell cost in the early part of the ramp It's higher than we saw with Ivy Bridge because the yields have been a little bit lower. You can also see that by the time we get into the second half of the year, We expect that Broadwell is going to have a lower unit cost than we saw on both Ivy Bridge and on Haswell at the same point to of their respective ramps.
And that's Moore's Law at work and I'm going to talk a bit more about that on this slide. I'll talk about more of that in a second. So to switch gears here for a second and talk about segmentation because that's really important. And what this chart shows is how we're segmenting our PC product line. To You saw that the ASP curve has been relatively flat for the last several years.
A big part of that is because we're seeing growth in the high end of the market. And you can see in this growth, you can see in this graph that we're seeing unit growth in our core product line. So the top part of this graph is core, The bottom part of this graph is Pentium and Celeron. And so in 2014, the core segment of our PC product line Grew by about 5%. So nice growth at the high end of the market.
You can also see when you look at the right side of the top part of the chart to That the mix in core has moved more towards i5 and i7. And this is happening because of the performance and the features to That we're bringing into the high end of the market. And Kirk is going to talk a lot more about that later today. At the lower end of the PC market, we're seeing even more robust growth. So what you see there is that the lower end of the market, so Celeron and Pentium in PCs Grew by about 14%.
And what's notable here is that we're bringing that lower cost Baytrail product and that's allowing us to lower system price points, Which is enabling us to gain share. And it's not just gain share from the traditional IA competitors, but we're gaining share from ARM based tablets and Kirk is going to talk some about that as well. To The value proposition is clear. For a few $100 now, you can go buy a touch enabled sleek new device. And when that's compared against somebody wanting to replace maybe a newer tablet, the value proposition is clear and they're buying more and more the PC.
The next page is going to show how cost becomes a really important tool for us to gain share. And so we've showed you this page before. This is an update to it. But what this shows is our lowest PC client Celeron costs. And you can see here how in 2014, Baytrail came in, replaced Sandy Bridge and lowered the cost by about 40%.
To And that we expect another 30% reduction in costs as we go from 2014 to 2015. To The cost improvement here enables us to grow the low end of the market and gain share. And having a segmented product line generally, when we think about High end and the low end allows us to bring features and performance at the high end of the market, grow that segment, lower costs, the price sensitive segment of the market, to All of that is enabled by our manufacturing leadership. And the ability to segment our product lines and utilize Moore's Law Is enabling us to grow share, grow the business and still maintain an overall gross margin for this year that's 63% and a gross margin Next year, that's forecasted in the high end of the range. So I'm now going to shift to talk about several Trends in the MCG segment, I want to start with multi comms.
As you heard earlier, we're in a very small group of companies to That are selling commercially available LTE data and voice modems. LTE is ramping now and more significantly, We're winning designs across some of the biggest players in the industry. So I won't say more on this other than we're ramping today. We expect this business to grow next year. The vast majority of the business for us next year will be on LTE versus the older platforms.
And Herman is going to talk a lot more about this in his section. To So I'm now going to talk about tablets for a second or for a few slides. This chart adds Volume to the PC trend that I showed you earlier. And so it's just reinforcing we're on track to the 40,000,000 tablets that was our goal. And this will make us the largest merchant supplier of silicon, the 2nd largest manufacturer of silicon that's going into tablets.
To The unit growth inclusive of tablets is almost 20%. So when you include the tablet unit growth, It's one of our best growth years that we've seen in a long, long time. And you can see from this chart how we're building this footprint of Intel architecture based devices. To And you can see that we're outgrowing the market. So we've bent that curve in terms of share.
And in 2014, we think we're going to gain back some share, so we're actually growing faster than the market. So I now want to go back and talk about the strategy That we outlined last year to build our footprints in tablets and then carry that forward into 2015. As a reminder, to Baytrill was a product that was designed for the high end of the tablet market and also for the PC market. To increase our footprint in tablets, we decided to take it Broadly across the various segments of the tablet market in 2014. And we've been successful in doing that.
We're shipping to the 40,000,000 units, we're across operating systems and we're across price points, which is all very important to us. Baytrill, as a reminder though, carried a pretty high Bill of material delta at the system level because of things like the memory subsystem, the power management subsystem that it required. To In the Bay Trail bill of material delta was as high as $20 in some configurations and in almost all configurations was more than $15 to We worked that down over the course of the year. So Baytrail CR came in and reduced that by about half. To But even with that, we were taking products designed for the high end of the market.
We were taking them more broadly through all of the different segments of the market And that was driving a significant cost delta and it was driving some contra revenue dollars. So early in 2015, we will bring out the 3 gs version of the Sofia product family. This product It's designed for the value and entry segment of the tablet market. And it has an SoC cost that's about one quarter that of Baytrail and it carries a competitive Bill and material cost at the system level. That's really important.
To be clear, we will still be paying some contra revenue dollars in 2015 Because Bay Trail and Clover Trail will be significant volume. They're designs we won and they'll be shipping over the course of the year. To But for the new Sofia platform, our expectation is that we will not have a bill of material delta, which requires contra revenue support. To Bottom line, the Sofia product line will improve our margin structure on tablets pretty dramatically. Zooming out for a second to talk about just kind of general profitability trends in MCG and I'll get to a forecast in a little bit.
But this combination of ramping LTE, to So starting to get volume that's paying off some of the investment we're making, improving our SoC costs, which you can see as we bring out products into the value segment of the market to And reducing the bill of material delta at the system level is going to improve our gross margin pretty to Significantly for MCG over the course of 2015. We're not yet where we need to be, but we're making progress. And as I think out and look at the product to roadmap and where we're heading. I expect that we can get to the point that we're gross margin positive for MCG sometime in the first half of twenty to So not where we need to be, but making progress. I just want to come back for a second to The shared investment model that Brian showed you and that I showed you.
When we look at this for MCG, you can see that only a relatively small portion of MCG's spending is unique. To the rest is allocating allocated spending for things like IP blocks and the capability that we use across the company, like our process technology to Process Technology Development. As we improve our product portfolio and ramp the products, we have a relatively small amount of unique to Spending to cover before we start generating an economic return. Again, this is our shared investment model
at work. You can see it today
in the data center. You can see it today in the IoT group. To I believe this will play out as we gain share and improve our product portfolio in MCG. For relatively low incremental investment, We can go after actually quite large end markets. Okay.
So getting into some specific expectations
to For PCCG and MCG
for 2015, for PCCG, we expect approximately flat revenue units or flat units to And a slight reduction in revenue relative to 2014. If I was putting a plus and minus around that, I'd say plus 1 Gartner minus 1 IDC to give a range. To You'll see from Kurt later today that he's not satisfied with this growth rate. So he has ambitions to grow it more than that. But that being said, our baseline forecast for next year is relatively flat units, a slight reduction in revenue.
To diving under that. We think we'll get slightly less of a tailwind from the enterprise market, a little bit more participation as consumer comes back. To PCCG, as I showed you, will have higher costs in 2015 associated with really two things. One is it's the year we start getting hit with 10 nanometer startup costs to add high Broadwell costs that I showed you, but both of those will come down nicely over the course of the year. To For MCG, we're ramping LTE, we're introducing Sofia, we're reducing the BOM contra revenue support on the new platforms to We're shipping things like Sofia.
And these actions we think will result in a operating margin improvement for MCG that's on the order of $800,000,000 to share. Again, not where we want to be, but good progress year on year. Okay. So now I'm going to very quickly talk about IoT, software and services and NAND. One interesting observation as I was preparing for this presentation as I was looking at them, to All three of these businesses have now crossed over $2,000,000,000 in revenue.
So against the backdrop of an Intel that's in the high 50s, They're not that big against the backdrop of the universe of companies in which they compete. They're actually quite large. They're all growing and they're all profitable. And I'll just kind of flash through a few of them and you'll hear more about all of this this afternoon. So the revenue for the IoT business is expected to be north of to $2,000,000,000 at $2,100,000,000 that's up about 18% from last year.
In this business, we're seeing strength in manufacturing, strength in retail and strength in the automotive Segments of the business. Operating margin for this business is 26% of revenue at approximately $600,000,000 You get a sense of to IP reuse that's really positively impacting the profitability of the business. We're investing in this business. You may have noticed the operating margin flattened out. We are very consciously making some investments in this business because we see a huge opportunity as we go forward.
To You're going to hear from Doug how he's taking cores that we're developing elsewhere in the company, things like Adam and Clark to And using them to go after segments of the market that require lower power and lower cost. So again, that reuse at work and he's opening up significant portions of the TAM as a result. You'll also hear how he's taking Wind River to And now approaching the market from the standpoint of being able to provide more vertical solutions, which we think is a core competitive advantage. To It's those things that's leading to a very robust design win pipeline. So if you look at the yellow line on that, that's the design win pipeline.
To In prior investor meetings, we've talked about the fact that this is a business that that design win pipeline really is a great leading indicator of future revenue because the design win pipeline here is Fairly long. And once something goes into manufacturing, it tends to have a pretty long tail. So it's that design win pipeline that to It gives me confidence that we're going to see even an uptick in the growth rate on top of the 18% that we expect this year. So a business that's been growing nicely and to We expect to continue to grow nicely. Moving to software and services.
Our software and services business is on track to To grow to $2,300,000,000 this year. It's moving from breakeven to profitable. And in addition, I think it's notable that we had All time record in terms of bookings for Intel Security, including the McAfee product line. So pretty strong bookings pipeline for this business. To More broadly, I'd say that our software capabilities are becoming an even more potent competitive differentiator.
To A great example of this is the work that we've done with Google to create the Intel reference design program for tablets. This program allows our partners to bring tablets to the market more quickly with Intel inside. So Android based tablets to market very quickly. We think that Intel based tablets will be first to market on Lollipop behind only the Nexus systems. To and that's a huge shift.
If you have been listening to us over the last few years, you'd see that we were 6 to 12 months behind on Android based systems. To we now think that we're first to market. We don't get a lot of direct revenue for this by the way, but it's a very important competitive advantage for to Renee will talk more about this in the afternoon. And then last for the section, I want to touch briefly on our NSG business. To You can see the business is growing nicely and that it's nicely profitable.
Revenue is going to cross over $2,000,000,000 to And it's generating 100 of 1,000,000 of dollars of operating profit and Rob will talk more about that later. To So I'm now going to shift gears and talk about another competitive advantage, which is our leadership to And you're going to see me tagging on to a lot of the stuff that Bill showed you earlier and taking it into some of the financial implications. This is the chart that Bill showed you. It has updated a couple of dots and lines from what you saw a year ago. To I do want to say that when Bill puts a dot on the chart, it means something.
It's not just PowerPoint and he agonizes over the dot And then he agonizes over the dotted line. So these aren't representative. They're actually what he thinks he's going to achieve. To and but just a refresh from what we talked about last year. Advancing process technology is getting harder and more capital intensive.
To fewer and fewer companies are able to do it. We're able to offset those increases in capital intensity by improving our density slash Scaling and this is keeping us on that historical curve of improving the cost per transistor. It sounds simple. It's actually huge for us. This is what This is the heart of Moore's Law.
It's what allows us to keep bringing more features, improving performance and reducing costs. And it's hugely important. What Bill showed you in his presentation is that we have line of sight of and plans for 10 nanometer. In fact, to that 10 nanometer dot is slightly better than the historical trend and that based on everything we know about 7 nanometer, We believe that we can stay on that historical cost curve. So now I just want to take a second and show you some of the details behind those cost curves.
To So we've shown this to you in the past. Again, it's updated. The first block on that prior slide is the capital intensity is increasing. To It was a little hard to get the sense of it from the scale. What this is showing is our actual expectations of capital intensity, it's actual through 22 nanometer and then what we expect for to And you can see here that 14 nanometer capital intensity is up about 30% from 22 nanometer.
So there's been a starting at 22, there's been an uptick in the curve to in terms of how fast capital intensity is increasing. And that's happened because at 22 nanometer, We really started to see multi patterning in lithography, which was driving this, which is driving this. One other observation on this chart, which I'll come back to in a little bit, Our unit growth CAGR has slowed. And so as a result, you can see that our peak wafer starts per node are actually down a little bit from 32 nanometer. And when I put that on a scale of how much capacity we're putting in place because of the increasing capacity we get, you'll see it's a pretty noticeable amount.
To The second block on that earlier chart showed that we're able to improve our density to offset that increase to capital intensity. The practical impact of that is that our die sizes come down. And this chart shows the actual weighted average die size for the company through 2015
and you
can see that it comes down nicely over time. In fact, You can see that starting in 2012, which matches when Bill showed you, we started to increase our scaling and our density that we've actually seen this curve start to come down at an even faster pace. You should note, however, that this curve can be impacted by mix. So for example, if we do more server volume to our as a percentage of the total, the curve flattens out some, if we're doing more Adam, the curve can accelerate down. So Bill and I are both showing you this slide.
We'll make slightly different points. But this chart, this comparison of Haswell to Broadwell really isolate that scaling benefit because it's looking at our core that we're developing at the higher end of our market. And what it compares is the 2nd generation Haswell core versus the 1st generation 14 nanometer core, which is Broadwell. And you can see, as Bill showed you, Broadwell is 37% smaller than Haswell, even though it has 1,300,000,000 transistors versus less than 1,000,000,000 transistors for Haswell. In addition to that, you get these nice performance and power benefits.
It's sub-five watts, so it fits in a fanless system. It has great graphics performance, So we can continue to bring new features to the end market. But to tie this together and to tie together 2 things I've just showed you, Our 14 nanometer capital intensity is about 30% more capital intensive than the prior generation. To This product has a 37% smaller die size, and we're getting the higher performance, more energy efficiency. This is the advantage that we get from our manufacturing leadership and this is why it's important for us to continue to advance as fast as possible as we go from node to node because we get this kind of advantage
in our products. So the other
way to look at that advantage that we
to So the other way
to look at that advantage that we get by advancing Moore's Law is that we can increase unit capacity without having to add More overall loading capacity. Again, you're getting as you shrink the dye, you get more diaper wafer. You can see that we've slowed down that addition of capacity now consistent with the peak wafer starts per week. This chart also shows the relationship Between the capacity that we put in place and loadings and the difference between those two lines is the utilization of our factory network. To Two observations on this chart.
First, the obvious one, which is Moore's Law is letting us grow our business at a lower cost. To And the second one is you can see in the chart in terms of the how we've tried to match capacity demand to That we're trying very hard to be tactically responsive to changes in demand. And you can see that as we hit the financial crisis and loadings drop to With a relatively short period of time, we're able to get those lines back into alignment by rolling capacity forward. We can now do that in a couple of quarters. And before it used to take us a much longer period of time.
I have to bring back text for a minute here. And maybe this will be the last year I have to use them. But I know that we still get tied up here to Okay, I get that, but you're putting in less unit capacity. So or minimal increases to unit Capacity. So why is it $11,000,000,000 of CapEx as you go from why are you spending $11,000,000,000 of CapEx?
To The simple answer is that's what it takes to advance to the next manufacturing node. To The slightly more complicated answer starts with a breakout of CapEx. And this chart is updating information that I showed you last year and it shows that about $7,000,000,000 of the CapEx that we spend is for factory capacity. I showed you this last year for 2013. It's not terribly different.
The other 2 big chunks of the pie are the spending that we do for research and development. So this is the spending that Bill does for kind of advanced to research on next generation processes. And for things like office building, the engineering computing environment that for a company like Intel is actually a fairly big outlay of CapEx for which we think we get a very high return. I'm now showing you A 4 year trend. So this is the first time I've showed you that.
And in fact, you can see that the trend has been pretty consistent back to over the last several years. We've been spending at or slightly less than $11,000,000,000 per year. And the average for capacity related spending to It's somewhere between $7,500,000,000 $8,000,000,000 of that total spending. So the way to think about this is it takes $7,000,000,000 to $8,000,000,000 of CapEx to move from node to node with minimal increases to overall volume over this time period. Our unit CAGR is kind of in the low single digits up.
To And you can tell from the earlier slide that we're not ahead of our skis in terms of getting unit capacity in place. In fact, the utilization of our factory network actually is quite high. To on top of that spending, then we spend another $3,000,000,000 or so of CapEx on things like research and development, non manufacturing. I'll come back to those numbers in a second. To So just quickly then reinforcing the guidance for 2015, we're expecting CapEx to be about $10,500,000,000 to down a little bit from where we are this year.
And in general, the same general Distribution across manufacturing, R and D and some of the non manufacturing buckets. So not a huge change in the or not much of a change really in terms of the distribution of CapEx. So one more text. So to The other conversation I have with some of you is that, okay, even at that $7,000,000,000 to $8,000,000,000 of manufacturing related CapEx, You're going to see an increase in depreciation and won't that depreciation impact your gross margins. So first a clarification, only about 3 quarters of our depreciation flows into cost of goods.
To The rest is going into below the line spending. For example, the depreciation for the development factories by and large goes into R and D, The depreciation for office buildings, as you expect, goes into G and A. The second thing to note is that Depreciation is going up as a percent of cost of sales. If you step back, this makes sense based on everything you've heard this morning. Capital intensity is going up, but overall costs are not.
If you say it another way, this increase in capital intensity to Is being offset by efficiencies in smaller die sizes, which is translating into us running fewer wafers. And that means that we have less Labor expense per wafer, we have less chemicals and gases and direct expenses per wafer. This chart Shows that we're approaching a point where depreciation that goes into cost of sales is nearing 30%. So depreciation as a percent of cost of sales is nearing 30%. To And I expect that as we start seeing the depreciation for 14 nanometer and 10 nanometer moving in, that that percentage is going to go up.
And in fact, to It'll go up into the low 30s. All right. So we tried to do this in a way that's going to look familiar to some of you,
to Which is we're sitting in
a bar doing manager math, napkin math here. And this is not meant to be a long term forecast of our gross margins. This is just meant to isolate the impact of depreciation as it goes up on gross margins at kind of current business size. So to Yes, depreciation will go up over time to match CapEx. That's just how it works, right?
If you're spending between $7,500,000,000 $8,000,000,000 of CapEx over time, the depreciation that's flowing in the cost of sales will rise to that number. But The rest of the costs will come down as a percentage of the total. And so when you do this back of the envelope math, it says that even with no revenue increase over the next several to So we just stay at the size that we're at in 2014. As depreciation increases to match CapEx, we're still in our long term gross to Margin range of the company. So we're kind of in the mid to high 50s with 0 increase to business size.
To With a 5% or 10% increase in revenue and in fact, we're forecasting 5% just for next year, what you see is to That we're in the middle or even the high end of our gross margin range. So the thing to take away from this, there's many things that impact gross margin, but this increase in depreciation Is not going to be the thing that takes us out of the gross margin range because again, depreciation as a percent is going to go up, we're going to see savings in other places. To So that page again was a static what if look, not a long term forecast, please. I don't want to see Intel forecast long term gross margin in the 50s. To That looks at the impact of depreciation on gross margins.
We've demonstrated that we have lots of levers to manage gross margin. And I love this chart because it shows kind of a long term to The gross margin is impacted by the competitiveness of our product portfolio, how much capacity we're putting in place, How efficiently we're running the factory network, our mix, our product cost. In the real world, we've been Above 60% gross margin for 4 of the last 5 years. And in fact, we're forecasting a gross margin midpoint of 62% For next year. It is down a tad from where we are in 2014.
So I want to give you a little bit of the puts and takes there.
We expect that we're going
to see elevated startup costs this year. So this is the year where we start seeing startup spending on 10 nanometer. We also expect to see our cost per unit being up a little bit on the year. As I showed you, Broadwell starts out pretty expensive, to But then comes down nicely by the time we get to the back half of the year. Partially offsetting those two negative drivers, we expect that we're going to see ASPs up a bit to in 2015, it's not that we're raising prices.
We think that server will be a larger percentage of the mix. So that helps. To And also the reduction in the contra revenue dollars will show up as an increase in ASP. So those two things give us a little bit of an offset to the 10 nanometer spending and the broad well costs. Lastly, to just give you a quick shape for the year, based on what I said, it shouldn't be a surprise.
We expect that the first half of the year will be kind of below the 62%. The back half of the year will be above the 62%. Again, Costs come down, start up sorry, Broadwell costs come down and start up costs also come down as we get into the back half of the year. To One last observation in this section. Similar to what we saw in IP, to As advancing Moore's Law becomes more difficult, more capital intensive, fewer and fewer companies have the scale to continue to build their own factories.
To I thought Bill did a great job of talking about how it's that partnership between the product side and the technology development side It's allowing us to stay on that traditional cost per transistor decline. And we think that that's one of the reasons that others aren't able to do it because they no longer have the manufacturing side of the house. To you can really see it play out in this chart. If you go back 10 years ago, there were dozens of companies that built their own factory. Today, it's just 2, it's us and Samsung.
To And this is the 2nd key competitive advantage for us. We have this broad portfolio of leadership IP, But we also have leadership in manufacturing, which allows us to do the things we've been talking about, integrate, improve performance and reduce costs to and do that at
a rate that's ahead of
the rest of the industry. All right. I'm going to go quickly through my last and favorite section, which is cash and shareholder return. It's always fast, but that doesn't mean it's not important. So what you see here is we continue to generate Strong cash flows.
This chart shows our cash from operations and our free cash flow. We're on track to generate $21,000,000,000 of cash from operations, to $10,000,000,000 of free cash flow this year. It's got to love that. The priorities of what we do with that cash, I think have been very well Understood by the investment community and they're unchanged. It's first invest in our business, next increase shareholder return to Via the dividend and we target 40% of our free cash flow to return to shareholders via the dividend.
And third, we modulate our cash balances and return cash to shareholders also via the buyback. So I love this chart. It shows a cumulative 10 year look at to kind of how we've executed to those priorities. I think this is the first time we've put this all on one chart like this, but you can see over the last 10 years, we've invested $153,000,000,000 in CapEx to R and D. That's the investment we make.
And we think that if we do that well, that's how we generate long term return for you all by making those smart investments to staying ahead of the rest of the industry. From that same date, we've returned, I was really hoping this was going to be over $100,000,000,000 but we're just to the edge of $98,000,000,000 to To our owners via the dividend and share repurchase. I mentioned that 40% of our free cash flow to the dividend. To we were a bit above that 40% in 2013. As we moved into the back half of 'fourteen and as I look at the cash flow I expect to generate to in 2015, we're now I think we're moving into the 30s, which is what then predicated us coming out with an increase to the dividend that you saw on the break.
So I'm really, really pleased to be able to stand in front of you and announce the increase to the dividend. We're increasing it by $0.06 per share, Which brings our annual dividend for 20.15 up to $0.96 And to close this section, I just want to On the journey we've been on and bringing down our cash balances and using the buyback to also return cash to our shareholders, we've been returning repurchasing shares since the early 90s. To our philosophy, I think as many of you know, it's not to time the market, but just regularly distribute the cash that we're generating to shareholders and manage to a prudent cash balance. We've actually been bringing down the net cash balance that we think we need to maintain based on to our responsiveness to the market. Since the start of the buyback, we've repurchased about 4,600,000,000 shares.
And since reentering to The market in 2010, we've brought down our diluted share count by over 500,000,000 shares. So pretty significant activity in this space, as Andy talked about. To So just putting it all together, and you saw some of this at the break, but I'll put it in context now. We're forecasting revenue to be up in the mid single digits. PCCG is expected to be down slightly in revenue.
MCG is expect it to grow pretty fast, but off of a depressed base. So you have to be a little careful with that, Matt. DCG and IoT are expected to grow at a very fast to the size of those businesses and you'll hear more about that. We expect gross margin in the high end of our long term range. And as we discussed, we expect it to be down a little bit from 2014 due to that increase in startup costs on 10 nanometer due to the Broadwall cost at the beginning part of the year, offset some by ASP as we mix higher to servers and as we see some of the abatement in contra revenue dollars.
Moving to spending, we expect spending to to Approximately $20,000,000,000 in terms of that as a percent of revenue, we're down some in 2014. We expect that we'll be down some more in 2015. Under the hood there, we're seeing increases in investments in our data center group and in the IoT group. Those are two places where we see a big opportunity. We're investing a bit more in sales and marketing, and you'll see some of that coming out into the market in not too long.
And then decreases in investment to In MCG and in internally developed SoCs targeted at phones. And last, We're forecasting CapEx at about $10,500,000,000 which is down some from 2014. So I'm going to end right here just reiterating my key messages. We're growing again and we expect to grow again next year. Our competitive advantages are delivering real value.
And I think very importantly, they're becoming increasingly rare. There's fewer and fewer companies that have the scale to do the things that we do. And I think that will bring value in the future. We're in an amazing position, I think, to benefit from these trends to move to the cloud and data analytics. And last, we believe that we continue to be prudent stewards of our owners' capital.
To so with that, thank you very much. And I'll bring Mark back up to introduce the Q and A.
Great. Thanks, Stacy.
To all right. I think we are about ready to go here. Yes. With that, why don't we start here with Gary. Peter, please go ahead.
To Thank you. Vivek Arya from Bank of America Merrill Lynch. Thanks for all the presentations today. I think, Stacy, you mentioned that you expect to to Sorry, I'm here.
Where is he? There.
Thank you.
You expect to be gross margin positive in MCG by early 2016. To Would you go as far out as saying that you could even be breakeven on an operating basis by 2016? And the larger question there is, to Given how the market is maturing in mobile, why hasn't Intel managed to say that, okay, these are the areas where we can be reasonably profitable.
This is
the areas where we are focusing in because I look at the investments you're making today, I look at all the balance sheet investments you're making in China, Why can't you be operating even, breakeven at MCG and in some reasonable timeframe? And I'll follow-up.
Yes. I guess I'd say that to The progression that we're making, we expect an $800,000,000 improvement in operating profit this year. I'd say in 2016, we expect another big improvement in operating profit, probably not breakeven for the year. I think that happens further out. And what you really see the company doing is Adjusting our product portfolio and our strategy in terms of how we're going after different segments of the market via partners, to it takes some time for that to play out.
So good improvement, not yet profitable and I wouldn't forecast profitability for 20 to Although I'd say it's probably a big improvement.
Yes. Just I want to add, if you think about it, Sofia will the 3 gs will be in the first half, LTE really mid to second half. Rockchip will have their first product probably sometime towards the latter half of next year. It's Spreadtrum. To We just signed that deal a few weeks ago.
The engineers are working. You got to think Air Force product probably won't come out till late 2015. So to The Rockchip and Spectrum kind of start to play a role next year. Sofia starts to kick in. So I think we've made a lot of progress.
We've got good momentum, but these are going to take a little bit of time to play out until they're a major portion of our volume there.
To And I'll just come back on one thing because I don't want to lose the point that I was making, which is what you see in the MCG P and L includes a big slug of allocated costs for things like process technology development, IP blocks. Yes, it's just it's how you do segment reporting as they bear their share of those company wide costs. To When you look at it on an economic basis, so let's assume we're successful in getting to gross margin breakeven sometime in the first half of twenty sixteen. The actual incremental investment that we're making to participate in those segments It's relatively modest, thinking of it on the order of a couple of $100,000,000 a quarter maybe. And so you're getting awfully close to the point to We can look you in the eye and say, hey, on an economic basis, these things are carrying their own weight.
It will take longer for it to get to the point to That it's in covering their portion of Bill's development costs and the core development and things like that.
Got it. And just as a follow-up. To So I understand all the points that Bill you made and Brian you emphasized on transistor manufacturing and leadership. There's a big player in Cupertino who has done Extremely well with 20 nanometer and it's sticking with that same foundry structure even for 14 or 16 regardless of to The disadvantages that you alluded to for the foundry structure. So my question is, is there something inherent with ARM architecture or design to That lets them continue to do so well in that low power part of the market because if PCs and mobile are blurring, to Then are you you might be very good in transistor, but is there something in ARM that continues to make it do extremely well in that part of the market?
Thank you.
So I'll start and then Bill can jump in. The simple answer is no. And the way the reason I give you that simple answer is to You look at the products that we have, whether it's a phone or a tablet, I've been using the Dell Venue tablet, I charge this thing like every 3 or 4 days. To We've proven that we can go into low power. The fact that we have fanless designs here on PCs is another example.
To the reason for Apple choosing whatever they choose, you really need to to Okay. To them about their strategy and their direction. But our products as far as being able to do low power, being able to have the Performance we want. Absolutely not. It's really been has that been the focus of the company?
Have we driven our product roadmaps there? No. Other to Then in the last year and a half to 2 years, we've really bear down focus. You see the products coming out. I think you'll see a lot more in the future.
We have some great plans ahead for products that operate at very low voltages and powers, great performance.
To Bill, do you
care to
add? Great answer. Great.
All right. Let's come back over here. Ross?
Thanks over here. Ross Zimmer from Deutsche Bank. Question on the OpEx side of things. To Stacy, you talked about the $20,000,000,000 you're going to spend and it's great to see that coming down as a percentage of sales a little bit. But if I remember right, I to About 30% of sales was pretty much your target for what OpEx was.
And by some of the rough manager math, it sounds like it's still down 1% or to So maybe 34%. So I guess the 2 part question is, is 30% still the target? And are you only going to get there through the revenue growth side of the equation? Are there currently some investments that you're making where investors should think that there'll be a step down, a market step down to get you to that target margin number a couple of years out.
So I'd say Brian and I are still committed to 30%. We've been very clear in saying it's a long term goal and that there is a period of time to We're going to be making investments above that. If you look at the investment portfolio of go back a couple of years, this is where we were investing in Building our communications capabilities. So we weren't as far behind the market leader, bringing in low power cores and SoC capability, those kinds of things. To Today, the investments as you looked at the shift that I articulated that we're making is more towards us putting bigger bets on some of the areas of the company That are growing really fast and where we think we have an opportunity to actually get out ahead of the rest of the world.
So we're making bets in the data center business. Diane will talk about that. We're making some bets in the IoT business where we're seeing growth rates are approaching 20%. So we'll still come down towards that, but it'll take Some time and I do think it's more likely to be seen as revenue growth versus big reductions in spending from here. I would agree.
To I mean, I
think that's the way you want us to achieve that goal. It would be fairly quick and simple to simply cut spending and get to 30%, but to You then would look around and say where's the growth, right? As a shareholder, we're trying to balance between those 2. And we think we have a roadmap to get there that combines both. To we talked about we'll spend less in some areas that may not be growing as fast like PCs and some of the other areas, but we are going to invest in those areas we think we can grow to add or faster than the market.
Great. And I guess as my follow-up, you mentioned the growth side. So transitioning over to that 5% growth target, a lot of it to It seems to be coming from the DCG side of things, growing again 15%, 16%. That was a great achievement of your target this year. But the last couple of years prior to that, to You were markedly below it for macro reasons, whatever the case may be.
Without front running Diane too much, because I know she's next, what gives you confidence that you can stay at a rate that to Is relatively elevated versus any sort of 3 year trend?
Thank you. Yes. If you go back to the years that were below the trend, it's because we had a very depressed enterprise market to It is a result of macro trends. If you look at everything I put in my little cloud above the enterprise, which is Cloud computing, telco, all of the networking and high performance computing, that segment of the business has been very consistently growing above 20%. So it really hinges on we're banking next year that we continue to see those secular drivers, the build out of the cloud and data analytics to It's driving that segment of the business and that we'll see enterprise being kind of a normal year in enterprise and based on everything we see, that's a rational forecast.
Great, let's come back over here. I think it's Doug, if I can see him in the show. Great.
Thank you. Great. Thanks for hosting the day.
All right.
If you could, I find it interesting that we've just heard your presentations and there was no mention of TikTok. When we look at where you're at And we look at the year that just occurred, your start up charges clearly came in a little less than expected due to the 14 nanometer slower than expected ramp. How do we think about what you're planning on 10 nanometer for next year? And what, if any, would be the gives and Takes to your start up charges that you're accounting on for next year.
So I can start with just a bigger picture than Stacy can tell you about charges. To we're not we felt like we went out a little early with 14 nanometers as far as Timing and performance and features and we saw actually competitors adjust to that. To So we're going to be a little bit more prudent, a little smarter about signaling to the industry exactly when, what and where. To And you'll just have to trust a little bit the 50 year history we have with Moore's Law and that we should be able to keep it going for 51 or 52 years. To 50, 54.
Yes. So we're going to be a little bit careful there about signaling exactly when, what and where. To And then Stacy can talk to you about the timing. Yes. I mean Or spending side.
I would just say on the spending side, it's a a fairly normal cadence of spending and I'm not going to be any more discrete than Brian was. We do think we've been Giving too much insight too far in advance. And so we'll talk about 10 nanometers sometime in the next to 12 or 18 months and when it's appropriate.
Great. Thank you.
All right. Let's come back over here. Trey?
To Hi, Joanne Feeney with ABR. I wanted to go back to your discussion about the mobile side of the business, Stacy, to The $800,000,000 in operating margin improvements you expect, so maybe you could clarify what you mean. If this year we're on track to see about $4,000,000,000 in losses in that segment, to Do you actually expect the absolute loss number to drop to something like $3,200,000,000 or are
you saying as a portion of the
revenues for next year, the percentage of operating losses will drop?
To No, take operating loss minus $800,000,000 and that's what we expect for next year. Real dollars. To Real dollars. Yes, I'm not creative enough to even know how to do it the way you said. I wish I thought of it, but I kind of
do it the old
to Fashion way, which is we're going to lose X and we're going to lose X minus 800 next year if we execute to the plan I put in front
of you.
And then as a follow-up, you didn't slip a comment in at the end about how you're reallocating your research dollars. And one of the things you said was that you're going to be reducing to allocation of R and D to phone SoC activities. So could you elaborate on what that means for the importance of the phone SoC to Intel's to Future and how that might be made up through your partnerships.
Yes. It wasn't meant to be a slip in. It was meant to be pretty specific. And to What I was trying to signal there is that as Brian talked about, we have a strategy now for the low end of the phone market to That revolves a lot more around enabling 3rd parties to go do designs on our architecture. And so what you're going to see at that low end of the phone market, You're going to see more energy happening from 3rd parties and less direct investment.
So what I meant to signal is to We're going to do more on enabling others. So there's an increase in spending on that side and less on internally developed SoCs for the low end of
the market. To Here's my simple model, because I always have to break things down into fairly simple terms. We will generate the IP that allows others to go and design. So you'll see continued investment. The modem we talked about being highly important, the other connectivity.
You'll continue to see save or more investments in those key IPs, the synthesizable core. What we won't have to do is spend as much money On the iterative products that you typically do once you've created kind of the master product and SoC that has all of these, to the partners will be able to do that now and they'll be able to then take those to market in their channels.
All right, why don't we come back to the other side of the auditorium. So it might be Jim. I can't quite see you. Great. Yes.
Thanks.
Stacy, a cost accounting question for you. To Can you show us the mobile, the MCG Group losses? There's the dedicated piece of R and D that goes to MCG. To Did those losses include any allocated R and D from the broader chunk of shared R and D?
Sure. To In the mobile communication group segment is what you're asking?
Correct.
Yes, absolutely.
That $4,000,000,000 there's an allocated piece from the broader group R and D. It's not just the R and D from that one slug that you're
to Yes. So correct. If you let me say it differently, make sure we're saying the same thing. Pretty much everything that's in that yellow and orange is allocated spending. So I'll use my friend Bill here as a good example.
He spends A lot on process technology development. He's got activity going on in 10 nanometer, 7 nanometer and beyond, right? To We have a methodology to allocate that spending amongst the different business units. And so MCG would pick up to A chunk of that. That's actually a large part of that orange bar in MCG.
It's in their segment. As Bill was just saying, even if MCG didn't exist, We would still be spending that money to by and large or maybe a slight incremental amount, but by and large we'd be spending that money to develop 10, 7, 5 nanometer process technology.
To Awesome. Thank you. Welcome. All right. Let's come over to this side of the room.
It looks like Mark Lipacis over in this corner.
To Thanks for the presentations. I think it's a question for Bill. Bill, I walked in a little bit late and so I'm strategically placed behind the speaker. I didn't to See your chart fully. But I think in the one corner, you said that 7 nanometers, you expected the transistor to be on the same or at to The historical projection or lower is, I guess, I'm hoping that you can correct me on that if I'm wrong.
And do you assume the question is, to Do you assume that EUV comes into the market and helps you achieve that?
So I think you're talking about the cost chart where at the very end, I put a few little dotted Points out at the end. That was intentionally ambiguous. To What we want to make clear to you is that we believe that the cost reduction historical trend can be continued. To So we're extending the dotted line on the historical trend. What we didn't say is exactly how far below that line we think we will be and how that Trend will be with the previous generation exactly because that stuff we don't know.
Part of it depends on how mature EUV is and whether we get to use it or whether to We have to do that technology without. So the positioning of the dot, which we will eventually put on that graph is still in discussion, it's a pretty wide bar, but what we can say is it will be below the historical trend that much we know.
To hence Stacy's comment that when Bill puts a dot on a graph, it really means something.
When he puts a dotted line on a graph, it means something too, but
to And the follow-up is, can you get below that line without EUV? Yes. Thank you.
To All right. Let's come back over to the study room. John?
But I don't want to. I want to be further below the
line. Okay.
To Thanks, Gary. This is
John Pitzer with Credit Suisse. Thanks for the presentation this morning. Brian, a question for you. To date, marching down Moore's Law has helped you tremendously in your core businesses. To And you can just look at the financial model to see proof of that.
It's unclear whether or not it's helped you get into these new markets and there's a lot of skeptics in the audience to That the hard fought tablet share this year was just bought tablet share. Is next year the year where your Moore's Law advantage really starts to play out in these new markets? And you gave us a target for tablets in 'fourteen for 'fourteen. To and you gave us a target for tablets in 2014 for 2014. Do you have one for 2015 definitional issues aside?
To Okay. So I see, yes, a couple of questions. You can't argue that Moore's Law necessarily to is what got us into the tablet market. Certainly, we had to have products that could perform. I've talked to you about I actually think to With Baytrail, especially as it came in at 22 nanometers, it was quite competitive relative to the others, to say with Moorefield Products.
And so you look at the battery life and the performance, it's very, very strong. So I don't want to say that Moore's Law didn't play a role, but Clearly, our leadership in Moore's Law hasn't what's led us to our position, absolutely. 2015 is the first to year where you'll start to see 14 nanometer or leading edge products in that space. And the first ones will be Cherry Trail. 2016, you'll see Probably Sofia products down there.
So I think that's 2015 2016 is when Moores Law will start to kick in into this mobile space. To You'll see it increase more and more year after year after that. The second part of your question is, we set a target of $40,000,000 and what are we thinking about for next year. To We wanted to get to a number that was sizable, that was got us into a market leading position to We could have a footprint so developers would come and develop on IA and all. We think we've achieved that.
We think now just within Intel, just not including Rock Chip and Spreadtrum and or what's a 2 in 1 and all that. We think we need to grow in about market from this point, right? There's not a need to go to gain share or gain footprint. So think of us as we'll grow it relative to the market. There'll be some pluses and minuses in to
And we're toggling the priority from significantly more share to improving the profitability. That's we've had in-depth to conversations about the levers we want to improve the profitability while making sure we're not growing below the market rate.
And then Stacy, as to follow on. A lot of the presentation this morning talked about your ability to leverage IP across multiple businesses. That to me sounds like a really op margin leveraged to strategy. I'll go back to Ross's earlier question. If you exclude the mobile wireless losses today, your op margin today is already kind of mid-thirty ish type levels.
To Why isn't 35% to 40% op margin longer term the right way to think about this business given the IP leverage everyone talked about this morning? To
I don't know that I want to talk about long term op margin. I'll say our goal is to bring down spending as a percent of revenue over time to 30%. If we're at the midpoint of the long term gross margin range we've talked about, that kind of puts us at a 30% to Top margin, we based on the technology lead that we've had on others, I think that's been the kind of core driver of why we've been at the higher end of that long term gross margin range. So a lot of Depends on can we maintain that lead and can we execute on the product side. So I guess I'd say we certainly have ambitions to be higher.
To The long term model that we've articulated is 60% long term gross margin and 30% operating profit, 30% spending as a percent of revenue.
All right. With that, I believe we are out of time for this Q and A session. So thank you all. I'd like to invite the General Manager of our Data Center Business, Diane Bryant to take the stage. I'd like to invite the General Manager of our Data Center Business, Diane Bryant to take the stage.
To All right. You're going to help
me out. Look at you, what a gentleman. Oh, my goodness. Chivalry isn't dead. To Okay.
So it's certainly my pleasure to talk to you about the data center business. To So there's 3 things that I hope to leave you with. The first is that there are a couple of big industry Trends that are fueling this increased deployment of data center infrastructure. The second is that we are investing to win in this to evolving and transforming market. We are investing to ensure that Intel architecture delivers the best to Results for all workloads across the data center infrastructure, across servers, storage and network.
And as to It has been said a couple of times already. We are continuing to forecast a 15% revenue CAGR out through our planning horizon, which is 2018. To Okay. So, first, I want to start with the big industry trends. The move to the digital service economy is one that we've talked about a bunch.
To This move to where IT is fulfilling the business public sector and consumer needs. That trend certainly continues and it's this virtuous cycle of to You have more and more connected devices, whether they're IoT or personal devices. Those devices drive demand for new services And those new services drive demand for the build out of the data center. At the pace of this cycle, the rate at which new services are being deployed, the rate at which new devices are being Connected is tremendous and it is accelerating. And this drives a pretty significant transformation in the information and communications to Technology sector as a whole.
The second as my friend Stacy commented on is Jevons paradox to And that's in there. We were thinking maybe an early relative of Andy maybe and kind of some family similarities there. That was to That could be that could have been your distant uncle. So if you don't know Jevons paradox, so this is 18 to 65, William Devon declared that as technology progresses, as the investment in technology Continues and technology becomes more and more efficient that there will be new usages and the consumption of those resources will actually expand instead of contract. To And we see that, right?
We see that technology continues to become more and more efficient. And so the result of these 2 big industry trends to Our 4 big drivers of our data center business. And that is cloud computing, Network function virtualization and software defined networking, which you can think of as just virtualization and cloud computing for the telco infrastructure, to High performance computing and big data. So a quick example for you of the pace of the digital service economy, because to continue to talk about this. Last year, we showed you this slide and this is November 11, 11, 11, 11 China Singles Day.
To So the digital version of a Hallmark holiday where everyone's encouraged to go out and buy something for themselves online, invented by Taobao back in 2,008. To And we showed you last year that in that 24 hour period, there was $5,700,000,000 of online spend. To fast forward 1 year and last week was Singles Day and the results were even more staggering. So $9,300,000,000 in Spend an increase of 63% year over year, 278,000,000 transactions handled through online ordering and payment systems. To See, step back and just consider the scalability of the data center solution that can deliver that kind of growth in demand in a 24 hour period.
And it's a Perfect proof point for the value proposition behind cloud computing, the ability to deliver on demand rapid services in support of the Changing in the demand environment. So Jevons paradox has played out in the data center to Many times and I have a couple of them here for you. So first, if you go back to 1996 when Intel entered into the server market, So we entered in and started the movement from proprietary, vertically integrated, risk based and proprietary UNIX based servers. To This big movement then on to horizontal server solutions running on Intel architecture with Windows and Linux to Standards based environment, that shift from proprietary to open has had a significant decline and impact on the efficiency of Servers. So you can see here that over that time period, the cost of servers has declined by 80%.
And over that same time, The demand for servers has grown by 6 25%. So a more recent example of Jevon's paradox is to With the virtualization of servers. So in 2,009 is when we introduced Nihalem, the Nihalem product, VEON product, to I mean, it included in it the 2nd generation of virtualization technology, which really drove the adoption of virtualization. And so as virtualization occurred, there was a server refresh, so that with CIOs and Enterprise IT taking advantage to Both the CapEx and the OpEx benefit of virtualization. And so that virtualization process to Drove utilization of the server infrastructure up from sub-ten percent in a standalone dedicated server environment to To about 50%.
The result of that efficiency gain was growth in server demand of a 17% CAGR over that time period. To So new usages emerge as the technology becomes more and more efficient. And cloud architecture, the move to cloud architecture is this next big Transformation inefficiency and we believe it will continue to unleash new demand. To So the resulting 4 data center growth drivers that I talked about, it's important to note that they permeate all market segments. To So this is a view we've showed it a bunch of times of how we manage the data center business.
So we manage it according to the end users that are actually Purchasing data center infrastructure, deploying that into a data center and managing it. So it's enterprise IT, the public cloud service providers, Telco service providers is in technical computing. So if you look at the callouts here, you can see how these four growth drivers are spanning all of those segments. To You see enterprise IT is now deploying cloud, private cloud solutions. They're also picking up from the telco market and they're deploying network Function virtualization.
They're virtualizing the network in order to take the advantage of those efficiencies. If you look at the public cloud service providers, to They're now deploying technical computing solutions, high performance computing solutions. And there was a great example at Amazon's re:Invent to event in Vegas last week where one of their customers had deployed a high performance computing workload into Amazon Web Services to Across 70,000 Xeon cores, they were able to go from a 0 flop to 7 to And 29 teraflop HPC compute environment in just 60 minutes. That's equivalent to the 63rd number 63 on the top 500 list. So you see public cloud service providers now deploying supercomputers.
The telco side of the house, they're turning into public cloud service providers. You can See China Telecom partnering with an enterprise IT supplier, VMware, to deploy infrastructure as a service. To And then in HPC, in the high performance computing space, you see PayPal, so a cloud service provider using high performance computing clusters to detect Anomalies in transactions and doing so real time. So there's this blurring of the workloads to Between the various market segments as these new architectures emerge and these new usages of the infrastructure emerge. To So, when we talk about the growth of the data center business, you folks often ask about the mix between ASP growth and volume growth.
And so, to I want to show this here, because we have continued to benefit from ASP increases over time. And so to Often we get asked is why is that? Why are ASPs continually going up? So as you can see here, while CPU unit growth has been at 5%. The compute capacity that we have been delivering to Generation after generation after generation is 39%.
And the result of that is that we see our customers Choosing to buy up the stack, to buy our products at higher and higher price points in order to take advantage of that performance that we're delivering. So we obviously continue to provide the benefits of Moore's Law that those organization gives to us. So we deliver a minimum of 20% performance generation after to Over generation at the constant price point, so SKU to SKU 20% performance improvement at a minimum. To But over the past 5 years, what you see here is 70% of our volume has moved up the stack. To 70% of our volume has shifted up to higher price points beyond that 20% gain that we give gen to gen.
To So significant shift up and obviously that results in ever increasing ASPs. To So then you could say, well, why would a customer see such value in continuing to buy up your stack? And the answer is very easy. It's total cost to Of operation, total cost of ownership. And there's two examples here to demonstrate that.
The one on the left is an enterprise IT example. To This is an example of enterprise IT making a server purchase decision for a virtualized environment, so virtualizing their applications. To So they could choose to buy 19 servers with a 6 core Haswell CPU or to get the same compute output, to They could buy 10 servers with a 10 core Haswell CPU. So the server price of the high end 10 core Haswell product is obviously greater, to But the total cost of operations, the total cost of ownership is a 44% savings over 4 years. And it gets to It's pretty obvious because you have fewer servers.
Fewer servers means you've got lower network costs, you have lower power and cooling costs, to Lower operating system licenses and maintenance costs, applications, virtualization licenses and maintenance, you just go right down the road. And it Simply makes sense to buy higher capacity a smaller number of higher capacity servers than to buy many low end servers. To The data on the right is from Amazon. So James Hamilton is the Chief Architect at Amazon for their data centers and he published their total cost of operations to Pie chart, as you can see. And in it, he made the case for why it made sense for him to buy a higher end to Custom Xeon processor from Intel.
Servers make up 57% of their total cost of operation. To And so as he says, a 14% if he can get a 14% boost in processor performance, so 14% performance increase out of his server to Capacity, he can do that with simply a 2% to 4% TCO increase. So it makes very logical sense for him to buy up to To pay a premium to have that custom processor solution. To So with those underlying growth factors then, we continue, as I said, to forecast a 15% revenue CAGR over the horizon. To We don't have any real expectation change in the growth by segment, with the caveat that it is getting harder.
It will increasingly get harder. It is getting harder, Jay, but it will increasingly get harder for us to tie our CPU sales directly into one of those Segments, enterprise, telco, HPC or cloud. And it's because of that melding of the workloads that I talked about, the fact to The telcos are becoming cloud service public cloud service providers, public cloud service providers are deploying HPC clusters, enterprise IT is deploying network function virtualization. To So these lines, because the workloads are melding, our ability to associate a given CPU sales to one of those segments is going to become increasingly more difficult. To The other point that I want to make regarding our growth is the diversification of our product line.
So increasingly, as we look forward, our revenue is coming from products to Other than our CPUs. So this includes things like silicon photonics, our high performance computing fabric that we've been talking about is coming into production to Late next year, so that's both the fabric controller as well as the switch silicon. We have a new distributed Ethernet to Switch product that will be coming out and then we have next generation memory solutions as well. So all of those then start to drive to Our revenue growth beyond our standard CPU business and you can see they're getting to 22% of our revenue out in 2018. To So we are investing to grow our portion of the silicon components within the storage box, The server box and the networking boxes.
So, I want to click through and give you a little bit more insight into those 4 big growth areas and why we're Confidence about them. So the first two areas are driving our business because of the new architectures to That they're bringing architectures that are being deployed and that's both cloud computing architecture and then for the telco side, as I noted, NFV and SBM. To The other two growth drivers are growing our business because of new usages for the data center technology and that's high performance computing and big data. To
So to start with the
cloud, as I mentioned, this is the next great example of Jevons paradox. So cloud Computing provides a significant improvement in efficiency, the next big step after virtualization. And the value proposition to It's compelling. So if you're an application developer, you're going to get faster time to market of your new application or your new service through this on demand rapid delivery Self serve capability that cloud computing delivers. If you're the person that's actually running the data center and managing the data center, cloud architecture is going to give you Operational expense reductions through automation.
So you have fewer IT folks running around the data center manually configuring your infrastructure. To And it's also going to lower capital expenses. So you get greater utilization of the infrastructure as you can see in the picture, so lower CapEx cost. To From the move from virtualization to cloud computing drives the server utilization from about 50%, the general industry Benchmark to 80% or even higher based on the sophistication of your cloud orchestration solution. So to That cloud orchestration solution gets to make very intelligent or can make very intelligent decisions about where to land the application to get the greatest use out of that hardware infrastructure.
To So and that efficiency, which is a very compelling value Position is what's motivating the significant growth in cloud computing. So since 2,009, when we actually started to track this segment to Very explicitly and develop products targeted at that segment. Cloud computing has grown at a 52% CAGR, so significant CAGR. And the cloud deployments to Are now 35% of our total data center CPU revenue. So it's a significant portion.
So whether that's the Tier 1 cloud public cloud to providers, the Tier 2s or now enterprise IT solutions deploying private clouds. So if you look at the number of players, the top 7 have remained the top to 7 have very consistently over the March of time, benefiting tremendously from the economies of scale. Some of these seven to Folks have gone public and said that they have over 1,000,000 servers running in production. So tremendous scale and that brings them a lot of benefits in that efficiency, The efficient use of their infrastructure. If you look at the Tier 2s, that the number of Tier 2s has grown dramatically over this period.
So back in the early days, to I mean, we could count them. There's tens, maybe a dozen dozen or so of them. Now there's hundreds of Tier 2 cloud service providers. So folks like Workday and Salesforce dotcom and Dropbox and RackScale and on and on and on. There's just many, many, many.
And then we are very pleased to see the growth to In enterprise IT. So enterprise IT now moving from the virtualization process that they went through in 2,009 2010, to Now moving into a cloud architecture with the deployment of private clouds. So in it, we regularly survey enterprise IT CIOs and in 2013, Dean, 7% of them said they were actively building out a private cloud environment. This year, that's up to 12% and we expect that obviously to continue to grow. To So and as this market has grown, we have grown tremendously with it.
It's been a great to industry for us to contribute to and participate in. We have included capabilities into our standard Xeon products. We have performance features that make it easier to deploy cloud computing. So beyond performance, the security is an obvious one. So security features, We've also included in our latest VEON Haswell platform features in the processor that allow to It allowed the cloud automation solution to operate more efficiently to look down inside of the processor and understand What's the utilization level?
What's the power level? What's the security level? And make more intelligent decisions about where to place applications. To And if you see there's now 45 cloud public cloud service providers that are signed on. It was to Led actually by Amazon and now we have 45 that are actually branding their cloud services with the Intel Inside logo.
So acknowledging that that Service, that infrastructure as a service capability is running on Intel. Softlayer is a recent example. So IBM Softlayer, which is to A cloud hoster for enterprise. They're promoting their cloud instances that include Intel's trusted execution technology. To So noting if you land your applications on this instance without TXD, you have a certain level of security, but if you landed on the instance that has Intel's to Trusted execution technology, you have a higher level of security and protection for your enterprise.
And of course, they charge a premium For that capability. Amazon is doing a fabulous job for us in exposing our the capabilities of our Processors, you can see when you log on to Amazon Web Services and ask for an instance, if you look across the 10 different to attributes that you choose from, 5 of the 10 are directly attributes of Intel processors. So you'll see, would you like to Intel's encryption instructions, the AAN SNI or would you like Intel's floating point acceleration instructions with AVX to Or Intel's turbo mode or what clock frequency. So you can see here the public cloud service providers see direct benefit in Exposing the attributes of our technology up to their end users and out to the application providers. So they see value in it.
To So then obviously, they're willing to pay for that value and we see value in it as well. So over the course of time, we have grown our to Market segment share with the public cloud service providers from 84% to now 94%. So that is the share consistent with rest of market. To And through that same process, we have increased our revenue with the public cloud service provider market by 69%. To The significant value that they see in the technology that we deliver.
So next to Is the equivalent of server virtualization and cloud computing, but for the telco market, for the communications infrastructure. And it has been coined by the industry to NFV, SDN, they could have called it virtualization and cloud and made it a lot easier for all of us, but they didn't. So let me talk about NFV and SDN. To So our overarching strategy in winning the network is in this move from proprietary fixed Function appliances moving off of that proprietary architecture on to Intel. And so this is the objective for the network, whether it's the network to Inside the data center, the switching and routing and load balancers and firewall boxes or the network the bigger network, to Telecommunications infrastructure.
So the WAN, the wireless and wireline infrastructure, all the way from the backbone out to the access layer. To So we want that entire network end to end to run on Intel. And we're very happy to say that we are now able to apply Intel architecture to all of those workloads to End to end. And we've gotten to this point through some significant investments over time as Stacy and B. K.
Were talking about investments that we've Explicitly made into the data center business. So first is just the standard Xeon product line that we've been developing. To As that product line has continued to grow in performance, as the core count has continued to increase and as the performance per core has increased, We can now reach more and more of those networking loads. We've also made significant investments in accelerators. So we have our data packet processing accelerator line, deep packet inspection, encryption to Accelerator line, deep packet inspection, encryption accelerators, compression accelerators.
So we've invested in accelerators targeted at the network. To And we've also made some very targeted acquisitions, particularly this year, including last week. So earlier in the year, we acquired Mind Speed and they gave us The ability to play in the small cell section. So they gave us signal processing IP that we didn't have. And then just 2 days ago, we solidified the acquisition of the Axia product line from Avago.
To And that product line then allows us to have a footprint in the macro base station space. So and that to Acquisition actually allowed us to accelerate our roadmap in macro base stations by 4 to 5 years, both the revenue and the share. To So significant gains there. So with those actions, we now can cover the entire network end to end. To So the second step then in the strategy of moving first from proprietary on to Intel architecture is to seize this industry architectural transformation to To network function virtualization and software defined networking.
So a proof point to Of how even the largest and most legacy ridden industries like telco can move rapidly when the value proposition is compelling to Is this move to NFE and SDN? There is tremendous momentum in the industry and you can see the timeline there. The value proposition to For the telco infrastructures for the carriers to move off of proprietary fixed function hardware onto open standards to Intel based infrastructure running in a virtual environment is huge. It gives them both the CapEx and the OpEx savings that to Enterprise IT found in moving to virtualization, as well as it gives them the ability to rapidly deploy new services real time self serve. To And so the pace of adoption is really quite impressive, especially if you know the telco industry.
So it started back in October of 2011 to In Paris, all good things happen in Paris, I guess. There was a carrier community event and the British Telecom presented to Their lab findings that they could run network functions on Intel architecture in a virtualized environment. 1 year later, that industry had to She had come together through the SC Forum and have established 9 use cases and 12 POCs that they would collectively work on to build out the capability. To 2013, they were deploying proofs of concepts and moving into pilots. And now this year, there will be 1st commercial deployments to As well as many more pilots, but commercial deployments have been announced by China Mobile, AT and T, Telefonica, to Verizon and SK Telecom.
So tremendous rapid movement of the industry on to network function virtualization. To And so I just like to play a very short video to have the leaders of AT and T and Telefonica Network tell you why this Move this transformation of their architecture is so important to them.
To
Evolution is not enough to stay in business today. So we have to face a lot of challenges. To So we need to change the way we deploy and operate the networks. Network organization is One of the main ingredients to transform our network today. And here is where Intel is to Playing a key role in this new transformation.
By using DPDK, we can get the The real performance and the enough performance to execute this network functionalities in the network. So to EBITDA was key for that.
AT and T strategy is really simple. We're moving everything that We can possibly move into software defined networking. How do customers perceive it? What are the differences? And the differences are really around to What we define the user defined network cloud is what we call it.
And when you talk to the customers that have seen and touched this, It's the user defined portion. Not only are they elated with how simple it is to interface, but first customer actually said, Wow, I actually feel like I'm programming your network. We have a long history of working with Intel to move through some of those changes that have hit our industry. To we have some joint R and D investments. We have people working with one another.
When you have 2 organizations like AT and T and Intel philosophically aligned and tactically deploy special things happening.
To And so, as this movement has been happening, we've been investing to increase capability of our product line for the network workloads, as I noted, we have in this period, we've from 2,008 to today, we've increased Our addressable market in that end to end network by 11x. And in that same period, we have tripled our revenue into the communications infrastructure to mark it. So this year, we're really happy. We crossed the $1,000,000,000 point for our Intel silicon into the telecommunications industry. To And that now gets us to a 7.5% share of the network market.
That's up 2 points from last year. To And about one point of that is due to the Avago acquisition that just closed. So we're making gains both in growing the market that we can address As well as growing our share within the market. And tremendous opportunity remains clearly. And we've also been investing in to build out the ecosystem around network function virtualization.
To It takes a lot of partners to do this. If you think about the ecosystem that Intel built out many years ago around standard high volume servers, to All of the software and solutions and systems partners. So we started the network builder program. And just 1 year after we launched it, we have over 100 participants, to 100 members and these span folks from the traditional telco market, well into the enterprise IT space. So you have Alcatel Lucent to From the telco industry world as well as enterprise players like VMware and HP.
And the carriers are to Showing clear results. Telefonica now has 23 virtual network functions across 17 different vendors running in their environment. To Dell has a network function virtualization starter kit that is in deployment. Red Hat is investing in a carrier to Great. Linux solution.
So the industry and ecosystem is building out around the network market running on standard high volume servers Running on Intel architecture. So next is HPC and the growing usages of high performance computing. To So HPC growth is across 3 vectors. The first vector is in the government sector and that is the area that has the investments have existed to For a long time, but we see worldwide those investments growing. One example is Trinity.
It's a very large $174,000,000 system that's Procured by the National Nuclear Security Administration. It's a Xeon Phi design win for late 2015. To If you happen to know this week was supercomputing 2014, so the new results of the top 500 list came out And we're very happy to say that 97% of the new systems on the top 500 list are Intel architecture. There were only 2 that were not Intel. So we now have 86% share of the top 500 systems.
And something else we're very proud of is if you look at those Systems that have a co processor or an accelerator in them, 15% of the top 500 list have a co processor. To We now have 33% share of those systems and this is just 2 years after we entered into this market with Xeon Phi to And that's 5 years after our competitor had already entered and made gains. The second Growth area for high performance computing is in the area of commercial deployments. So there is this continued move from physical to digital, from to The physical prototyping and testing to computer modeled and simulated solutions. And then the 3rd area is, as I spoke before, cloud.
So and I'm sorry, is big data and the use of high performance to Computing in the cloud. So we see new usages. So big data analytics is a big driver for HPC when you talk about the complex analytics to require for things like real time predictive modeling of the PayPal solution or complex analytics in support of genome to Based personal medicine. And in high performance computing deployed through a cloud, that model is also So that is a new usage for HPC and the total the percent of the total HPC spend that will be in the public cloud to It's predicted to double over 4 years. So new usages for high performance computing.
To And we're obviously investing to win in high performance computing to continue that beat rate. We're meeting or beating our targets for Xeon 5 for this year. To We see strong demand for our co processor environment and we're actually making very strong gains on the 2nd generation of Xeon Phi, which is to code name Knight's Landing that arrives late next year. The wins in Xeon Phi are significant for us. It's a very strong ASP.
To So the ASP of the ZFi product line is over $1,000 So it's a wonderful contributor to our business. To With the 2nd generation Knight's Landing, we're on track for production. The A0 silicon is out and I'd say it has to As many transistors on Knight's Landing as there are people on the planet. So 7,200,000,000 transistors, thanks to Moore's Law, so one transistor for everyone. To And we're very proud that we already have 50 systems developers committed to that product line.
To The middle there is beyond the CPU. So we have not made any R and D investments in the true scale InfiniBand product line That we acquired from QLogic a couple of years back, and yet our design wins of that product have doubled year 50% growth rather year over year of the TrueScale fabric. And it's a clear indicator of the desire to For our integrated omniPath fabric solution that comes out late next year with Knights Landing. So customers are recognizing that a good on ramp to Onto the integrated omniPASS solution is adoption of our to scale InfiniBand product line. So we're seeing nice growth in an existing product line.
To And then at the last on the last column there, it's key that the growth in Xeon Phi is fundamentally driven by the applications being able to Track value, performance value out of it above and beyond what you could get with a standard Xeon system. So we're investing to continue to build out to Worldwide, we now have 41 Intel parallel computing centers and these are centers where we work with the local universities and research institutes to To parallelize and optimize common applications for Xeon Phi. To And the last is big data, the last of the 4 and this is currently the biggest of the big industry buzzwords. It's very big, a big deal as Stacy says. So we'll take some credit for the big buzz around big data because the to Cost of storage and compute have continued to decline over time, thanks to Moore's Law and the growth of standard high volume servers and storage to So over the past 10 years, the cost of servers has declined 40% and the cost of storage has declined 90%.
So it's now cost to feasible to actually store all this massive amount of data and compute on it. And so we believe this is another great example of Jevons paradox. To As the resources have become more and more efficient, new usages like big data analytics have emerged. And so it's clear that Big data analytics is the next big technology disruptor with an opportunity to transform all industries. To The IDC predicts that the market will grow to $41,000,000,000 by 2018, which is a 25% CAGR.
And it's interesting to note there how much to Of that growth is in hardware. So with big data analytics solutions, there's a large range of open source software solutions to And so like Hadoop and Hadoop analytics platforms. And so the investment in building out these big data analytics solutions can go then to the hardware to To build. So it's obviously good for us. And there is pent up demand for big data analytics solutions, we believe, and so we're working hard to unleash Set demand.
So we have the partnership with Cloudera that BK spoke of earlier, where we've worked with them to harden their Hadoop distribution for enterprise. To So integrating for instance our security instructions into their distribution. So now it's possible for enterprise IT to to encrypt data real time both in transit as well as at rest. So the performance is great enough Using our instructions and the power of Xeon that they can do that. So you can provide a enterprise trusted secure data warehouse solution.
To And we've seen very strong growth year over year in servers that are deploying Hadoop. And we've also done things such as launched a developer platform Aware to And we've launched that out on Amazon Web Services, inviting people to develop analytics solutions on our platform. To And then we've with health care industry being the biggest of the big data opportunities, we've We partnered with a couple of folks to just demonstrate to the industry the things that can be done through analytics, whether it's research to And into new treatments for Parkinson's disease with Michael J. Fox Foundation or partnering with Knight's Cancer Institute to On integration of the many different types of data with the goal of cancer research through cancer research and genome research. To So it's very clear that big data analytics solutions value the full range of our data center portfolio.
To And to demonstrate the growth of IoT devices and how with the build out of all these IoT connected devices, we're driving the growth in new usages and new Applications for big data analytics solutions, I'd like to invite to the stage Ron Kasabian. And Ron is the General Manager and Vice President of our Big Data Analytics business. To And so Ron, I have been wearing this basis watch for a very long time and at last you're going to tell me why.
Yes. Well
So, come on over here.
While you have been wearing your beautiful Basis Peak watch, we've been streaming data from your watch, your activity data Into the cloud and loading it into a distributed database like Kadoop.
Okay.
And running that on running on Amazon Web Services. And we've been collecting that data and that data can be used for a whole bunch of different things. Today, we're going to look at how we can use it to Increase your quality of sleep.
I see. Okay. Are we going to project this up here?
Yes. Yes.
There we go. Oh, I'm sorry.
Yes. To
do that, to What we're going to do what we've done is we've actually taken a cloud based machine learning tool call Neuron, developed by some partners of ours called Coldlight. And we've loaded 5 years' worth of data from 10,000 individuals on activity and sleep data in turnaround. Okay.
So we've got that huge base
of data there. Now we're going to compare your data against that and we're going to see what kind of patterns and predictions, Neuron can develop to For you to determine whether you can sleep better and maybe how we can help you sleep better.
I'm glad you're so concerned about my sleep.
So this
is going to happen. I do care about you.
Thank you.
This is going to happen in real time.
Okay. So
to Less than a second, so don't blink.
Okay. Don't blink.
Okay. And what we're going to do is we're going to take data from the last couple of days. We haven't refreshed it lately. We're going to take data from the last couple of days from you and your watch.
Okay.
And we're going to compare it against this huge database and we're going to run some and we're going to develop some insights, which we'll look at real quick.
Okay.
So I'm going to click refresh. And now we can see up in the top right that 24%, that's pretty good. So people are recommended to at least get 20% REM sleep per night. You're predicted to get 24% based on your to Activity over the last couple of days. So that's good.
We'll be better after Investor Day.
After this demo
And based on your activity.
The other thing is down on the in the right bottom right half, there are a couple of predictions. There's some short term predictions again generated on the fly to basically say if you go to bed an hour earlier, you're going to increase your quality of sleep by another 1%. And then long term, there are some predictions like if you increase your vigorous activity by 2 to 3 days a week exercise, to Then you could potentially increase your quality of sleep by 5%.
Okay. To So that is lovely. It's probably not the most helpful piece of data I will get today how to get a better night sleep. So I'm sure that this is all about one example of a broader range of data to Ingev, data analytics solutions that are of great value to the world.
It is. In fact, lots and lots of lots and lots of to Data analytics and machine learning are being used today. It's being used in healthcare. It's being used in manufacturing and retail, lots of different industries, as you pointed out earlier. To And the ability to analyze massive amounts of data is really bounded by the amount of compute and network and storage we have available to us.
So to for this demo here, we loaded the data into Neuron and we're running we're re Training the machine learning algorithms on a regular basis. So to do that and to generate your predictions, it took 94 Xeon course. To That's based off a base of 10,000 users. If we were ideally to increase that to 1,000,000 or 10,000,000, to The number of Xeon cores required would increase by a factor of over 100.
So it's a great Great use of our technology across servers, storage and network.
Yes. And these applications require not just high end Xeon Processors. There's opportunities Potentially for Xeon Phi and high speed fabric and more memory and more storage. The future of analytics at the end of the day It's really based off the ability to apply increasingly complicated algorithms to increasingly large amounts of data to And find that insights that no one person could find by themselves using compute to find a needle in a haystack.
Unleashing new demand. Yes. Thank you, Ron. I appreciate it. You're welcome.
To And Mike Bell, I apologize, but I like the Mika a lot better than the basis. So I'm going to switch over. I'm sorry. No offense to the basis watch. To No offense.
Okay. So, I do Stacy is giving me the hush. Okay. So, I do want to hit on 3 other areas of investment. These are areas that we've been making significant investments in and will have an increasing impact on our business going forward.
To So let me click through those here. So first of all, as the world's dependency upon IT grows, the number and the types to Workloads continues to grow. And as I said, we are committed to making sure that Intel architecture, that single architecture covers the entire workload space. To So one architecture across service storage and network provides tremendous efficiencies for the developers and for those folks that are actually running and managing a data center. So we have over 100 standard Xeon and Atom SoC SKUs at any one point in time in production across to compute, storage and network.
But we are equally adept at providing customized solutions with the Intel architecture And we have a broad range of implementation options that you see across the way here, all the way out to full custom CPUs. And so last Here at this event, I noted that we had delivered 15 customized Xeon Processors. Today, that number is 35. To And just in the last 4 months, we've had some real fun announcements come out. So one of them, Oracle Elastic CPU was announced in support of their Elastic Cloud, at the Amazon event last week, they announced that their new C4 Compute Optimized Instance Was running on a custom Xeon E5 CPU.
Microsoft just launched a couple of weeks ago Azure G, which is their to An instance of Azure platform as a service that's targeted at big data analytics and that is running on a custom Intel to Processors, Xeon Processors that we did for them to meet those workload needs. And then HP just launched their next generation of Moon Shot running to On the Haswell processors and one of the cartridges that we did was a custom cartridge with the integrated graphics Iris Graphics solution targeted at media and remote graphics workloads. So overall, if you just looked at the cloud service provider market, to 23% of our CPU volume is now custom processors and we project that that will grow to almost half of our processors for the public cloud Market next year. So it's a tremendous capability that we have. Another new and exciting product line for us is silicon photonics.
To So we I have to get my props here. So we started shipping our 1st silicon photonics products just last month. There are 3 targeted markets for silicon photonics. So, I want to hit on them briefly. So, first is in the data center.
So, this is from the top of the rack switch on up to the core network, replacing existing traditional fiber optics with silicon photonics. To The ability to do that, we have a very disruptive cost structure with silicon photonics. We're the only solution to That has a fully integrated onto a single piece of silicon on this module here. And that allows us to deliver a solution at a cost structure that is Half that of other silicon photonic solutions and a third of traditional fiber optics. And that's with today's 100 gig to 100 gigabit per second bandwidth.
As that continues to grow, the distance and to The ability we have to distance the traditional and other silicon photonic solutions continues to grow. So it becomes a very strong competitive advantage. To The second market is high performance computing and the high performance computing market has a is IO to This is awfully big. The high performance computing market, Cabling and the node to node interconnect with copper is a constraint to the performance and it drives up power, which then again constrains performance. If you look at the IO spends in high performance computing, 30% of the total HPC spend is going into IO.
To So the promise of silicon photonics with high integration, low power, small form factor, lightweight cables is a very compelling value proposition to high to Performance Computing. And then the last is Rack Scale Architecture, which this is an example of the Rack Scale Architecture here. So Rack to Scale architecture is all about driving compute density into the rack. So as you drive greater compute density, you need to drive greater bandwidth down into that to Into those compute nodes and copper, the copper cables that I showed you there, is limited at 100 to It's limited at 3 meters at 100 gigabits. So if you're going to go beyond 25 gig by 4, you need silicon photonics to do that.
To So very compelling value proposition across the 3 different markets. And so as part of our investment, to We have created an industry standard around our silicon photonic solutions around the cable and the connector. To So prior to our work here, each one of the silicon photonics or traditional fiber optic solutions had Proprietary cable and a proprietary connector. So that's an investment, that's a cost that is kind of no value add. So by standardizing the industry, we're driving down the cost of the cabling and connector solution and we have multiple players there.
And so And then you can see at the bottom, we have multiple many, many, many design wins. Some of them we were able to put on the slide and show you today. To So we are shipping 1st production now, but we see tremendous ramp in opportunity. The market is about we project in a couple of years, it will be about $1,000,000,000 to We think we have a great opportunity to win there. So, lots of work.
And I should also add, just like we have the processor and we've integrated the fabric Into the processor, over time, we would also have the ability then to integrate the silicon photonics with the fabric into the processor. So it's a great opportunity, another use of Moore's Law. And last, as I pointed to, is the Rack Scale architecture. So to This will be available this architecture will be available from multiple vendors in 2015. It's an architecture that's purpose built for cloud computing.
So So it's kind of the next generation of the rack moving from 2U rack mount servers moving to a fully integrated to Cloud based solution. And so what this architecture is all about really, it's about the ability to deliver on demand Applications down to the resources that get the best utilization of those resources through the pooling of compute, storage and network. To So for instance, here you have a tray of Xeons, here you have a tray of Adams, you have the pooled storage and the opportunity for us to Is that it can accelerate the CPU refresh, because you can refresh those processors without having to refresh the entire server. To It also is CapEx savings because you have fewer as Dell calls it UCPR unnecessary crap per rack. To So you have fewer fans, fewer power supplies, fewer of all that stuff that's really no value add.
So if you're spending less on that stuff, you can spend more on Intel silicon and valued products. And then it also gives us the opportunity to grow our share of the footprint as to As noted there with a variety of products. I do want to spend just a minute to talk about the competition. So with the first shipment of ARM 64 bit Processors, there's a new round of discussions that are occurring. So obviously, we take competition very, very seriously and there will always be competition, especially when you have
a business opportunity that's
as strong as ours. So, to Especially when you have a business opportunity that's as strong as ours. So there is now 12 ARM vendors that have to state that they are entering into the data center business. That's down from 16 last year. IBM has also over the year, they've opened up their Textures, they have openpower.org.
Obviously, they're trying to increase their footprint of power as that market continues to shrink so that they can sustain the support and services revenue. To And then AMD obviously continues on. So our strategy is pretty clear. We are committed to delivering leadership solutions across the data center workloads. To As I noted, we have a full range of implementation options at our disposal to meet those needs.
We have an annual product R and D investment to Just for the data center group at about $2,000,000,000 So it's a significant investment that we make in order to sustain that leadership. And we have obviously a very to Bancis ecosystem running on Intel architecture. And so in doing so, we can continue to deliver the absolute best Performance per TCO at whatever the workload is. And as you can see there, James Hamilton, again from Amazon, when he was at re:Invent last week, he was interviewed and asked to For his thoughts on ARM. And as he says there, Intel continues to be the right option.
When you do the numbers and you're trying to maximize the performance you can get to At the lowest cost of operations, Intel comes out ahead. So to conclude, our industry is in a period of tremendous change, which to Create tremendous opportunities for Intel. We are absolutely investing to win and to expand our position as the industry moves to To these new data center architectures, to net new network architectures and in the adoption of new usages. To And as we stated, we will continue to grow the business at a 15% CAGR out through the horizon. And I encourage you all to come visit our demos.
We have many of our to General managers here and hopefully you can drop by. And with that, I want to say thank you and introduce to you Kirk Scoggin, Senior Vice President to And GM of the PC client group.
Okay. Well, I realize it's been a long morning, but the way I look to Cat, it's about $1,000,000,000 of revenue a minute. I'll be up here to explain. So hopefully, we'll keep you interested for the next 35 minutes or so. To Although I'm excited about the client computing group and the org announcement, today I want to talk about why I'm still invigorated about PC clients in 2014 2015.
And there's really Three things I want you to walk away with today. One is, at the end of the day, PC meant personal computer and maybe for a few years, we lost that personality. And I think there's innovation that's coming back and the strategies we've laid out for the last 3 or 4 years and that innovation is driving some of the growth that I'm confident we'll have in the future. To The second question I get from a lot of you and I was just in New York a few days ago is, hey, does performance really matter? You're going across new operating systems like Chrome, to It's high end gaming really matter.
And so I'd like to just give you a perspective. I think performance is becoming more important than ever, especially as we go forward and what that means to our average selling prices. To And then third is we are investing, as Brian said, in a lot of new user experiences that we think can help significantly refresh our existing installed base And get people excited to want a new PC, not just need a new PC when something breaks. So let me start off and talk about the innovation strategies. So to As was said by Stacy and BK, last year we were here talking about revenue down mid single digits and operating profit flat.
And as you heard, to We've been delighted with the year with operating margin now up over 20%, revenue up single digits. It's been fantastic, to not just driven by XP refresh and hopefully you'll see some of those as I get through today, but really by reinvigorated companies in the PC market that are innovating, I think faster Never. I'm also excited that if you look at the other businesses around PCCG, hopefully you saw that with Diana and Photonics And some of the other things that we're talking about today, our non processor chipset businesses, so things like our gateways, home gateways, we're now number 1 in the world in cable gateways to With our Puma silicon, more than 100,000,000 units shipped into customers like Comcast and Charter, Thunderbolt silicon with more ports on the next generation Max, Things like our Wi Fi silicon, the leadership we've taken on 802.11ac. This is the 1st year we'll cross $1,000,000,000 in that business as well. So not just the processors, but also increasing our share of wallet in some of the peripheral businesses as well.
Okay. So Stacy showed you this chart. And yes, I can confidently say we'll be in this range of the TAM. But this is really part of the reason we created this client competing group next year is that, as I went to New York last week, I spent a third of my time just explaining what chip was in which business unit and if I buy a Vatrel T or a Vatrel M to And our customers were seeing the same thing. IDC doesn't include 2 in-one detachables in their PC number when you see this score to So you got to dive under the covers and say what is included?
Do they include a Surface Pro 3, is a tablet or a PC? Although Stacy talked about flat to Units, I'm here as the business unit GM saying, I think there's innovation and excited customers that we can do better than that, not just in 2015, but beyond. So that's Probably a good bet that Stacy and I will take this year, even though I think it's the right thing to be financially conservative. This is 4 now consecutive quarters of year on year PC growth. To So we're excited about that.
In the Q3, our notebook business was up 21%. Desktop, which a lot of people had said was dead, to was up 6% and our top line revenue was up 9% year on year. If you look at that growth curve, why did it occur? I mean, certainly, XP refresh helped, but we still think there's about 170,000,000 PCs out there that are still running XP even after the installed base this year moved over. We're also seeing tablet saturation in the mature markets.
And also as tablets move down to phablets in 7 8 inches The productivity that you can do on a 7 inches tablet is very different than you can get on a PC. And a lot of people now have got a tablet in their house, 1 or 2, and now they're back Looking at the innovation you'll see today and saying it's time to buy a notebook. So if you look at the installed base, I think one thing that's relatively shocking to people is the installed base of PCs now is 1,800,000,000 units. To And certainly, when the iPad came out, people were elongating their purchase. And so you look at now the number PCs that are 4 years and older and it's more than 600,000,000 units out there.
And so one thing that you might hear that I don't want to to Harm you with, hey, the refresh rates are getting longer. What we're finding and we interview about 2,500 people a month, we do about 250,000 interviews a year, believe it or to Is there now water falling their PCs down, for example, putting them into the kids' bedroom to do their homework or to have games and things like that? So while to The refresh rates are getting longer. The total available installed base is getting bigger. And when that breaks, the kids are coming back to their parents and saying, hey, to I've had a PC in my room the last year and a half.
I still want a PC and it's actually causing a refresh. And so the overall TAM actually and refresh rates get bigger from that perspective. So even a small change in this refresh is a big deal. And with Microsoft now coming out with a new operating system next year, Operating system refreshes are always good for hardware refreshes, and we're excited about that. So to I contend, as I've talked to you that this year there's been more innovation in the PC market than in the last several combined.
To If you just look at the traditional desktop space, we still have an all in one where you put the processor behind the screen to About a 17% compound annual growth rate going forward. And we're seeing the increase in density where you're taking desktops out from under the office to Putting them into the kitchen of the TV with gesture or with touch, just to check the stock price or do to And that's increasing the density of desktops per home. In the hotels, for example, if you go over here to the Marriott next to Dore, you'll see that they replaced all their desktop towers with all in ones behind the counter, but all the places you get your ticketing for airlines to Or check-in or go to the concierge are now all in one. So we're seeing business increases in the number of PCs purchased per business as well. To We also have a new category called our mini desktop, which is one of the fastest growing categories at 20% annual growth rate.
This happens to be a Lenovo Tiny, HP has a Mini, Dallas launched 1. And this is growing at over 20% Compound annual growth rate. And this is a full Core i7 vPro, another benefit of Moore's Law that Bill talked about. And as this technology continues to evolve, what we'll be announcing this year are basically compute sticks like this that can plug into the back of to anything from a TV or a smart monitor and bring intelligence into that. And that market is tens and tens of millions of units that traditionally had run on ARM and Android that now we can put into a fanless Intel envelope.
Last thing I wanted to show you is if you can just hand me over the portable all in one. This is probably one of the fastest growing categories now. Best Buy is putting a store in store in about 400 of their stores. But this is Not your father's automobile desktop, right? This is a Lenovo Horizon 2S, it's £5, 4 hours of battery life, 1080p display.
To You can lay it flat. It has touchscreen and it basically now is movable around the house. And this is the kind of thing you're seeing now go into places like your kitchen and this kind of area. So lots of innovation on the desktop. Likewise, on the notebook side, just colors.
To For 5, 6 years, you had a choice of black or gray in notebooks. Now you can get red and blue and yellow and green and just about any color you want. I'll show you more of the innovation mechanically in a second. But the other thing that's happened is BK said is we're now embracing all operating systems, right? For to decades it was a Wintel, then it was Microsoft and Mac as we continue to see Mac growth.
In the Q3, you saw Mac sales pass iPad for the first time in a long time, just based on the outstanding battery life you can get on a Mac Air. To But look at the other logos on here. I'll talk about Chrome at length. You're now going to see Android portable all in one. So if you like just a big tablet, Is this a tablet or is this a desktop or is this a portable all in one?
Again, another reason why all the areas are blurring. To And then one that might be interesting to you is how many people know of Steam OS or refer to Steam OS? Yes, so that's the logo there, the third one in. SteamOS now has over 100,000,000 users and they have an entire ecosystem where people go and get games and bring it into the console and we're very excited about what's Happening there as well. So port of choice as BK said.
So what I'm happy about is Sometimes it takes a while to get these strategies in place, but we've had a very consistent strategy on how to reinvent the notebook and get growth back into this business. To We brought core microarchitecture in, in 2010. We drove basically the entire world of thin and everything is thin to basically cut the weight and the thickness of notebooks in half since 2011. Touch Has been the fastest ramping technology that's gone into a notebook, faster than 2 d cameras, faster than even Wi Fi came into a notebook. And that's despite the shaky start that Windows 8 had.
And then 2013 2014, we've added Chrome support and now we've moved to this to 2 in 1, best of a tablet and best of a PC in a single device. So How is that 2 in-one going? So again, 2 in-one was really our concept of why do you have to carry around both a tablet and a notebook. If you can get all day battery life, We can make these things incredibly thin. Why can't you get the best of a tablet and a notebook and a single device?
So there's really 2 focus areas for 2 in-one. The first is, let's just get people excited to go back into the store, not because something broke, but because they want a new PC, not just because they need a new PC. To And what we're finding here is with year on year retail sales now of 2 in ones up 150%. We do exit surveys now over 1500 people in U. S, to China, India, Brazil, Japan and England.
And what it's saying is that people that come in to buy a 2 in-one are refreshing their notebooks a whole year earlier to The people that buy a clamshell, a whole year earlier. And that's and when you ask them very specific questions, did you want to buy this or did you need to buy this? To And increasingly people are saying, I wanted to buy this. So that's kind of for the 13 inches, the 14 inches and the 15 inches screen sizes. To The second thing we wanted to do is basically drive share back from premium tablets.
There were at 1,100,000 tablets to selling even before the keyboard and the cover at pretty significant price points. So in this 10 inches 11.6 inches or 12.5 inches category, It was really about giving people a reason to buy a PC, a tablet first model where you detach the screen and it has every bit as good of a tablet experience. And to And in that space now in all 9 inches to 12 inches including all tablets, all iPads, etcetera, 2 in ones now represent more than 10% of the market. To And in the case again of people walking out the door with 2 in ones, 56% of them said they probably would have bought a tablet had they not walked out
of the store with a
2 in one, to Which is a big number, which means we do believe we've arrested some of that erosion that was going to 10 inches tablets to and that's happening in the 10 inches to 12.5 inches screen size. So more than 70 designs last year, basically nothing under $6.99 Now more than 50 to designs at system price points below $6.99 or about 40% of the designs below 6.99 to The other thing we did this in the Q3 is we announced our first new brand for PCs in 5 years to And that's Core M. And we did that because we had we felt we had a very unique value proposition to go after premium tablets to And value 2 in ones. We literally have a product now that doubles the performance of any ARM or Atom product to in the marketplace. And so you say, why do we have confidence that we can grow and people are excited to come in versus a 4 year old laptop, again, dollars 600,000,000 in the market, to twice the performance, 2 in 1 versus a laptop only, twice the battery life and half the way.
So to This is literally what you kind of forget what a 4 year old notebook looks like and I'm going to do my best to keep it holding out here. And then you look at what Lenovo is now putting into Best Buy as of to Which is the new Yoga 3 Pro and you just get a perspective of how different it is. So I can't hold that much longer.
Got it. But if you
just look at it, how amazing this is, this is a full core performance to And we'll sell up the full core i7 and obviously, even though this is a PC first, tablet second, it's still incredibly Fin, so please go to Best Buy and get one after today. But that's also with 10 hours of battery life. So as BK said, We don't have an issue now on battery life anymore. We're still getting that same kind of performance in battery life. Okay.
The next area. So drilling down into the Baytrail space or Baytrail M and Celeron and Pentium. This is an area where we hadn't invested to significantly in the past. And as a result, our share in the sub-three ninety nine PC space versus AMD had fallen below 50% to And our Chrome share had fallen all the way to 24%. With Baytrilm and Celeron and Pentium, we've made a significant increase now.
We're now the largest provider of chrome products in the market, going from a low of 24% to over 65%. And I don't think we're done here. The second reason I have confidence is that chrome units are expected to triple by 2017 from Gartner. To Our brand as Intel because of our teach and our teacher initiatives is very strong. And as a result, If you look at someone like Samsung, last year they had their own Exynos ARM Processor in their Chromebooks.
This is now the Samsung Chromebook 2, to 9 hours of battery life, under an inch thick, less than £2.5 at $2.49 So even someone who had their own internal Exynos processor to Moving over to the Intel solutions. And then as Stacy said, Stacy showed you a slightly different graph on Baytrail. To But if you remember, we had Sundar from Google up on stage launching Haswell based Chromebooks. Those were on our big core. Now we're taking Bay Trail and we're able to get to much lower system price points, which expands the TAM.
So for notebooks, to Now what you can see is Q3 going into Q4, 83% of our Celeron and Pentium mix is now in small core. And we're getting product margins at or better Then our big core, but we're able to get down to price points as low as $199 and Black Friday, you'll see things even lower than that. To So what Stacy showed you just so you can reconcile is all both notebook and desktop percent day trial. This just gives you more data into what we're seeing on the notebook side. To Okay.
On business, so it seems like every week you read about a major retailer in the world getting hacked to Or a government being hacked by cyber terrorism. VPro today is viewed, I think, undisputedly as the world's most secure and managed desktop. You can manage it out of band. We've been working on simplifying the deployment for several years and we've now seen a 13% increase in to vPro, which is only core i5 and i7 because security is becoming the top concern in the IT space. We're also seeing vPro get into devices in Doug's IoT world because they're putting them into point of sale terminals or point of sale terminals are getting hacked or vending machines or kiosks to as well.
And the big transformation I think in the last year has been you used to get a super thick notebook from your IT department. You could go down to Best Buy and get Something incredibly thin. If you look at what's now available from someone like Lenovo here, this is 9.7 millimeters, 8 20 grams, 12 hours of battery life and full LTE. So a fantastic notebook and Lenovo is obviously known for the great business keyboards. But to Just like that, you've got yourself a tablet with outstanding battery life and core level performance with all of vPro to security and manageability features.
So what we're going to do this year is we're expanding that to benefit the line of business managers. So we're going to put pro wireless display in. So this is basically every meeting that you go to, you try to Find the dongle to connect to the dongle of the projector. Basically by the first half of next year when we launch the next generation core, you'll just be able to flick your screen onto your projector and it'll be secure and managed just like an endpoint. So people can't hack into your network, but you don't have to worry about dongles ever again.
To And we're committed to go into another new business called Y gig, which basically I'll show you a demo in a second, enables you to connect to your projector or to your screen and all your IO wirelessly, anywhere between 3 10 times faster than WiFi. To And this will grow to a multi $100,000,000 business for us because we are providing the silicon not just on the notebook side, but So on the display side, because it's an end to end connection and experience. And again, Intel is uniquely served because people trust to The security that we're putting into these kinds of things. Okay. So to I just wanted to quickly summarize then sort of the multi segments of notebook and desktop and then we'll move on to performance.
So the way to think about this and you'll see demos out there as an entry. We're fully supporting Windows and Chrome. You'll see that down to 199 price points, maybe even below. And the 14 nanometer versions are on track called Braswell. I can confirm everything's on track to get 14 nanometer into the Celeron and Pentium space.
In mainstream, we're going to continue to move to thin and light And we plan to ramp the fastest core generation we ever have. The benefit of having 14 nanometer, A little later than we had desired is that all the motherboards are there and we plan to take the next generation core to family all the way from Core i7 all the way down to Celeron when we launch it. It's going to be a very fast transition in the mainstream. To In premium, we're creating new enthusiast SKUs, I'll talk about that, and we're ramping our Iris and Iris Pro brands. I'll talk about that as well in terms of raising average system price with our graphics.
To In 2 and 1, we're right in the middle of the core ramp, core M ramp. So you'll see about 7 to 10 products hit the shelf here over the to Few weeks as we ramp Core M detachables. And then in the business space, you're going to see products like Helix, square some of the thinnest systems in the world are now business PCs, not just consumer PCs, increase our vPro security and management and then create a whole set of small business SKUs that have kind of lightweight security and manageability that is more affordable for small business. In the desktop space, to In entry, we're seeing a huge engagement now from the China Tech Ecosystem. As far as I know, basically 100% of the desktops to And notebooks out of China Tech Ecosystem are Intel based.
We learned from the aggressive growth of tablets there. We embraced it and we have a very strong relationship with to CTE ecosystem there. We're going to create a new set of enthusiast SKUs for the high end in towers. I'll show you a few of those in a to In the mini space, this is again one of the fastest growing segments. So you're going to see a new steam box on the steam OS launch on Intel architecture.
To in all in ones, we're driving price points down to $4.49 and even below things that used to be $9.99 are now $4.49 New relationships with the display vendor to cut 4 ks displays in half in the all in one space. And then in business, really a ton of form factor innovation, to Again, vPro for IT. So again, the purpose here is this isn't really just a one stop, to One form factor world. When I manage data center, a lot of our time was explaining why even though enterprise towers were going down, HPC and cloud were still going up. Again, you've got all in ones and minis here, growing at 17%, 20% a year, even though the traditional tower business obviously is going down.
To Okay. So let me transition to performance and why I think the performance requirements are going to be to more important than ever as we go into 2015. And there's 4 areas I want to talk about. 1 is this, does performance matter in Chrome? Is Chrome just a value operating system?
To The second is what's the value proposition of this new brand with Core M? The third is what happens when we put 3 d cameras and everything From these very thin tablets all the way up to notebooks and 2 in ones. And then last is what's going on with enthusiast gamers. To So what we have here is just a general performance statement of our 2 processors, kind of entry processors. On the left is a Core I3 and on the right is a Core I'm versus ARM.
And so you can see on WebExpert, which I think is a pretty Understood. 3rd party benchmark, we're anywhere between 2.43x the performance versus ARM. So if you really look at an Acer product, to this is an Acer one of these is the Acer Core i3 product and the other is the ARM product to Less than $300 on the Core i3 product, you can basically open a Hangout session, pull up about 9 websites and you can still smoothly go browse through Chrome. On the competitive systems, once you load Hangouts and you put a couple of websites on. You're going to get incredibly jerky motion and we'll have that out in the demo area.
So you can just literally play it for yourself. But we've been working a lot with Google On optimizing Chrome and what traditionally was just Celeron now, we have multiple OEMs now launching Core I3 and even Core at 5 day systems this year based on Chrome. That'll help us scale the average selling prices on Chrome. To And then on the right, this is just showing a Windows version of that same thing with Core M, not even Core I3 being 3 times the performance relative to to So we feel very good about how we're situated relative to ARM and the core processor. The second area is RealSense.
And so BK showed you a little bit of why he was excited about RealSense. As we get into the end of the year, we're going to have this integrated. I'll show you the number of systems in a second. To Well, I thought I'd do is just show you what happens to CPU utilization when you go move to a world of 3 d. A lot of people don't realize we've acquired a number of 3 d camera companies.
To So Craig, why don't we show them this is a system that will be available in early 2015 from ASUS in one of their notebooks. To So why don't you show them what they have?
Yes, here with an integrated camera, and let me just show you just one basic experience of what we're looking at combining the innovation to We're moving to the PC and our compute devices with RealSense 3 d cameras, but also pairing that with the performance of our core line. So Let's go ahead and take
a look at this experience and what we're going to
do, I think we'd do something fun for the morning because we can do a bunch of gesture, we can do collaboration, but Let's go ahead and we have a digital avatar application. So let's take a look at what that looks like here. And as you can see, I'm just actually Taking a window look
at this. But as you
can see, the application itself has a baseline performance. We're looking at about 30% to 40% for me to just be ready to go ahead and make this thing work. But what I'm going to do is load on some of the calibration here and that's going to go ahead and start our scanning. So as you can see now, it looks like it's actually doing all of the hundreds of points across my face to as well as to give us this experience right here. So as you can see, it's all of the individual points on my face are being tracked at Same time in addition to muscle structure.
So if I push out my cheeks, get something like that, a lot of head movements, something like this. And this is to An experience that we're actually able to do in real time for the first time. But if I want to take this ugly demo guy mug and turn it into something that's a little bit more fleshed out than a wireframe, let's try something maybe a little bit cuter. Something like that, right? But to Okay.
Well, I want to go ahead and do an improvement on okay, let's see if I can make this demo mug look any to Prettier instead of cuter. Oh, okay. I'm going to say kind of a definite improvement.
So, come up the stock price.
Yes, I think we're up a little to So and here's the deal. Now with this performance in innovation, for the first time, that's a lot of numbers we said, thousands of points across your face and all the performance that we need. But What we can do for the first time is actually convey real emotion on a digital avatar. So this guy is kind of like a sexy to or even to the point of excitement like pump you to Okay, that's all silly. But let's go ahead and bring back to the original CPU monitor.
Now we've actually kicked it up to over almost Twice, including some spikes there. And that's the real gist of this demo, everyone, is that we're looking at the combining of the innovation that we're getting in RealSense And at the same time, all the performance that's required for a great experience like this.
All right. Thank you. Good stuff. To All right. So next I want to talk about enthusiasts, because this was honestly an area that this is our most loyal customer base.
To A lot of people don't realize it, but software revenue from PCs past game consoles in 2012 and it's never going to go back. It's $23,000,000,000 to Revenue in the PC gaming in 2013 going to $33,000,000,000 in PC gaming by 20 to And these people in some cases refresh every 1 year, every 2 year, every 3 years, and we just weren't building products for them. So this year, we actually went and built Very specific products. We did built the world's first 4 core, 4 gigahertz on every core, overclocking well over 6 to Gigahertz for these teams. This is like the most amazing audience.
You get in front of them with 3, 4000, they're screaming about clock speeds and USB ports and PCI Express buses. To But we also went out and went one step further and at PAX to about 4,000 gamers, we launched our first 8 core 16 thread desktop to So I thought I'd just show you what the heck this thing does as you connect it. This is the 8 core 16 thread Haswell E. To And so what we're showing, you won't be able to see it necessarily on the screen, I don't think, but this is we don't have a 4 ks projector, but this is full 4 ks and you can run 4 discrete cards, Multiple 4 ks monitors and get just an absolutely outstanding gaming experience with this kind of product. So to come out and check it out in the demo showcase.
But again, the world's first 8 core. This is why when you see our core i7 business is growing so high because These people are just streaming into to win in this space. Okay. You got enough.
I can do this all day.
So you wouldn't believe this picture. China just built its world's 1st PC gaming stadium with 20,000 seats. This is 20,000 people in Poland Attending, if you're here in San Jose in a couple of weeks, we're sponsoring Extreme Masters. We're expecting tens of thousands of people at the San Jose Convention Center to watch their best gamers compete For the basically gold medal of gaming. So this is a big deal.
We're focused on it. It's a real reason why Core i7 is pumping up. To Okay. So it's not just about discrete. We have invested a huge amount of our die size and one of the biggest benefits in Moore's Law is in graphics.
So if you look at since 2006, when we launched 5th generation core in early next year, we're going to have 100x increase In the graphics performance. And over that time, our share in graphics has gone from 40% to over 70%. That sounds good, but there's still more. The reason I'm excited is we're getting an average selling price increase here of tens of dollars. And we can actually go after discrete About 80% of the discrete cards in the market, we already technically outperform.
So now this is just about building a brand around our new Iris and Iris Pro. You've seen Apple now bring this into a large percentage of their Macs. And it's not just these huge, huge gaming machines. We can now put some of the almost discrete level graphics into something as simple as this. This is an MSI machine, less than 20 millimeters of Z height, 25 ks 25 to 60 resolution, only 1.3 kilograms, but discrete level gaming performance.
And we're seeing more and more people to go to gaming from a mobile perspective. And then you don't need to have these huge machines. This is the new Omen system. So we're seeing people like HP now enter to They had bought Voodoo. They had ignored it.
They're now bringing a brand new brand, their Omen system to market. This thing dances with LEDs. You got to play around with it, but purpose built High end gaming machines for notebooks. And then if you can just look at the desktop, you don't need 4 huge discrete cards with these huge fans. This is Iris Pro in a form factor that can support 80% of discrete performance today in a form factor like this.
So Lots and lots of enthusiasm here around the extreme gaming market that we will continue
to work on.
Okay. So quick roadmap update. Simply put, everything's on track that we've told you. So CoreM is ramping Ten systems hitting the market as we transition over to holiday, our first new PC brand in 5 years, primarily for detachables and new premium tablets. 2nd is we're launching 5th generation core, that's the Broadwell products.
I'm expecting one of, if not the fastest ramp of a new process technology in our history, core i7 down to Celeron launching in early spring. 3rd is the next generation Braswell, Celeron and Pentium taking over from the 180 or so designs we have on Bay Trail, that's on track for second half. And then Skylake, our 6th generation Intel Core is on track for the second half of the year. So I feel really good about the transitions here and especially the core i5 5th generation core ramp to Because of the healthiness of that Bill showed at 14 nanometer. Okay.
Lastly, New user experiences. So what do we mean by this and what are we doing? So the reason we're focusing on user experience is we think it can help refresh those 600,000,000 PCs that are out there. We think if we put things like 3 d cameras and wireless charging into our tablets, they'll be differentiated to And they'll help gain market segment share for Intel tablets. We're seeing some average selling price uplift.
For example, if we put pro wireless display that's secure and managed to wireless display into conference rooms around the world and that's secure. We can drive that with vPro, which is a sell up in business. And then obviously being an innovator, it helps grow the Intel brand as well. So there's 3 areas that we've focused on. 1 is eliminating all wires from computing.
To The second is eliminating all passwords. The average person having about 18 passwords has to change them every 90 days. Our goal is starting by the end of this year, you'll be able to download a McAfee application that is you are your password, where your biometrics basically eliminate the need for you to enter passwords for Windows login and eventually all your websites ever again. And then the third is move the world to 3 d to with these 3 d RealSense cameras. So when I say deliver a no wires experience, this is as we do market research, this is one of the most frustrating things
is You
got your power brick, you got your USB ports, you got your HDMI cables, your docking stations. And so what we're talking about is eliminating the wires for display, to docking, charging and data transfer between PCs. So what I thought I'd do is just show you again something that's coming out in a few months, to But I'll just show you what we mean by Y gig silicon of how you dock in a future corporate environment and then how we do wireless charging. So this is a reference design. By the end of this year for Skylake, we'll have full reference designs where you literally would not have to put a port on the side of a PC.
You wouldn't have to have any USB ports, any power ports, anything like that. So to Craig, why don't you
Yes, let me go ahead. Let me start my entrance again here because I figured I'm early. To But just as far as how the future is going to look with our whole no wires implementation, this is normally if I just went up, I'm going to go ahead and set my PC down. And this is normally when I get to work. I have all the adapters in my bag and all those other items.
And here we're going to go and actually automatically just when I set it down and connect, I didn't press any buttons. I didn't configure any software, but just able to be able to set it down, not only my wireless display, but all the individual pieces, to Your USB, your storage, your peripherals with keyboard, all of that's automatically connected just on So it's about
3 to 10 times the Performance all wireless going from an Intel chip in here, a wide gig chip and an Intel chip that's here in this wide gig dock or eventually we'll actually have the wide gig connect it directly into the back of the monitor. So if you had a terabyte drive hooked up to it or anything like that, you could literally just do that as well.
Sure. But then that's going to take away 90% of the wires that we have in our huge mob that we have over there. But we have one more and Seems to be the heaviest one that we all have in our bag and that's that brick. So we want to ditch that out of all of our equations here and here's how we're going to do it with wireless charging. So I've actually installed a mat on the top of this table.
And what's great about Resonant's magnetic technology is that you can also go through 2 inches of material. So we're looking easily to install underneath tables or inside furniture. But what that allows me to do that I'm going to illustrate with this board here is it creates this wireless hotspot that I have here on my desk. Now what can I do with that type of technology? Well, that's just easy.
Kirk, I'm going to go ahead. I can charge my Bluetooth earpiece. I have a couple of phones here. Go ahead and charge that up. Again, multiple devices that we have at once.
Here's actually one of my favorites is that we have it so small and simple, we don't to We have to have it built in. But in a case like this, I can go ahead and retrofit my existing devices to be able to charge directly on the fly, which is pretty cool. To But lastly, not only the multiple devices, but multiple power profiles as well. So we're talking about being able to provide power All the way up to the laptop. So when I go ahead and put this down, we can say that he's charging, he's not charging.
I'm going to go ahead and light up charging again. Not charging just that Easy. No buttons, no musts, no fuss. Just go ahead and put it down and you're charging away. So in 2015, we may never need to plug in again.
Pretty cool.
Okay. Thank you. So we're working with all the furniture office to Spacs, we're working with all the major cafes around the world. We're working with all the major restaurants. We're working with the airline lounges so that to The same technology will scale from wearable to tablet and to PC, a very scalable thing that again to we'll waterfall through what the IP that Intel is building there.
Okay. Last but not least on RealSense. There is, again, a set of Cameras that are going to come out that are going to transform the world from thinking in 2 d or with one eye to being able to look and see with full 3 d. To And there's both user facing cameras and then there's world facing cameras for things like tablets and for detachables. This is going to enable us to do gesture based gaming.
It's to be able to actually do pulse detection and blink detection, so you can securely log in to your PC with very, very high fidelity because of being able to tell if to There's actually blood flowing through your face and it's not just something else. Capturing, sharing objects to Being able to print them out with 3 d printers, doing depth analysis and enhanced photos. So I think Brian showed you one example. To We've got cameras going into piece to tablets that are going to be smaller than and thinner than even an iPad Air. So this is the Dell Venue 8 that Brian was to Talking about with an integrated 3 d camera to do autofocus.
You've got it going into everything from this new HP Sprout, which was just announced about a week ago by Dion and the new HP Inc. This has a 3 d camera actually built into this all in one and it actually is doing projective touchscreen. So I can basically open up applications and get 2 dimensions. I can scan objects here in 3 d to for scrapbooking, there's a whole set of applications and this is going to be available for you to play with in the demo center out there. So there's a commercial to take a look at what the new Sprout is.
To this is just the beginning of a whole new range of projective computing where gesture can play a role in a multi screen workspace. And then what I wanted to show you here is the first kind of real demonstration of a world facing camera That would go in a next generation tablet or 2 in-one. I had the CIO Emirates Airline, which is right now the largest international carrier in the world, believe it or On passengers, they're building an airport twice the size of anything else on the planet in Dubai. And what they do is they actually measure every single box to It goes into every single airplane by hand, every single box for cargo because they actually have to optimize it putting into the containers. So they either have to buy a multimillion dollar piece of equipment to It scans and rotates the box or they actually have to manually sit and measure with a tape measure and log it.
And what you're basically seeing here is the airline to And the whole shipping industry is going positively bananas because you can now literally just take a tablet, point it at this device and you're getting the dimensions of that box With a pretty damn good accuracy, just by pointing it there. And you could actually imagine we could waterfall this technology into a wearable device, so you It could be hands free in the future as well. So just one example that has real benefit to driving up the average selling price of tablets. To And everything doesn't have to go to a $99 or $79 tablet. We're seeing a lot of applicability.
Things like insurance salesmen that go take 24 pictures to Of a crash scene and a bumper, how long is the skid mark? Forensics in police departments wanting to do a 3 d capture of a crime scene. To There are so many business applications for 3 d and tablets that are getting exciting here beyond what you can expect for consumer gaming. So we have 8 OEMs committed, Lenovo, HP, Dell, Asus, Acer, Fujitsu, NEC and higher. We have 15 PC designs coming in the spring, more to With Skylake, we've seen Michael Gallup excited at our developer forum on putting it into tablets.
And this is just the beginning. So to very excited about 3 d and you saw what it did to CPU utilization, which means it's a sell up on top of the great usage models. To And then what you should expect is right now we have more than 65 applications we're working with. Some of these are very confidential, to But you can see some of the biggest names out there from DreamWorks to Scholastic, who does Clifford the Big Red Dog for those of you in the U. S.
Here For kids gaming from Crayola, the ability and Skype, a lot going on here on the applications front that really is going to turn on this 3 d capability. Okay. So in conclusion, three things. One is I do believe we're making the computer or the PC personal. It is a personal computer after all.
And I think the strategies and innovation that's happening in the industry with our OEMs will drive growth. I think we're obviously forecasting that. Performance requirements are growing, whether it's chrome all the way up to 3 d cameras. And then we think we're on a path to eliminate passwords, eliminate wires and move the world to 3 d over the next 12 to 18 months. To So look forward to talking with you guys at lunch and I hear your stomachs growling.
So why don't we get Diane and I up here and we'll do a quick Q and A and go from there.
To all right. Thanks, Kurt. The procedure will be the same as the last Q and A session. I think in an effort to allow a few more people to ask questions, why don't we do just one question and we'll skip the follow-up for this time around, again, just to allow more people to ask questions. It looks like we may have one over here, please.
To
Great. Thank you. Chris Rolland, FBR. So on PC, Kirk, maybe you could talk a little bit more here. To Can you help us understand the guidance sort of flat units, revenue down?
How much do we think there is, for example, in to left here. How much might be channel inventory that we're working through here? To what's the sort of mix of enterprise to consumer here and how much market share is there left for you to take in X86.
Okay. So I'll try to I'll do them in reverse order. I think the last time I stood up here as the data center guy, you guys were saying, hey, you're at 88% or 89 to How could you possibly go higher and what are you at? 94%. So I think if we're sitting at some of our customers at 80% or 85% share, there's to Only room to increase market segment share.
That's number 1. Number 2 is we can compete head to head with ARM, I I think very effectively and we've embraced China Tech Ecosystem and they're now excited about going not just at the $79 or $99 tablets, but going after Core M tablets. So I think the next time I talk to you, we'll be talking about a bunch of Shenzhen designs on Core M, not just on Adam, which is another good sell up. To the mix right now is about fifty-fifty business to consumer, give or take. I think we spend a lot of time talking about consumer, but to Government, education, we're bidding every week on 1,000,000 unit bids for 1 to 1 teachers on Chrome.
And every time we win Chrome versus an iPad, it's Intel architecture, Intel Wi Fi in the Chromebooks, etcetera. So an iPad wins, it moves over to Chrome. We get the CPU win, the chipset, in some cases, sometimes the NAND, to The WiFi and that's a big shift and education is a growing part. To The biggest issue I think that's a wild card is Brazil and Russia were our 3rd and 5th largest markets. And given the Ukraine conflict and the Brazil Financial situation, those have gone back.
When I talk to the retailers there, people want to buy PCs in those markets. And as soon as to Those macro issues come back. 2 of our top 5 markets are going to come back with a roar and you guys can predict that
to As well as I can.
So I have confidence there.
We move back over to this side of the room, please. Ambrish.
Thank you. Ambrish with BMO. Diane, DCG, great job this year, but the last 2 years were not that great. So just looking out ahead, sorry, to But I did say great job
this year.
You did. Thank you. Looking out ahead, what's embedded in your assumptions to on ASP and then also in the enterprise. Thank you.
Yes. So you're right. Last year, we grew 8%. The year before, that was 11%. I wouldn't say to That was bad.
So we went from 11% to 8%, heavily driven by the economic situation and now back up to 16% plus, as Stacy said. To So looking forward on enterprise, so you're saying you said the mix between to ASP. So we do continue you saw the trends are pretty consistent on ASP versus units. So we don't expect any dramatic shift in that trend. So as we continue to deliver greater and greater capacity, we expect to see the continued value proposition of buying up the stack.
It's a very easy math equation as James Hamilton did for the industry that if you have a fixed amount of to Data center capacity, the thing to do is to buy higher up in the stack and get the greatest amount of performance you can per to That gives you the highest performance per TCO. So it's a very simple equation. So we don't expect any dramatic shift than we've seen historical between to ASP and units driving that growth. On enterprise, so enterprise now is falling just below 50% of our total revenue now is going into enterprise IT. And we've said historically, we think the enterprise market will continue to grow around 8% and there's really no change there.
To The enterprise market will enterprise IT market will continue to grow, thanks to the build out of private clouds because of the efficiency that brings, to Development of big data analytics solutions because of the value that brings. And then we'll still continue to see a little bit of to The refresh off of Windows Server 2,003 end of life.
Thank you, Diane.
Scott Parker?
Hi, Harlan Sur with JPMorgan. A question for Diane. On the custom side, obviously, great traction here. How does the focus on IP and IP reuse enable you to drive to more rapid design cycle times to support your customers. And then maybe if you could just touch upon product gross margins, custom versus merchant on a relative basis?
To Yes. So, IT reuse is absolutely the key for the data center business holistically. To And I think both Brian and Stacy did a good job of showing the leverage between from an IP block perspective, the leverage between clients and servers and even back from servers to clients and some of our to Ethernet controllers, we tend to lead. There's certain IP blocks that we tend to lead on. I think so I'll be bold and say the server group has led in the move to to SoC capabilities, system on a chip capabilities where we can rapidly deploy a next generation product, pulling different components Together and taping that out rapidly.
So that move to system on a chip capability is obviously important all the way down in the handhelds and the tablets and PCs, but equally as important to For us, and it will give us across that spectrum you saw of the way we're delivering customized solutions, to It will absolutely help us move further up that custom to the custom CPU side of that roadmap, where we can take to Our customers' IP block rapidly integrated into a system on a chip methodology with our own IP. So It absolutely is the system on a chip move is absolutely part of that continuum, but it is evolving. It's evolving for Intel and it's evolving for the data center group as well. To So our margin yes, our operating margins are
Relative margins.
Yes, so relative margins. As I alluded to with to The James Hamilton AWS example, our customers are willing to pay a premium for a customized solution. To So the reason they want to customize solution is going to bring them some value, right? It's going to with Oracle, it's going to give their Elastic Compute to Solution a capability that it wouldn't have otherwise. For Amazon, it's going to give them significant performance per TCO for a given workload.
So to They're asking for those solutions because they're doing the math and saying they get value from it and hence they're willing to pay for that value. And it's why you saw to On the public cloud service provider chart, why we've been able to grow our revenue so substantially over the time is we've Been working directly engineer to engineer with those customers to say, what is your workload and how can I accelerate it and how can I get you so much more value out of your data center to That premium is a good thing to do? So it's wonderful, wonderful margins.
All right. Back up over here.
To so Diane, looking at your forecast next year for DCG to grow 50% or greater, have you embedded any benefit get whatsoever from the expiration of Windows Server 2,003 in that forecast.
Yes. So there's so the Windows 2,003 end of life to Obviously, it takes as an old CIO, I know how long it takes to convert your applications to On to the next generation operating system. So, it's not something you do overnight. It's a 6 month to a year process. To So part of our growth this year in enterprise, we believe is because people have been buying procuring new service in Report of those applications moving.
And so we'll continue to see some of that, but the end of life deadline is July, I believe, right? It's June or July, it's July. To So we do have some of that baked into the first half of the year volume as well. So it's all baked in. I think we all knew that Windows would be end of life in 2,003 and so it's all part of to our model.
Great. Back up over here.
So, Blayne Curtis of Barclays. Kirk, when you look at the 2:1 market, to You said, I think the Bravo Y was 1,000,000 units in Q1, not all 2 in ones. Just any thoughts on the mix of 2 in ones and PCs to In 2015 and where that would come from, whether it be from the tablet market or notebook users moving to that form factor. To And I'm assuming the price points probably don't overlap with the 40,000,000 tablets that you have, but is there any cannibalization there? And then to Diane, I'll just sneak it in.
Are you really getting 4 hours of sleep at night?
Yes. So I think on 2 in-one, I'm not sure to You said I said it was 1,000,000 Broadwell wise. We've been shipping millions of units of Core M into the market this year already That are now hitting the shelves, again, between 7 10 designs will hit for holiday and then significantly more as we go into next year. And then what we also said is we're shipping millions of units in preparation for a very early spring 5th generation core launch of our traditional Celeron Pentium Core I3, I5, I7, which will be on Broadwell U. I think the form factors, the way we think about it is to today, detachable seems to be preferred if you're a tablet first user and that's traditionally a 10 inches 11.6 inches or 12.5 inches screen size.
And in that space, to VK's point, when you detach it, to You want it to be the best tablet in the world, which means LTE attach rates are going to be as good, I think, or better than tablets because you're buying a premium tablet. So that's a small to The 13 inches to 15 inches market like a yoga that I just showed you is really about a PC replacement and accelerating the PC refresh cycle. And I think So far foldovers and detachables are the 2 form factors that are winning, but you can still find swivels and flips and all these others. But I think People are really starting to center more and more on the detachable and it's really a function of are you a tablet first user or are you a notebook first user. To If you're a 13 inches to 15 inches and you're buying a 2 in-one, it has to be the world's best notebook.
And then I'm basically giving you a tablet for free. It's just a large 13 inches to 15 inches tablet. To If you're buying a ton of 12 inches detachable, it better be the world's best tablet. And then you can dock it in and hopefully save weight and Z height and everything because you're buying a keyboard that was designed to work together. And the other thing the OEMs are loving about 2 in ones is they can sell a lot of peripherals.
So you're getting multiple keyboards per screen now to Being sold, so you'll have a keyboard with extra battery. If you want 14 hours of battery life, you can have one that's just a cover. By the end of next year, you'll have them with Charging wireless charging built into the keyboards. So the OEMs like this is actually a reason why I think the OEMs are getting reinvigorated is these peripherals are where they make a good chunk of their money. Great.
I
think we'll get to 2 more in. Let's do one back here and then we'll come back over to the other side.
To Thank you. Chris Caso from Susquehanna. A question about unit growth assumptions and it's one of the things that came up on the earnings call as well. And given we're a little farther in, is there any incremental information you could provide that helps to reconcile What Intel is seeing with regard to unit growth rates as compared to the overall industry? And as you look into next year, what's embedded in the 2015 assumptions with respect to unit growth.
That was a server question or PC question? To yes, appreciate it. Okay. So yes, I think what Stacy said is, he's assuming, at least for to The financials, flat units and slightly degrading ASPs. I think that's a function of mix because as you saw, the Celeron and Pentium is growing faster.
Our core i3, i5, i7, every time we come out, we basically keep telling you we have new records on vipro, new records on i5, new records on i7 and new records on our ks SKU, which is our overclocking stop. So the high end is very, very healthy. The value space is very, very healthy. And so when you see an ASP decline, It's been primarily because it's just we're gaining more share back from ARM against Chrome like the Samsung conversion or against AMD in the value windows and to Okay. So relative to unit growth, the reason I'm bullish is we have a new Microsoft operating system.
I think security is more important than ever in business. I get a lot of questions on will server 2,003 affect corporate ITPC purchases. I've been talking to CIOs All over the world, I think the answer is no. We don't think it will. Refresh rates are pretty locked and they're going to just keep buying PCs.
To So I think it'll be, as Stacy said, more consumer next year than business. This year was more business than consumer. It'll still be more to Sure that emerging and if we can get some of the emerging market I personally believe that as the same saturation in tablets happens in emerging market to It's happening in the U. S. And other markets that people will go back to the PC again because we have price points that are compelling for emerging markets.
To And so we've been saying that roughly that trails the mature markets by about 18 months or so. So I think that's still a wildcard. And then you have the macroeconomics and political to Instability of Russia, which has been Russia at one point was the 5th largest PC market in the world. Brazil was the 3rd largest PC market in the world and both of them have fallen off to to Japan and Germany. And so when those come back, I think there's more tailwinds as well.
All right. We'll sneak one last one in. It will have to be hear in the back of
the room. Great. Thank you. My question is about Skylake. You mentioned it briefly, but when you had this kind of later than seasonal to ramp up Broadwell.
Is Skylight going to be kind of back to school type of launch? And does that mean you have a shortened life for Broadwell?
Yes, we haven't publicly disclosed the ordering of our products, but what I can tell you is We'll have a very robust desktop ramp and a very robust mobile ramp to For notebooks and 2 in-1s. So we're expecting to have both of those products ramping significantly in the second half of the year. To And as it sits today, things can change, but it'll be a cleaner and more rapid ramp than you've seen with Broadwell this year. To We have more headroom in the schedule to have like a complete holiday kind of a situation.
Okay.
Thank you. All right. Thank you all very much for your patience. I know we've run it a little bit long. We promise we'll get you out there to feed you right now.
Again, seating is very informal for lunch. Grab any chair you like. There will be 1 or 2 executives at each and every table and that will be an opportunity for some informal networking. Thanks and we'll see you in about 45 minutes.
Ladies and gentlemen, please welcome Renee James. To
Good afternoon. Welcome back after lunch. We can grab a seat. Thank you all for hanging in with us. We had a great morning and we have a wonderful afternoon planned for you.
We're going to pick up on the theme that Brian started this morning and talk about what we do with the 75% of the $11,000,000,000 of investment to and how we use that in the adjacencies. We've picked a few of them to talk about in detail with you And give you examples of how those platform investments lead to differentiation and market leadership for us across our product lines. To So we talked a lot this morning. I'm using the same slide. I think Stacy did a good job of explaining it in detail.
So I don't need to do that for you. To But a lot of our investments as we've talked about are utilized in different segments. We talked about the core of them. And this afternoon, we're going to talk about how they extend into platforms. So I think many of you know that in the technology industry, Platform investments are one of the key ways that IT companies create additional value by aggregating different assets together, creating Leadership and differentiation at the platform level and getting ahead the next generation, the next generation.
And that's really what we are trying to do with the investments we're going to talk about This afternoon, extend the Intel architecture into emerging and growth segments where we may or may not be and Not only find new growth for our business, but also extend our platform leadership. So I'm going to go through several of them and then we're going to drill down on 3 of them. And I have to The GMs of each one of the businesses to give you wonderful details and roadmaps and all the things that you would like to hear. I have no haikus. To I have no demos like Kirk.
I know, right? So I'm going to go pretty quick. To I am going to jump up if they run too long and say, okay, thank you, Herman, we're done. And Keith, to I thought thinking on Herman. I love Herman.
But that so I'm your afternoon talk show host is the way I would think about it. So let's talk first about mobile communications. I know you're all dying to hear Herman. He's going to give you a lot of detail on this. But I just want to reiterate a couple of key things that we to think about here.
Communications in general is one of the emerging areas of key platform differentiation. To and as you know from the things that have happened in the market this year with the exits and some of the changes, to Intel is emerging as one of the leaders in this area. And I've talked to some of you at lunch, we talked about this. Many of us have discussed this in other forms, but it bears repeating. So as you think about the investments that we're making, think about some of the R and D at the platform level like this.
And I think Brian started to talk about this this morning. To When a decade or 2 ago, a decade and a half ago when everything was about graphics and Windows and streaming video and everything was brand new and we Trying to do more and more. We made tremendous investments at the platform level in graphics and we were nowhere. And graphics With something that everyone said, why are you guys doing this? You're not wearing graphics.
Graphics isn't part of what you do. And over the course of a decade, we became to The leader in integrated graphics as we are today. And graphics is just taken for granted as part of the platform, but it's a super high value part of the platform. To I think you can as we look forward all the segments of computing from wearables, IoT, phones, tablets, to PCs and yes, even into the data center as Diane described and she talked about what's going on in the network communications business. To Comms in general, multi comms is a strategic asset.
It's a platform level asset. We talked about the leveraged investment. But to Strategically, that element is something that if you have it, you're a have versus a have not in this in the industry going forward. It's going to become a point of differentiation as it gets integrated, much like graphics did a decade ago. So we think about it at the platform level to As not only a BU investment, not only of course as part of getting into phones and tablets and all those things, but it's a strategic investment for the long term.
To Security and privacy. We're not having a drill down today, but Chris is here. I don't know where you are, Chris. I just saw you. Chris Young, who just joined us that Brian introduced this morning to It's here and I hope all of you will get a chance to talk to him.
We are continuing our investments and Stacy mentioned that this is a multibillion dollar business. To But as a platform asset, those are leveraging the things that we've done in the core of the product line, both in core Amzion and extended into Adam, to As well as the technologies we acquired in combination are becoming a platform asset. And very much like I just gave you the story on communications Over this next decade, security is becoming one of those next platform assets where you need to be able to integrate it into the platform at multiple to Different levels of integration. So we continue to do our work. The thing about security that's important for this next year is how it plays into our core product line to And it's end to end.
So security is from the client through the edge through the cloud network into the data center. And you'll find that many of these platform technologies are end to end. And one of the unique differentiators about Intel that Brian talked about this morning is that you can design One product with multiple operating systems, one product with multiple points of differentiation at the platform level to end to end. And this is important for creating solutions. And solutions is the way that we think we are going to generate from software to silicon more value on our platforms.
To Internet of Things, we're going to have a drill down on this and you'll hear from Doug. Internet of Things is very exciting for many reasons for us. Brian talked about how we are already in this business and we've been in embedded for a long time. That's great news. It leverages connectivity.
To It leverages software integration capability. And more importantly, it is sold as a solution end to end. And one of the things I'm very, very excited about is that this group is the furthest along from my opinion and all the decades we've worked on end to end solutions to And really realizing the value of being able to create vertical solutions for different segments of the market. It's a multi $1,000,000,000 business. It's growing rapidly and we're able to sell solutions here.
So that's beyond the silicon. So silicon and software, so it's very a exciting emerging segment for us. In wearables, Diane demonstrated she's still wearing it. She has her bracelet. One of the things that at the platform level, we think about wearables and people say, what are you doing on wearables?
You know what I think about wearables? To We're getting the next generation of developers excited about the Intel platform. We're not missing the next big thing. We're out there with development kits to And ideas and prototypes and partners getting developers around the Intel architecture. This is critical As many of you talked to us about getting into mobile and all the work we had to do to get Android developers caught up on our platform, wearable developers are being born on the Intel platform.
To And I think Brian's enthusiasm and embracing the maker community is a huge piece of this as well. These are the people who are designing the products of the future. And when you are talking about platform investments and proliferating the Intel architecture for the future, this is a big part of why we would do that. To And finally, certainly not last or least is storage and memory. So we the industry always to It goes around and around about storage and memory.
But at the end of the day, one thing is very, very clear as you build bigger and bigger systems that are more and more complex, to memory and storage become even more strategic. So I think over the horizon at the platform level, not to say it's not a good business and Rob will talk about it, to Yet again another multibillion dollar business. At the platform level, this is a very strategic area of investment, to Because it becomes either the opportunity to accelerate or the bottleneck. It becomes another high value portion of the platform to That we want aggregated around Intel. And strategically, it is an opportunity for growth for us.
So Rob will talk about that. So when we look at looking forward for the next end number of years, this is kind of the list of what I would call key platform technologies to That we're investing in. And when you look at that stack of the shared investment that we talked about this morning, inside of that to Are these investments. And they're not that visible to you. So we thought we'd take a minute and just call them out.
So as you listen to to The afternoon presentations, listen to them in the from the frame of mind of, okay, they're laying tracks for the future here. They're also building new multi $1,000,000,000 businesses. But as Stacy said, to A $2,000,000,000 business on the scale of Intel doesn't always show up. So that's what that's really kind of why we aggregated them together this Afternoon, so that we could look at them and think about the future strategic position that Intel will be in as a result of having made these investments to And the adjacent growth opportunities that go with them. So with that, we've got 3 that we're drilling down on.
To The general managers for the others are here. We have demos on everything else. So we're prepared to talk about everything. But in the interest of time, we pick these 3. And we're going to start to with communications and mobile technology.
And just quickly just to talk about what the strategy is at the platform level, it's leadership to In connectivity. And by that, I mean multi comps. So not just cellular, right? It includes Wi Fi, Bluetooth, NFC, etcetera, etcetera, etcetera. So leadership in multi comms is a strategic asset for the corporation across all platforms.
That's the number one strategy from a platform perspective. To 2nd, of course, the platform mobile platform leads in a low power and we talked about some of that this morning and Harm is going to talk about it more. But it is the point of innovation and you saw in Brian's color charts, the green arrow coming back. So innovations that come back into the core from the low power team, Very important from a platform. And then of course, not talk about much, but something that is absolutely critical and many of you have asked about Is the development methodology around SoC and rapid derivatives and this team, one of their platform jobs, right, Because we're all one big R and D team is to really innovate in new design methodologies around rapid derivatives.
So with that, I'd like to ask Kermit to come up We won't give you the hook, Kermit, and talk in detail about the mobile
strategy. Thanks.
Thank you, Wene, for the introduction. A warm welcome from my side as well. So I go a little bit deeper. First of all, I think I want to share with you to a few market trends that we see and that are leading us in our decisions on where we orient our focuses. To First is the smart mobile devices continue to grow.
So we continue to invest, as said it has been said before, and that stays
to
Yes, that is. The next thing what we observe is that the low end is actually growing much, much faster than the high end. To So our strategy is also to participate in the entry segments and in the value segments. Another trend that we observe is that the LTE growth is to be much, much faster than any generation had that before. It's very obvious why that is.
And that makes us to doubling down on our investments in communication technology and push the envelope here even faster than we did ever before. To And last but not least in that slide, we see a growing trend on phablets, 60% maybe already counting in this. To And also here, we take our tribute, and we will see later. What we do is we develop platforms That can go in any form factor and any shape. So let's take a look back for 2014.
We are still in 2014. To We took a very focused approach then this year, and that focus was pretty much anchoring around 3 to Points. One is we wanted to grow Intel architecture and the footprint in mobile. We did that first on tablets, and we have focused on this one, Working on cost reduction and differentiation. Next pillar, grow our leadership in communication and connectivity.
Develop a full portfolio, as Rene said before, has been one of our focus points for today. To And capture and lead in the low end and the entry segments where the biggest growth to build partnerships here and see that we get a foothold in the China Tech ecosystem where a lot of that takes place and build partnerships. To And before I go into the details, I think we can go and score and see how did we actually do against them. The year is not fully finished, So we have a few weeks still to run. So don't count all the chicken before they are hedged.
But I think to We can at least speak about where the trajectory is and what we think it's going to happen. So we believe we are on a good track towards the 40,000,000 tablet to Volume that we had given us as a target. Last quarter, the quarter before, if you look into those numbers, to We see that, that's called us actually to be the number 1 merchant silicon supplier into the tablet market. If you take Apple's captive volume into this calculation, it leaves us on a number 2 spot. I think that is a reasonable achievement.
To Nobody of all of us, maybe even including me and our CEO, might have believed that we can achieve that audacious goal that we had give in ourselves. So we are on track to this. We delivered also on world class advanced LTE, to 70 to 60 generation carrier aggregation, cut 6, 300 megabit per second is shipping. It's a globally competitive platform. It's we have accelerated the rate on how we innovate, look at the generations in 2012, not present.
In 2013, maybe half a year behind the market leader and in 2014, add time to market with a market leader. I think We have delivered on this as well in this year. And last but not least on that, first, integrated Intel architecture, to Integrated SoC, communication technology and application processor. We are on track here. Will PRQ Means production release have for this product by the end of the year and then ramp it with customers in the next year.
To So let me go into more detail. So that is pretty much saying everything on what we want to talk about. But here's a few more details. There are 40,000,000 tablets. If we drill a little bit deeper into this, we see on the statistics.
To First, we make big great inroads in entry and value segments. You might have said a year before, Yes, maybe they get a little bit on the high end and the performance segment. But will they ever be able to get into other segments? Yes, we are. To You see price points $99 and below and stretching up to $400 So we can cover the entire price stack in the market.
To That is done. And you see on how that proportion is, how many designs we have in those sensitive segments. To And I think that is a big, big step forward. The company is changing, and we know how to maneuver in this market. Next thing what we can see from that statistics is you might have said Intel is a Windows house.
To They cannot do Android and what is about the compatibility and so on. Already those numbers of designs show to That we put our mind there where the market is, and we focus there what the market demand is. And sure, we all know There's a lot of demand in the Android space. And so we have many, many more designs in that space with our customers. To All in all, we count about 100 OEMs and about 350 ODM design SKUs to That our customers build on our platforms.
They may not see all the light of the market, but we have enabled so many designs to That customers have something to choose from. And our customers can go and offer different SKUs and different designs in their market. To And that is the heavy lift that we have done this year. We have long term partnerships developed. To They are shipping and they are growing.
And what we see today is we have about 20% of wireless WAN attached, so cellular attached. To That part is growing every day, so to speak. And last but not least, it's not yet the last, What we have in this market and brought to this market is a completely new way on how to engage in this ecosystem. To It's channel partners and helping our customers in marketing, helping our customers also with how the way they can sell those products And opening up channels for our customers so that this circle gets, so to speak, closed again. To Good platforms, chips from our side.
And then in the end, when it goes and sell them out, find their ways, we have a network around the entire planet to Of resellers, retailers and so on. And we can help with this whole ecosystem that we have created around tablets to With our partners. And last but not least, of course, we are working hard on the platform, to EBOM cost reduction, and that brought us step by step further in this market as well. I have a few showcase designs here. 1st to Of all, I would like to take the left one here.
That is the thinnest tablet on this planet, to 6 millimeter thickness, see height as a wonderful display. And what we have done in this tablet here to Is we have integrated more cameras. And with this, we can take depth photography. So to Easy speaking, those cameras do what our eyes do, and they memorize their picture in different levels of depth. To And that helps to do completely new stuff.
A complete new ecosystem can build around this. To And we can show you one example what we can do with this. As that picture, as we know or the technology, so to speak, knows to the depth of the picture. We can make variations that depend on how far the objects are away. And you see this here On how the color goes through that picture.
So that means depending on the distance that gets colored or stays black and white, We can do this from back and forth. And so it's a nice game, but it gives an indication on what could developers actually do with this technology. We are just at the beginning of those capabilities. And our Picture of next year is, there will be tens of designs out there with that technology, maybe 100. And then there will be thousands of apps to develop to that technology.
There will be 1,000,000 of people taking pictures with this and 1,000,000,000 of people Making these kind of modifications. The modifications, by the way, you can do on any device. Just if you have taken that picture with this wonderful technology, to You can have everybody in your family play with it. Another example where we brought innovation to the market is, For example, the Fuhu Dream tab for kids, very nice design, very robust design. It's a powerful design.
It's based on Baytrail. So If kids are in bed, it's also good for adults who have a powerful performance tablet. To Another innovative design, sleek, unique 2 in-1s have come out of this portfolio. And I have here the Lenovo Yoga 2. To And that device even here, this one, that has a camera a projector in it.
So you can take this and project to You want to show not only on that display, rather also against the wall or whatever.
To So a screen.
Let me change gears on you and let's step over to on how can we actually make this being so fast? How do we get the customers So fast on 350 different SKUs. And how do we do this even faster? The more and more we do that. And this is our turnkey program.
The turnkey program means we have a master reference design, So customers can, if they want to take that right away or they take any kind of combinations of components that we have pre validated to And verify that this works. And we give them tools that they can bought very fast, that they can make modifications. We give them support, whatever is needed here. And with this, we can bring a customer up within weeks. After the platform is finished, customers can start, build on it and that works within weeks.
And what we can give around this to And on top of this, that is the Intel brand, our channels and our matchmaking. We even run to trade fairs with our customers and help them find other partners on totally different places on that planet Where they can make business with based on our designs. And they know once we are with our marketing in this, to That helps them sell their products. With this, I spoke to the 350 to Global Designs, 30 ODMs already on that on this design methodology in China, printed circuit boards, to assemblies as people doing intermediate steps. And one thing is important, and then that is what I wanted to mention.
And this is already this year, why we were ramping up that capability. 45% to All the tablet devices that we are shipping comes out of that capability. To already while ramping those capabilities, that makes up for 45% of the numbers. And how powerful this is, Maybe I can give you somebody who can speak to this much more authentic than I can.
To I'm Afeng Wang, the President of Yifeng Digital. We're an to establish tablet and mobile device manufacturer in China. And we have been building products to In our Shenzhen factory, for more than 20 years, we have shipped almost 15,000,000 tablets to market in the past 5 years. Intel's Turkey program has allowed us to keep costs down to deliver our 1st Intel product with exceptional efficiency and speed. To It took just 2 months to go from RFP to shipping our new to that will be available at Walmart on Black Friday for $99 This is our 1st, the product with Intel.
And now we enjoy a great partnership. I'm very impressed with the to Dramatic changes that Intel has made in such a short time to support our new product. A year ago, to We couldn't do business together. But now, I believe we will have a long lasting partnership to To deliver high quality Intel architecture and brand to our customers.
To I
couldn't do this any better. So that is authentic. Let me change gears on you. Performance And experience matters. We heard from him that these platforms have a performance, and they distinguish in performance, to Not necessarily always in core count, but that is an architectural choice we take on how many cores do we put into and how powerful are they And what is the best choice in terms of numbers, of course, and power of individuals.
And with this, We achieved good scores in the benchmarks. If that was a trade show, I would speak much, much longer through that slide here. For this to auditorium, it should be just I think I want to say we have those comparisons and we have those spaces Where we focus on and what is important for the user experience, where we invest into those platforms and make them better and delivering you a better user to experience with this. Another topic I want to address is the applications. They, of course, run on that performance, Sure.
And you would always have trusted that Intel can do the best for the Windows environment. Sure. They know that for centuries. Android, you have always been asking, is that compatible? How does that work?
Can you really do this? And that is all designed around ARM and so on and so forth. You know all of that because you have asked me those questions. To I can just tell you, it just works. We have made it just to work.
And whatever that is, what kind of app that is, we wait every day to customers to call us to say here there is an effort to problem. That is what we are waiting for. We have a team for this and we wait every day if somebody comes and then we jump on this to fix that problem. And in most cases, it turns out it was pretty much bad, poorly programmed. And after we help those to App developers to program it right.
It even ran better on ARM devices as well. So that is to What we do for this market, and that is what we provide. Once those people are in communication with us, they start to think about, to Hey, what is actually if I go and do this natively, if I compile this right away natively on Intel architecture, Then I can unleash the power of that architecture for me. And so and step by step by step, one after the other, they go and do their apps natively. To That's, of course, what we prefer because that unleashes the power of our architecture.
And that to Comes with the full support for developers in that ecosystem with software development kits, with development tools, what they need Completely for Windows as well as for Android. That is the way on how we have made our way into The Android ecosystem. I want to give you a few examples on what that led to. Here's one example. This is a Nexus player.
And this Nexus player does not only play to Netflix or Hulu, you can have access to the complete Android ecosystem with that player. To And it's also optimized for gaming. It's based on Moorfields. So we came within a year From you asking us on how are you doing with Google, is that really compatible, would they ever look at something else to have to A Nexus in the market. Google has chosen Intel architecture for that Nexus Device.
That was actually a good piece of work because that brought a lot of engineers together and optimized to The Google software and the apps in order to run on that device. And with this, we get into this market step by step to And get the credit of that whole ecosystem. And what can deliver more credit than a Nexus device? To Another example is our reference design. We call that ERDA, Intel Reference Design for Androids.
To That is a design, which is very narrow in the component list that we have agreed with Google on, to But it's broad enough for our customers to differentiate. And if customers stay in that envelope, they get a quick access to To software. Because we work with Google to make that software always concurrent and work, to And it can be distributed with the lightning speed. And that helps customers and it helps Google to have always a concurrent software load on the devices out there. And you see on our shipments on Android, those numbers are constantly growing.
To As a result of that, what we do for that ecosystem. And now I want to change to over shift gears on you to smartphones. You have seen the new family that came from Asus, to Sendphones, the Asus Petphone Mini X, Brian already spoke about that before. It is really a good deal, to 199, it's an LTE device here in the U. S, available in multiple stores, to 199, everybody asked me when that came, is that really without a contract?
Yes, that is really without a contract. So go and buy one of them, 2 of them, 3 of them for your family. It is a good deal. To Another cornerstone for smartphones are, of course, modems. Communication technology.
Intel LTE Cut 4 shipping to In Samsung Galaxy Note 4, shipping in the Alpha and also shipping on the LG G3. To And towards the end of the year, you will see more devices in the market using that technology, including TDD in China and TDS CDMA. To And last but not least, for that slide here, we have also new partners with whom we work. For example, Lenovo will come up soon with new products, but also partnerships like Rockchip and Spreadtrum to With which we go in a completely unprecedented approach into this market. To Complete new engagement and way on how to go to a market, how to broaden the footprint to And being fast and nimble in the market.
So innovation does not only happen in labs or in research institutes. Innovation also happens in business models and engagements and in processes and procedures. To The LTE ramp is always something that comes up, and Rene spoke about this, communication technology is an anchor point. To We are shipping today in the U. S, in Latin America, in Europe, to In Southeast Asia, so to speak, globally.
And I have here a few logos of all those operators at which we are certified. To That is a global certification. This is a TRUV 5 mode solution and globally certified. That is what we want to have in the market and that is what we believe what customers eventually all will need. We have more than 25 designs in the market.
Asus, Samsung, Dell, Lenovo, these are the brand names in which they will show up. And we're also pursuing other legs with modules. Modules help us to be in the market faster, to They help us also to be in a market for designs or products where it wouldn't pay off to right away do sold that on development. To And for those markets, we have modules, which can be equipped or not equipped, put on or not. Our module partners are Huawai, Sierra Wireless or Telit.
And those modules go also into the wide open market of machine to machine and Internet of Things. So we are present In that with all the technologies we have at Intel. And if I sum this up, this means we have a very solid foundation to fuel growth For the future. We have built strong partners with customers and with partners. We have a design pipeline, Customers taking our platforms.
We support ecosystems, and we have built an ecosystem, as we have shown in the tablet space. To And we have a solid road map of products. And moving in 2015, to We have sure, of course, focus points for our expansion. And one is to The Sofia family. As said before, it's on track to be ready by the end of the year.
It's the 1st Intel integrated architecture With communication SoC. And I want to give you back again the numbers. So it's a 3 gs version, it's a 3 gs R, to set up a performance up version of this and Sofia LTE. All those platforms are designed that our customers can build any to Productive want out of this. So here, I have a few examples.
This is the MRD, to The master reference design, that is a 5 inches one and that is a 7 inches one. Out of the 5 inches to Customers can build anything from 3.5 inches 4 inches up to whatever they want. The 7 inches is optimized to For if you have more space, you can do a cost optimized design. So for that reason, we have built that 7 inches design to As well to show customers here, if you want to have a cost optimized one, 7 inches and above, you may want to take this because That can be even more cost optimized than the space and volume optimized design here. So whatever customers want to build, whatever Kind of market they want to serve, screen size, change, go and do.
They are ready and prepared for this. To And those platforms will also work with our partners. Those partners will also go on those platforms to And help us proliferating this and bringing that footprint into the market ever faster than you ever could imagine. To One clip deeper on the communication and connectivity. That is an advantage to Trust because we have all the technologies we need for that market.
We have 2 gs, 3 gs, 4 gs, to Aka, LTE. We have NFC. We have positioning systems. We have Wi Fi. To We have WiGig, we have Bluetooth, we have FM radio, everything what we need to build those products.
And we put that together to As we think we need this, our capabilities allow us to integrate everything what we want to integrate. To We are maybe not integrating everything. You have never seen us integrating a 3 gs RF with a 3 gs baseband to Because we are smart enough to touch that rather go to the market as the market needs it. You have seen us doing that in 2 gs And you have also seen us integrating even a 3 gs power amplifier into a 3 gs transmitter. So we have the secret source.
We have All those building blocks and we have the secret source of system know how on what goes together best and what the market needs. And that is how we integrate this. One example is Sofia 3 gs R. The RF chip comes with an integrated 3 gs RF with an integrated Bluetooth, with an integrated to FM radio with an integrated Wi Fi and with an integrated global positioning, all integrated, all Our own technology, and it's all low power. So also Wi Fi.
Intel is a very known Very well known Wi Fi expert that has been all brought down to low power and that is all in one chip. To That is what we can do. We can break it out and build a discrete LTE modem as we do for the high end road map to Or we build modules and bring this in a different form and shape. And you say, okay, that is engineering. What do you do in order to protect that?
What do you do for the ecosystem to push that forward? We are present in all standardizations that are necessary for this to And we contribute heavily and actively in those standardizations. And when it comes to connecting all those devices, We even have driven this convergence with the open interconnect consortium That we are driving as an open platform that can connect all those devices seamlessly. That is the philosophy with which we drive this market. To Before I come to the end, I have a few more boring slides for you maybe.
To It's the road map. It's all legitory. Now that road map comes. So for 2015, in the performance and in the mid range, Our working horses are our LTE solutions, the 7,160, 7,260, shipping today, to Working horse, towards the second half of the year, we will have 7,360, 3 carrier aggregation, to It's cut 9, 4 50 megabit per second coming to the market, customer sampling next quarter. To Baytrail is our working horse today.
It's shipping in high volume. Moorfield is a working horse today, shipping in high volume. To And towards the end of the year, we will qualify for production Cherry Trail. Cherry Trail will then go into volume in the next year. To I have an example here.
So if you run around later, then you can also play with the Cherry Trail technology. And for 2016, to you see Broxton is the next generation and you see Sofia Mid. This is important. To You see that we bring the Sofia architecture in the higher market segment, into the mid range of that market segment. So we broaden this architecture, and we broaden those capabilities and bring it there.
And last road map slide to for the value and entry, Batrails is currently the working horse here. That will be phased over to the Sofia 3 gs, Then Sofia 3GR and the Sofia LTE. And in 2016, you will see a 14 nanometer version of Sofia to out of our own manufacturing. And now I want to preempt a few questions, and I already had this at my lunch table today. To What are you doing exactly with Rockchip and Spectro?
So if I knew really what we are doing exactly, to What we do is we have with Rockchip, we started with the Sofia 3 gs. To That was the first Sofia platform we had. We said, we go and engage with this. And we built together with Rockchip the Sofia 3 gs R. To Both of us can sell that product.
We own this product and we have one more product on our platform. That's the whole philosophy. It's no big secret sauce. And on Spreadtrum, we start first on the Sofia LTE, go with an agreement with them on the Sofia LTE and they will rebuild from there. There is more in the drawer, but nothing more to release, to That is how we started.
And that is these are the platforms, the products that you will see us collaborating on. And with this, I come to our next year. The focused strategy to win for 2015 is not very much different than this year, What actually a good company usually has, and that's continuity. Grow the Intel architecture mobile footprint. I think that's very obvious on how we want to do this, the MRD, our partnerships, our customers.
The global leadership in communication and connectivity With all those IPs in house and the capabilities to integrate them, I think that is very straightforward. To And we want to capture more of the growing value and entry segment. Very simple. Sofia is the anchor point for this. To China Tech Ecosystem is the hotspot where we have to be for this.
We are there, and we have partners there. We have seen one of them before. To thank you.
I should have mentioned this upfront. We're going to have Q and A with everybody at the end. So because there's more in the drawer from Herman. He'll be coming back and so get ready that question and to find out what's in the drawer. To So equally exciting is the Internet of Things.
And Doug knows this because I'm like the biggest cheerleader for him because I'm very excited about this segment for a bunch of reasons. To We Brian talked about silicon software to silicon this morning and I told you in my preamble comments that I think Doug, not to put pressure on him, has the best opportunity to really build end to end solutions out of his business and he's going to talk about that. To We are able to use our leadership in connectivity that you just heard about as well as the low power investments and really turn them into something to follow on to a great embedded business that we've had for a long time. I think all of you know that we put the Wind River assets in with to The group that's been very helpful. Doug's going to talk about it a little bit, but I think that allowed us to even get more out of that investment.
And to As Brian said, on the operating system side, software in general has become a bigger capability and differentiator for us. When we start to go into vertical solutions like IoT, software is a very big deal because the customers expect you to deliver the entire stack to With the silicon. And so this is part of the reason that we did that integration a little over a year ago and is part of the reason that I'm very excited that I'm seeing Doug being able to do so much with that. So without further ado, I would like to bring up Doug Davis to talk about to And wonderful opportunity for growth and a big platform opportunity, Ferntell. Great.
Thanks. Here we go.
I I've realized through the course of the day that it's kind of great to go a little bit later in the day because all the pieces are laid out. Now I just get the task of pulling it all together for you and pulling that whole story together. There's really 3 things I want to talk about today. The first is around how we have this opportunity. Today, we have a big business.
Already we have a big footprint and that we're evolving from that footprint that we've been building over the last 30 years. To this number of devices, these things that are out there that have integrated into architecture already. To The second is how we're utilizing the other technologies and capabilities from across Intel in many of these different market segments to And how we can deliver those technologies and bring value into other market segments. And then lastly, I'm going to shift gears a little bit and go from talking Specifically about the business, so talking more broadly about the end to end capabilities that Intel has when we talk about the Internet of Things. It's not just about the endpoint devices, but as you've heard throughout the day, the capabilities to create these end to end solutions and the value that can come from those.
To Now I want to start out and talk a little bit about a definition as well because as I've been out talking to customers and analysts and many of you, to The description of the Internet of Things is a little bit different. We had a great conversation even at lunch today about what is the Internet of Things. So I thought this picture might help. You may have seen different versions of this from different people around Intel or even other companies. To But for us, it really starts with those sensors.
The sensors are the eyes and ears, the temperature, the vibration, The rotational speed of a shaft in a motor, even cameras are considered sensors that are helping us understand what's happening in the physical world. To That sensor data then comes into these computing devices where we can do something with that data. And we put these things into 3 different categories. We talk about the home Internet of Things. These are devices such as PCs and tablets, to game consoles.
But increasingly things like home automation systems, home security systems that where we need to be able to aggregate Different protocols and aggregate data from these different types of devices and then to be able to feed that data back into the data center or cloud. And that's typically done to through a home gateway device that serves that function of aggregating data and creating that connection back to the Internet. The other area is around what we call the industrial Internet of Things. It's machine tools, it's medical instrumentation devices, It's even that windmill out in the North Sea, right? It's aggregating data from sensors in these kind of industrial applications to Into typically an industrial gateway, a gateway can do local analytics, but then feed data back into the data center or cloud.
To And the 3rd area we described is the mobile Internet of Things. And these are devices that connect directly to the broadband wireless infrastructure. To Of course, smartphones and wearables like Diane's wearing. But things like cars and trains, those things The need to be able to connect to a broadband wireless connection in order to feed that data up into the data center cloud. And so these devices need to be able to use secure interconnected intelligence to deliver on the capabilities that I'm describing.
And then use data analytics to be able to extract information from all that data that these things are creating. And so connect devices through the network infrastructure and then into the data center or cloud. Now the other thing about the Internet of Things is there are numbers that are getting thrown around that to Huge. You probably heard the numbers from John Chambers in terms of the economic impact of the Internet of Things. There are predictions from analysts that by the year 2020, there'll be about 50,000,000,000 devices connected to the Internet.
And those 50,000,000,000 devices will generate about 44 zettabytes of data. Yes, I had to go look it up, to 10 to the power of 21, that's a zettabyte. And then once those things are connected, to That gives us the ability with all that data to do analytics. And so some people have looked at this and said, well, isn't this just kind of a different name for the embedded business, right? This has kind of been going on for a while.
But I really see some changes as I'm out talking to customers, we're seeing these Dynamics from an economic standpoint beginning to shift things. And the economics are driven by the fact that you see at the bottom of the slide. The cost of sensors have come down 2x to The last 10 years. But these things need to be connected and that connectivity is becoming more and more pervasive. Why?
The cost of connectivity has come down 40x in the last 10 years. And then as we gather that 44 zettabytes of data, we have to be able to do the analytics and that requires more and more computing, computing at the edge of the network, computing within the network in some cases and certainly big data analytics and computing of all that data that goes into the data center cloud. To The cost of processing has come down 60x over the last 10 years, thanks to Moore's Law. To How does that translate then into our business? As we've looked at this space now and how we wanted to focus, We focus this business into a number of different market sectors.
And I want to give you some insight into some of the numbers and conversations I've had with many of you. You've been asking about what this market looks like. So we've structured around market sectors. Renee said earlier that one of the things that we've done is really put a focus on these sectors. And we have a focus around retail, to Transportation, manufacturing, industrial and we include energy or utilities in that space because they have similar characteristics.
To we've always kind of had a broad market business and this is where we do things like digital security and surveillance. We do medical instrumentation devices. And then we've created a new sector around smart buildings. And I'll show you an example a little bit later around why we think that's so important and the promise that we think is That's associated with that. You can see across the top, how we are positioned In terms of market segment share, we've had a focus in the retail space for several years.
We have about a 40% market segment share there. To I won't read them all to you, but you can see how we're positioned in each of these sectors and where we're deriving the greatest growth. So some of these sectors are growing fast, Others may be growing a little bit slower, but it's a characteristic of those markets. Manufacturing, industrial space moves a little bit more deliberately than some of these others. Our growth in transportation is driven largely with the efforts that we've put into the infotainment space and building our Presence in that space in the automotive market.
You can see in the upper left, the overall size of the market and we describe to in terms of sand based on a number of industry analysts forecast. So we're giving a bit of a range here as well $11,000,000,000 to $13,000,000,000 And you can see how it breaks out by these sectors. So you've seen the revenue numbers associated with the business. Many of you asked about market segment share. Based on that SAM definition, we have about a 17% market segment share and you've heard the growth numbers.
Renee mentioned that Wind River is part of this business and I want to kind of expand on 2 things. Wind River gives us the ability to engage in a broader to set of applications. They have a big embedded footprint. They have a legacy in VxWorks and that gives us a big footprint, where it creates more opportunities for Intel architecture over to Time. And it gives us the ability to create more integrated solutions.
We're creating a capability that we call application ready platforms to by taking our processor, an operating system from Wind River, an application stack that gives this thing a personality And even integrating technologies from McAfee to create an integrated secure solution and a customer then can order that SKU And get all those elements combined together. It doesn't mean that we only work with Wind River. The majority of the business has historically been based on windows, continues to be an important part of our business in terms of overall size, but certainly Linux and Android, Chrome in some areas As well as many proprietary operating systems are important for us in terms of this business. And then I'll give you a little bit more insight to As to how processors and technologies come to play, you've heard a lot about the adjacent nature of this business. To Can we describe our product line and how we use products in the business?
According to this chart, we've used this kind of notion of a pyramid for some time now. To And we described the TAM as everything from very high performance computing all the way down to 32 bit microcontrollers. That's the TAM. So we're looking at 32 bit processing when we think about the overall size of the available market. Our SAM really goes down into what we call an entry performance 32 bit MPU space.
That's the space that we participate in today. To And we utilize the subset of the product portfolio that Intel has to be able to meet the needs of our customers in each of these different areas. To And we'll pick a subset of products that enable us to give customers a range of performance that they need to offer long life capabilities. To And even in some cases for these products, depending on the market sectors that we're in, we'll offer extended temp capabilities as well. And so we'll take this to A subset of these products to be able to support these different market segments and bring the domain expertise from Those sectors into how we support the products and how we support customers doing development.
And you can see now with the addition of to Adam, over the past few years, it's one of our fastest growing product lines today in terms of overall volume. And Quark now gives to The ability to go even deeper into the pyramid to be able to support another layer of processing where customers see value And what we can deliver from an Intel architecture standpoint and the kind of integration that we can provide as well. So we take advantage to All of these technologies across Intel and bring them into these different market segments and take advantage of that Scaling and the adjacency of the overall business. Now Stacy talked a little bit earlier about the importance of us looking at the business and How the future looks in terms of the design win pipeline. And this is really important for us because as you look across those different market segments, they have different characteristics.
To you can see in retail, retail typically moves pretty quickly. We introduce new products, are able to adopt those products, get them integrated in their products deploy them fairly quickly. In some of the industrial or manufacturing spaces that process takes quite a bit longer. They go through a much more rigorous a qualification process and that timeline from design win into volume production takes a bit longer. And so we need to be able to have this robust Pipeline of design wins to continue to fuel the business over the next several years.
So with that, I want to shift gears a little bit. I want to open it up now beyond the specific business here within Intel and talk a bit more broadly about the Internet of Things. We worked with an analyst. We went out and talked to a number of companies to That are in doing smart factory implementation, smart buildings. They're doing medical Type of applications and really trying to create end to end solutions as defined by that Internet of Things definition, right?
And we you can see the sample size is 37 and you go, well, that's a relatively small sample size. These were 37 face to face interviews going into a deep discussion About the challenges that they face in creating these kinds of end to end Internet of Things implementations. And you can see From the green bars, it describes the performance of today's solutions. How capable are the things that they have available to them now? And then that yellow line describes really how important it is for them to be able to complete these kinds of implementations.
And you can see over on the right hand side, Their requirements and how important they are pretty well matched up. Well, it's good. We're delivering great products for them, right? Where they have challenges are around security, device interoperability. You have different sensors Oftentimes speaking different languages in terms of physical protocols and that device interoperability becomes really important to them.
To The IT, OT integration, a lot of talk in the industry around this, around that infrastructure to From a data center standpoint that directly supports factories versus the data center infrastructure that supports the other operations And the desire to converge those. Advanced analytics, right, the ability to now extract information from all that data to And then ease of use. It's how complex is it to bring all this together and to make it all work. To And so based on this data, we put together 5 tenets, 5 elements that we think are important in order to create these kinds of end to end solutions. And this is really guiding the development work that we're doing around Intel today.
Of course, it starts with security. Security is absolutely the foundation. We all read the newspapers, key focus. And it's security both in hardware and software. So it's integrating security capabilities into our processors and combining that with the software capabilities that we can deliver as well.
It's having those two things interoperate that's important. The next is around connectivity. By definition, these things are connected to the data center or cloud. So connectivity, but then once you start connecting billions of devices, it becomes a challenge around to discovery and provisioning in the management of billions of endpoint devices. I said earlier, you have all these to Sensors in these devices that need to talk to each other.
So data normalization is important, right? The ability to have these things, share data and then to be able to look to The effects that these different data sources have on each other. Actionable analytics, right? So being able to extract information from all that data, but more importantly, to be able to do to To create new products, new services, create greater productivity in your operations. And finally, the ability to monetize all this, you've created this end to end capability.
How do you get paid for it, right? And we hear the term a lot, data is the new oil, Right. The ability to not only as the owner of that data to be able to create revenue from it, but maybe even to give access to that data to another party to Who may be able to use that data to create a new capability and then pay you accordingly. And those are going to be important as well. To We're also very conscious that creating these kinds of end to end solutions to be able to look at different data types, to be able to do analytics across a number of different systems.
Maybe it's in the retail space, my customer loyalty program and looking at My inventory levels and looking at real time store sales information requires a number of different partners that we need to be able to work with to help our customers really implement those and make it easy to deploy. And so working with industry consortiums are going to be increasingly important as we go forward. Intel is one of the 5 founders of the Industrial Internet Consortium. So you can see the founders AT and T, Cisco, to GE, IBM and Intel. And we formed this consortium to be able to define what it takes to create these kinds to of Internet of Things implementations.
And then to give direction to the existing standards bodies in the industries to around what needs to change in order to support the evolution of the Internet of Things and to then create work groups. And these work groups will take this technology to And actually go build proof of concepts to do pilots to demonstrate that these things can be delivered. To The other one that we think is important, you saw Herman mentioned this one as well as the Open Interconnect Consortium. Again, Intel is one of the founders of this. You can see Samsung MediaTek, again Cisco and Intel forming this consortium to create a framework to enable interoperability amongst these different endpoint devices, not only in consumer applications, put across these other areas that I described as well.
So much broader than consumer, we wanted to span industrial, commercial types of applications And to be created in such a way that we can have a truly open ecosystem to be able to create to New applications, new technologies at the pace that the innovation can move and to do so in a way that is unencumbered. To So when I started into this role, I've probably been in the job a couple of months and I was meeting with a reporter And he was kind of pounding on the table saying, hey, this all sounds really great, Doug. Where's the economic benefit? I want some real examples That are generating real value, where are those? Please show me those.
So I thought I would show you a few examples. I'm going to click through these fairly quickly. The first one to And you've heard Kurt mention it. You heard a few references that we use bPRO technology In the retail sector to be able to provide manageability and security and endpoint devices in the retail environment, Point of sale, digital signage, kiosks, ATMs, those types of applications. But we worked with NCR on a technology that we developed, A software technology called the Intel Data Protection Technology.
And this technology works on financial transactions. We announced this October 15 in London at an IoT Day event that we conducted there. To What this enables us to do is to be able to encrypt the transactions that recur in the retail environment to from the card swipe device all the way back to the server. And what's important about this is not only encryption, But the fact that that data no longer resides in the point of sale system itself. And so it provides that secure level of transaction.
And We see the challenges that the industry faces today and we believe that this type of an end to end implementation can help alleviate some of those challenges. To The second one actually comes out of our own factories. We worked together with Mitsubishi to create a solution where we put to A gateway device into tools in our assembly test factories. And by the way, if you go into our factories, our factories to Already pretty amazing Internet of Things implementations in a factory environment. But this gateway is giving us access to Even more sensor data than we had previously.
And the engineers are now using that data to be able to further optimize how those tools perform, To be able to further optimize yields. They've been able to pretty significantly reduce yield loss that's just caused by variations in the equipment. To I had the opportunity to be in Penang last Friday and met with the team and saw the results that they're delivering. And you can see it's delivering about $9,000,000 of Savings per year, both in terms of improvement in yields as well as improvement in equipment uptime. The next one is a customer that we've been working with called Beenomix.
Beenomix builds a gateway device that goes in 18 wheel trucks that are running up and down the highways. And they built this device for a company called Saia Trucking. Saia is a large trucking company and they've implemented these in their trucks. And I thought it would be good maybe to have them tell you the story about these devices. So if we can run that video.
A company called Venomics to Is providing real time individualized driver coaching, comprehensive vehicle analysis and safety and compliance tools through the Internet of Things. To The truck really hasn't changed a great deal since Mr. Saia bought his first one back in 1924. The size has changed a little bit, but the capabilities and the driver's fields to Very similar. It's more about the tools we use to do the job.
Well, a heavy commercial vehicle is just littered with sensors, 100 to The sensors on the vehicle. We take all that information and we fuse it into creating a picture of exactly what is happening on the vehicle at any to We've processed all that data in real time on the vehicle so that when we know what the best thing to do is, We can provide that information back to the driver or the maintenance personnel or any other operational personnel that need to know what's happening on
the vehicle. The drivers no longer have to do paper ballots to DOT. Everything is done in electronic right now. There is an antenna component that essentially sends signals out through the Internet to transfer the data from the truck back to the home office.
The Intel technology that we use on the vehicles actually is what enables this to all happen. To to reducing our dependence on foreign oil and providing a cleaner and safer environment.
Now when I talked to Saia's COO, he told me that they're saving about 6% on their fuel costs on an annual basis, But that translates to $15,000,000 in fuel savings. I was conscious of my audience and went and looked up to Their earnings report for 2013. So 2012 to 2013, they improved their net income by about $11,500,000 They said it was because of focus on efficiency and implementation of technologies. I don't know if there's a direct correlation there, but it seemed to hold up. So it's good.
The last one is a company called Rudin that we've been working with. Rudin is not necessarily a household name. They're a company that's been in existence for 100 years. Some of you from New York may recognize the Samuel Rudin Trophy is handed out for the New York City Marathon, which was run just earlier this month. So that's the association with Rudin.
Now we work together with Rudin and with Cisco on a product that Cisco has called EnergyWise to be able to attach to To a large building that Rudin manages in New York City. They manage lots of buildings in many cities to And they use this technology to really instrument 1 building and that one building in the last year, they've saved $1,000,000 in energy costs. To And that includes living through one of the coldest winters in New York history. I thought it'd be kind of cool to show this to you. They gave me access to their system.
They call it DBOS and they describe it as an operating system for buildings. And so this is live data, to if we can pull it up on screen. This picture is actually their energy usage from a little over a year ago before they implemented the system. There's some important to Things to realize is, as they would start to heat up or cool the building about 6:30 in the morning and they would keep the building at a pretty constant to Temperature throughout the day and begin to ramp down around 6, 7 o'clock in the evening. That was their typical profile.
And then they implemented the system and they started Looking at other data sources. So they connected to data at the turnstiles in the building and they started looking at building occupancy. To interestingly enough, 8 am, people start coming into the building. By what, 10 o'clock the building let's give them to Credit, let's assume there are customers coming into the building. So they come in a little bit later in the day.
There's this lull in the middle of the day, people going to lunch. There's about a 2 hour window there where the population of the building starts to fall off. And then later in the afternoon, you can see people start leaving customers to Start leaving the building and then later the employees start leaving the building. Well, what they did was they took this data and they combined it with their energy consumption. By the way, you see this blue line isn't complete, because this is live data in that building right now.
And what they started discovering was That they could begin to modulate how they managed energy consumption in the building based on the occupants that were in the building. To And so you can see now that they can ramp up, but they begin to ramp down much earlier in the day. To And they can ramp down in the middle of the day when there are fewer people in the building. So important capability. But what was even more to Fascinating, I thought as we were talking to them was they said, as Double Hump Camo has now given them an opportunity to implement battery storage capability in the building.
You couldn't do it when you had that kind of constant curve, but now they can start to implement just the right amount of cost effective battery backup to be able to clip the peak demand usage. And that's one of the ways in which they get a lot of the efficiency. The other interesting things as these algorithms continue to improve as we're doing the big data analytics back to the data center, this is a profile of a week. And so you can see that their predictions adjust based on the week. Now interesting enough, it appears that on to Friday, they must have a lot of people who work from home.
So just saying. They're all visiting customers, Brian says. I agree. There you go. To So I want to wrap.
If you look at end to end, the capabilities that Intel has to deliver On these Internet of Things implementations, I contend we have some of the strongest assets of anybody in the industry, processors for things, to Gateways both for the home and industrial. I described those earlier. The ability to connect, Herman talked about the assets that we have from a connectivity standpoint and we need to connect Internet of Things applications. Diane talked about the transformation in network infrastructure to And the cost that we saw down 40x in 10 years as SDN and NFV begin to be implemented more and more, it gives us more capabilities there. And of course, rich assets in the data center to be able to aggregate store and analyze data.
The ability to deliver security solutions And the ability to deliver new services to extract value. So hopefully, you can see that we have a big opportunity that we're building off of. We're leading with solutions and technologies that we can bring into these other market sectors and we're well positioned to deliver on end to end to Internet of Things implementations. Thanks. And I'll hand it back to Renee.
Because I'm so far away. All right. To Last is not least in this case. This is an equally exciting opportunity for us. Rob is going to come up and talk about memory and storage.
And this is an area that really is the platform play. And so I want Rob is going to talk about how important to Memory is to the platform and throughput and other things. But as you heard about the data center from Diane and you heard from Brian to And Stacy, how big a part of the growth of the future it's going to be. As right behind communications Has to be memory and storage as a technology that's critical to the future evolution for throughput, for performance, For the health of the platform. So with that, I'm going to ask Rob and then when Rob is done, we'll have time for Q and A.
To. Thanks Rob.
Thank you, Renee. So thank you. Happy to have just and actually I'm excited to have a few minutes to talk to you about our memory strategy. And I would hope to that you would take away a few things from the conversation that we have here. One is that although we've been in memory for a very long time as a company, to the more recent sustained innovation and focus has delivered profitable growth for Intel and cash contribution back to the company.
To end that when you look at memory and storage and you include it more aggressively into the platform as Rene was indicating, You get a bigger canvas and a bigger palette of colors on which to paint solutions to solve IT problems, both at the computing fundamental computing level and bigger problems for the IT industry. And then finally, our computing insight to into how computers work, the advancement of computer architectures, the use of computers in IT industry, to along with the ability to optimize the platform at the CPU and memory controller and storage interface level and the ability to innovate in memory technology gives us a unique advantage, both in terms of advantaging the platform and as a storage to Technology vendor. And so underneath this, our strategy is effectively one of Moore's Law. We're going to be technology driven. To take advantage of Moore's Law.
We will advance semiconductor process technologies and innovate there. We'll be customer inspired. We're going to use that Insightful information about how computers are used and the advancements of computers and computer architecture to build better products. And then finally, we'll be platform connected and that we will use that understanding and the ability to optimize at the platform level to make Diane's servers better, to make Kirk's client platforms better and to make our memory storage products better. But I thought I would start on the lighter side.
To And memory and storage have always meant to be together. Data and sorry, CPU and data have always been meant to be together. To And like a kid from the other side of the tracks, economics has kept us apart. And I put on my tie, that's my avatar there. I put on my tie to And we're coming across and but seriously, what did CPUs do?
They operate on data to And you want that data to be as close to the CPU as possible. You're doing comparisons, you're doing calculations, to you're doing searches on that data. And any time there's a delay and access to that data, It's a problem. So in a perfect world, all the data the CPU would ever be working on would be right there and register immediately available to the CPU. And so those of us in storage are really all about getting that data closer to the CPU from a time standpoint, getting it lower delay to the CPU and getting more data to the CPU closer.
And you can see that in a more scientific curve than my avatar there to About the advancements of technology, you can see the impact of Moore's Law versus what was happening in mechanical storage. So as Moore's Law advances, particularly as we get to multi core CPUs, the performance of our processors is going up very, very fast. To and the mechanical media, although it's gotten higher capacity, more bits per disc has actually not been improving in to Performance and that creates tension. That creates a gap in computer architecture and filling that gap becomes critically important. To And we've known this for a long time.
We've known that storage that to. Semiconductor storage is more reliable. It's much, much faster, thousands of times faster than mechanical storage to And that it will scale well with Moore's Law and we've been working on it for a long time. And that that solid state drive there is from more than 2 decades ago.
It was our 1st solid state
drive in the marketplace. But like to It was our 1st solid state drive in the marketplace. But like the kid from the other side of the tracks, it was not economically viable to in computers, it didn't have high enough density, it didn't hit the right cost performance density curve. But we've kept on it And we've looked at multiple different technologies. And today, our solid state drives are nearly 200,000 times more dense to send that initial solid state drive.
And that is the magic of Moore's Law compounded over multiple generations. And then sort of more recent view of technology advancement, we broke through to at the same time, we were struggling with some consumer sales into non ball memory. We had a breakthrough in technology around using this for solid state drives. To And we've been evolving that technology. We started to hit the right cost point and the right density point.
And we've evolved that technology very aggressively over the last 6 to 8 years and began with an investment in leveraging our deep understanding of semiconductor presses technology together with Micron, to delivering pitch doubling before anyone else in the industry led us to be able to leapfrog the industry and get to 34 nanometer before anyone else. Rest of the industry later came along with us and pitched doubling. We did word line air gap to Isolation for bit cells. Bill talked about that earlier in terms of logic. But in memory, we did had to do that earlier because we were seeing interference between cells and it enabled us to get to the next click on Moore's Law in memory.
The rest of the industry came along later and that had enabled us to get to 25 nanometer before anyone else. Then finally, you guys are familiar with the Hi k Metal Gate technology that's happened at Intel. We use Hi k Metal Gate technology in our last generation a planar cell technology and that'll enable us to get to planar to 20 nanometer process technology before anyone to In the industry in a way that is very, very useful for computing. It wasn't just for consumer electronics. It wasn't just for low cost storage.
It was in a performance way With the right level of reliability for solid state storage. And in fact that year we won process technology of the year. Now we're in the middle of an important Transition in solid state. We're in the technology. It's about 3 d NAND.
And 3 d NAND is really all about getting to low cost and getting to higher density. To And doing 3 d NAND just as a direct replacement of 2 d NAND is really not that interesting. What we really want to do is we want to expand the TAM, get to a bigger market with memory technology with 3 d. I'm going to talk a little bit more about that later. But I want to go back to my story to around fixing the gap in process in computing.
So we want to make Diane's servers faster. We want to make them scale faster. What we did was we created solid state drives that fill that gap. So they are the thing that fixes that big latency problem and enables the processor to scale more effectively. And in 2,008, we brought what I would call the 1st modern day solid state drive that hit the right cost performance trigger in the industry was at the right level of reliability to and it began a whole industry.
So in 2,008 when we launched that, the SSD business was about was a $0,000,000,000 industry. To Effectively, it's a couple of $100,000 Since then in the last 6 years that industry has gone from 0 to $13,000,000,000 in 6 years. Based on that gap that we were talking about before, it was a computer architecture problem that we understood and we're able to fill the gap and it enables Servers to scale. And that's the so what? It's cool technology, but so what?
It created a whole industry. And why is that? Why you can see the computer architecture to but it delivers real results for our customers. It solves a real IT business problem. Diane talked about the importance of big data and scaling big data.
To And when you do that with hard disks, you get a certain level of performance. But really what we want to do is we want to do real time analytics. So when you get time to that business solution that answer much, much more quickly. And when you implement that with solid state drives, you see tremendous performance speed up. You don't just see 10% faster or 30% faster or 50% faster or 100% faster.
You see 100 of percent faster. 3x in this particular example of the modern day to business analytics with Hadoop. And the reason for that is to that they're much, much faster. At the physics level, we know semiconductors are much, much faster than mechanical drives.
To And
if you were we demoed at IDF a couple of months back a new level of IO performance. And when you look at Storage, you look at it in terms of the capacity, how many bits can you fit in a form factor, but also how fast is So you take something like this. This is sort of a modern day storage device that looks like hard disk, right? And so today, to because we're a disruptive technology that we're bringing into an existing market, we build them in so that they physically fit in the same hole in the box As the predecessor technology and they connect to them. And if you take a look at that and you want to get the same level of performance, to if you want to get super high performance and get that analytics done, with just 28 solid state drives, so it's about 50 terabytes, 60 terabytes to update that.
You can fit that in 4 inches of space, right? And you can perform these very fast analytics. If you want to do that same thing with hard disks, to This rack would need to be 500 feet tall in order to get that level of performance. So if you want high performance, you would move to a solid state drive. So breakthrough, this isn't just a little bit faster.
It's not just a little bit denser. It's way, way faster and it's game changing. And like Diane was talking to it changed the way people use computing. It's much more efficient and it drives more use of computing at the end of the day. To So I want to also talk about this idea that we can address IT pain points.
We always knew to That when we brought solid state drives into computing that it would cause them to be much, much faster, that it would cause them to scale much more effectively. To but what we didn't realize as completely is that when we went more aggressively to embrace that as part of our solutions space, to They would see that much bigger of a canvas on which to paint solutions and that much bigger of a color palette in which to paint those solutions. And to what we found was we had a new way to address scaling, bringing caching Into servers. We've got a lot of activity going on in that area. I wanted to use just one as an example for you and it's a security one.
To And vPro, I noticed that a number of people use that today. When we look at security in a client environment, so we use to as an example. We've got laws in the country around protection of personal information. We've got hospital workers that are trying to be productive to with new devices, they're using personal information. On the other hand, we need policies that enforce the protection of that data.
We want to make it easy and highly secure. So we can make solid state drives with encryption in them to that encrypts the data and then we can have passwords on them. And in isolation, that's a good solution. But when we engage the vPro team and we create a pro based to We have additional information available to us. We know where the drive is.
We know where the platform is and we can change to the level of authentication we need, we can make it easier for the nurse or the doctor to get access to the data when they're in a safe zone. To And when the notebook or the tablet or the phone moves out of that safe zone, we then have stronger authentication and better restriction and access to less to state available to them. We call that geo fencing, so that the platform behaves differently and the access to your data is different based on where you are. And we put that in our pro SSDs and they make the vPro platform better, more secure and they create differentiation for our solid state tracks. To And what so what?
So the implications of that platform technology that to the integration into the platform overall and the technology driven new levels of capability results in market leadership. And in one of our focus markets is the data center, of course. We're trying to improve that. And we are seeing we have had tremendous success there. We've got 30% plus market segment share directly.
We have a partnership with HGST, Who is now part of Western Digital for the SaaS market. And we have 2x, more than 2x the market segment share of our next nearest competitor. To And even if you were to stack a Sandisk confusion have become 1 more recently, even if you were to stack them together, We would have more than 2x the market segment share. So the business results of that technology driven platform connected strategy have generated market segment share. Now I want to go back and talk about technology again.
And I said I would talk more about to 3 d technology. So today in 2 d and actually some of the new 3 d technologies, people are putting 128 gigabits to of storage on a given die. But what we wanted the reason we want to do 3 d NAND is because to we want to get higher capacity. We want to get lower costs. In order to do that, we need to get more bits per die.
So with our 3 d NAND, we're putting to twice the number of bits on a die that compared to anyone else out there in the industry. And why do we want to do that? We want to do that because we want to get breakthrough levels of cost. To And then how do we do that? So what we do is 3 d NAND is what it sounds like.
To we store cubes of transistors instead of a checkerboard of transistors. So In traditional two d NAND, what you do is you lay out a checkerboard of transistors. You have 128,000,000,000 of them in a memory array on a device. To And that's a lot. That's a lot of transistors.
In 3 d NAND, you're trying to advance Moore's Law, but you're doing it in a more creative way. So what you do is you put the checkerboard a little further apart, right? So you relax how close they are together, but then you go vertical with Into a cube of transistors. So in this particular example, we have 4,000,000,000 pillars or holes that retching down into that die into a stack of materials that to 32 layers deep. And what we do is we create a pinhole if you will, right, dollars 4,000,000,000 of them to that have 32 layers stacked in them.
So you can see here is a cross section of that. And that aspect ratio of that think of your the tallest to skyscraper you might know, which we'll use the Taipei 101 example. You have to stack multiple Taipei 101s on top of each other to get Kind of aspect ratio. And in each floor, if you will, in that tower, you have a memory cell. So at every layer in to In there you end up with a memory cell.
So we have on 1 die cubes of transistors where we end up with 256,000,000,000 bits stored there. To And I thought I would come up with a three-dimensional example. That's a lot, right? $256,000,000,000 however you want to look at it at MLC and actually to At TLC we're at $384,000,000,000 And so there are about 300,000,000,000 stars in the Milky Way Galaxy, to Right. So that's your perspective on size in 3 dimensions.
And so what? So I mean it's cool. It's Really interesting technology, but what does that mean? What's the benefit of that to computing? The benefit to that is we can put about a terabyte to of storage in a form factor that's about 2 millimeters thick.
And I don't see if you can see that and see how thin that is. To about a terabyte of storage in that. And so what, that's actually kind of cool and technologically interesting. But what that enables us to do is to put no compromise storage. That's high performance, very reliable and high density into all of these devices over here.
So we're no longer having to make a compromise on how much storage we can put in there and it's still very reliable. It's still very fast. And when we talk about market growth in a minute, I think it's even interesting was what you do is you could put good enough storage. So something less than a terabyte at a much, much lower cost. And that enables us to expand the market for this type of thing much, much more broadly.
So there's no reason to not put in Kirk's best 2 in ones, not to make them super thin Because you can get as much storage as you want. You also if we can get a cost effective, then we get it at the lowest price points as well. And for Diane's business, what we want to do is we want to get as much storage as close to the CPU as we possibly can. To And what we're able to do in these kind of form factors that slide into Diane's racks sideways here, we can get over 10 terabytes of storage into this. To We plan on building 10 plus terabyte storage devices within the next couple of years based on this.
So it's a breakthrough. It is an impact to how we make semiconductor process technologies and it's a significant impact on how we make computers as well. And I do want to say one thing, BK is into using technology. To The early versions of the technology in his day to day life. And we did have an early 3 d NAND SSD to And actually, so we're using it to present this presentation.
So some I got a question from a number of you guys about where are you in the technology health. We're planning on launching this in the second half of the next year. And this presentation here was actually is being done from a 3 d NAND SSD to And so far so good on that. So, hey, I did want to say this is a disruptive technology to And we're really at the early stages of solid state drives. Although it's gone from $0,000,000,000 to $13,000,000,000 we're really in the early stages of technology to We're in this traditional technology adoption lifecycle where we go from working with the innovators to early adopters to the majority.
And as we do that, We see tremendous volume growth along with it. And today we're really although we're at $13,000,000,000 to as an industry and had $2,000,000,000 inside of Intel, we're really at the very early stages of this. We're at about 20% market penetration depending on what segment you're looking at, to about 20 probably in servers, less than that in desktop, a little bit more than that in notebooks. So our growth to in terms of the solid state drive business, it's not limited by overall market growth of either the desktop or the notebook or the server market. It's actually limited by to The penetration.
And so our goal, the reason we're worried about solutions and costs of 3 d NAND is about driving that technology adoption to And we're about to get at the steep part of that technology adoption curve. And in order to supply that, you guys many of you guys know we have a big wafer factory up in Lehi, Utah. We're about 20,000 wafer starts a week up there. We have a special relationship with Micron where we take that same technology and we use their other factories. To We also have a relationship with SK Hynix and are using their technology someplace because we need a broad set of apply because this market is somewhat unpredictable and we need to be able to expand quickly for our customers.
And then finally, of course, if we if it makes sense, We can bring the technology inside and manufacturing inside of Intel. Now for you guys, knowing my audience, right, this is the sort of bottom oh, sorry, if you want to make one more thing. The current projection is that we'll be at 50% by 2018. And that seems a bit conservative. To But the current market projections are that there'll be about 50% market penetrated.
In the notebook market, they're probably thinking about 50% in desktop something less than in server, they're still seeing about 30%, 35% penetrates. So there's an enormous opportunity for sustained growth in this market to for some time to come. Now for this group, Stacy showed you our P and L over the last or a view of our P and L over the last 6 years. But I want to show you underneath that, we've been transitioning the business from being a NAND business to being an SSD business. To And so when you look at this business from a SSD market perspective, it looks much, much more interesting than as a pure NAND business.
To and so we see sustained growth opportunity because the market is under penetrated. We see an opportunity for us to be differentiated and grow aggressively with that market. And so I'd like to leave you with Our fundamental strategy is one that's technology driven. We're going to take advantage of Moore's Law. It's about scaling.
That's a unique advantage we have. To It's about taking advantage of the unique insight that Diane and Kirk's teams bring to us on how computers work and how our customers are using them. And then finally, we're going to be platform connected. We're Intel, right? And we're going to make Diana Kirk's platforms better.
And our interaction with that on pro, around servers is going to make our products together, better together. So there's tremendous growth opportunity. And with that, I'd love to take any questions you have and we'll bring the rest of the gang up here.
Thanks, Rob. All right. I'd like to invite Renee and Doug and Herman. We've got Herman.
Great. Up here, we'll bring some chairs out
to and then
we'll do another Q and A session. Again, I'll ask you to ask just one question, if you would. And if you could hold off asking a second round of questions until we've had a chance to get around the room and hit anyone who hasn't had an opportunity to ask a first question. All right. To we have here.
I'm going to stand. You can stand. Yes. I'll feel like sitting.
Let everybody get seated.
I'm standing.
All right. Wonderful. Okay. Over here, please. Stacy.
Thanks. Stacy Rasgon, Sanford Bernstein. Had a question on the I guess for Herman maybe on the mobile strategy.
To Where are you?
Right over here.
So I know you said you were cutting down your internal SoC development. I know you said you were to sort of putting that on to your partners to do the SoC development and the derivatives. I just had a question. What is it about what you're doing with partners that makes them willing and able to take on the extra effort and the expense of Doing their own sort of derivatives. It's not a service that you're providing anymore.
Why do they want to do that instead of buying products from a competitor that are fully baked where all of that is done, all of the certification is done, to The performance of the radio and even the process at this point is probably better than anything you're able to deliver at least with Sofia, which is made on lagging edge. What is it about that business model to that's going to help you drive volume in smartphones. And I guess as a corollary to that to drive economics in the business, I presume you need volume to get volume, I presume you need smartphone. So just I still I guess, I'm unclear how the strategy to build volume in smartphones to drive economics in the business works, given you're cutting your own internal investments.
To So there's different kind of partners. We have one group of partners, which are partners in the sense that to We build together with them products there, so to speak, our customers. They wouldn't go and modify to A platform or they wouldn't go and modify a chip. They buy the chips as they is and hopefully we have built them smartly enough to And with a lot of enough of foresight that it exactly hits what their market is expecting them to deliver. To So and then we have other partners with whom we engage on a much earlier stage on the chip level stage.
To And those partners are not customers. These are partners in the same level of the market. So they have their own customers. They have their own to kind of market niches or market areas where they want to go, which is complementary maybe to that what to We have done and so we are for example, in the case of the 2, 3 gs versions we have from Sofia, they have different kind of feature set. So with that, we can address different kind of market segments and can address more customers because they have Are the customers inroads that we may not have?
And they have also engineers that go to customers. So it brings a much, much better to enlarge a workforce and the portfolio together.
Could you give me a more concrete example of that?
To Sofia 3 gs is one of those examples. Sofia 3 gs was the platform that we did to be in that market of the single chip integrated parts. We built that as a dual core. We had a particular graphics in it and so on and so forth. To And then when we met sat down with that partner, in that case, Hawk Ship, we came to the conclusion there are other segments to In the market where we might be beneficial to have more horsepower on it, so have more for cost in it, have different memory interfaces or have more to Offer graphics in it because that market segment would need that.
And so we built that then together with that partner.
All right. Let's come back over to this side of the room.
Garrett, please.
I've got a question on 3 d NAND. Hynix to And Micron, I think all the 3 d NAND guys have different technologies. How does your solution encompass the different 3 d NAND technologies. And what do you mean by disruptive cost?
Yes. So So first of all, the Micron technology is through a JV with us, right? So the Micron and us are collaborating together very effectively, I think, on new technology development. To and if you look at what's out there in the market today, the initial three d NAND devices are still 128 gigabit devices. To and our goal is not to simply have the same cost structure, but a different manufacturing methodology, but to have a breakthrough in cost.
To And in order to have a breakthrough in cost, the more bits per die. And so our initial is not going to be we already have 128 gigabit die on 2 d So we'll be delivering 256 gigabit die in 3 d NAND MLC and then 384 in TLC. To So generally, if you can build a higher density dye, it means you're lower cost, right? So if you could build a 256 EBITDA, you would.
To But just to clarify, it doesn't it's 3 d NAND technology agnostic in your SSDs?
To So, yes, good question. There's 2 things that are going on here. 1 is we're developed we're doing the material science and process technology development to around a specific implementation of 3 d NAND, right? And that's what I was showing in those electron microscope pictures there. To The early version and then what we were running up here was an early version of that 3 d NAND technology that's 32 tiers deep And has 2 50 60 gigabits per cell.
Now in addition to that on 2 d and 3 d, we have controllers to that enable us to work with that technology. But then we also have a very fast growing market. So we're going to want to be able to have the ability to get supply from multiple places. And so we figure out how to make that controller also work with other people's technology.
To come back up to the top center here.
Looks like maybe C. G. Great. Thanks. C.
G. Muse with Evercore ISI. I guess, Rob, to follow-up on the 3 d side. There's clearly challenges there with the new technology. I'm curious if there are delays there, where you would look for increased bit supply, whether You would look for an increased planar shrink, whether you would add new capacity.
And then if I could ask a quick question to Herman, following on Stacy's question, Could you provide just a big picture level of how you think about your handset business from here? Is it really all about partnerships with Spreadtrum or Is there something internal that I should be thinking about as well? Thank you.
I didn't quite catch the 3 d NAND one. So it was CJ, do you want
to hit 3 d NAND? Yes, sorry about that.
To If challenges persist and you're not able to get the pilot line next year and ramp more meaningfully in 2016, where will you look to to
Yes. The short answer is we have 2 d NAND in our factories today and we have multiple options for that. But to the shortest answer is, I just showed you an SSD working with 3 d NAND in it. We're confident it's going to work.
So the other question, I think that's a quick one. We have customers, our partners have customers, so I you can expect to see a mixture.
To So maybe, Herman, we can give a little bit. We have customers that I think we talked about, OEM customers who do phones today. To We also have a lot of modem customers who build phones, which have been talked about through the day as well as the partners to that we so those kind of a combination of 3 different ways that we would serve the phone market.
To let's get to Betsy here in the middle.
Thanks, Mark. Betsy Van Hees, Webroot Securities. Thank you so much for putting on a great day, Mays, really appreciate it. Just wanted to go back to 3 d NAND versus planar NAND. And just curious as to why to You guys aren't putting focus on instead of going to 3 d NAND, but 3 bps per cell in SSDs and why can't you get the cost breakthrough there Before making a huge capital investment into 3 d NAND.
Yes. The answer is the clear long term strategy is 3 d NAND, to Right. What you're trying what you're doing is you're backing off the density, if you will, from an XY dimension and going vertical. To and it is the technology that you're going to it's the right long term technology strategy where you have multiple process generations that you can do off of that. To TLC and the next level of compaction on 2 d NAND is a band aid for the short term.
What we really want to do is get on the right long term technology strategy.
Let's come back over here.
To Ed
Snyder, Charter Equity.
Herman, it sounds like you
kind of got a bifurcated model here. I know there's 3 sets of customers, but you've got this SoC business that's moving along and you're going to push that to A lot of your partners. And yet at the same time, you're still developing these thin modems, 7,260s coming out and you've got the win with Samsung there. To Is the investment in that going to continue? That has been a very expensive project for everybody.
Broadcom just exited to And we know the struggles that many other OEMs have faced. Ericsson is out. I mean, they're in the Samsung model, but they've already abandoned their efforts there. So that seems to be where most of the R and D to was spent at Infineon and Intel and subsequent companies. Is that roadmap going to continue, thin modems and you're going to keep moving into to LTE Advance or is there some shift going on that you're looking at attacking the low end of the market and then maybe if you to get success in the big picture smartphone guys, you back off there.
And is there any chance that you're moving away from your arms so that some of this Traction you're getting, especially in the thin modems has some benefit for the factory because you're not fabbing that internally now? Thanks.
To So the thin modem technology or standalone modem technology to It's something that we have traditionally done. There was always a significant market for this and we believe there is a significant market to That directs the leading edge of the devices. They need the highest data rate. They need the most advanced feature set. So by itself, needless to say, that is a wonderful vehicle to develop the technology and to push the envelope on the capabilities.
To Why others have left that? I think that has nothing to do with this or that. That has just to do with Those investments are really high. Not everybody on that planet can sustain this. And if your products are not good enough, you have not enough Customers and yes, and then the business case doesn't work out anymore.
We believe we have that technology. You see we are shipping this, and we continue to push the envelope here forward. So that is one part of the answer. The other part of the answer is how does that translate or how does that map onto the SoCs. So that of course, this technology also goes into SoCs.
Those SoCs want to have LTE technology as well. So we bring the 72 IP that is currently shipping into the Sofia LTE that I have announced For next year. So that goes into this as well. We can make that decision whether we launch this as a standalone modem to As an integrated version for every generation again and again new. So there is no need to do first to Slim modem and then an integrated part or do first an integrated part and then do a slim modem.
It depends on what we have customers for and what we deem It's the right thing to do.
Yes. I just want to add on. So that's why I started at the very beginning with my comments about This being a platform level investment. So leadership in comms is a platform level strategy for us. So the answer to the question is no, our strategy is not changing.
And I just want to make sure we're super clear. And yes, we know people have exited, but I think that's an opportunity for us to on turn.
Great. Let's go over here. Hi. Two quick questions on NAND. The first is You mentioned the breakthrough cross performance.
Is that unique to Intel? Like does Micron get to share that with you or to And the second question is, you talked about bringing the manufacturing in house. So would that be a separate fab for memory that Intel would build or how do you do that?
Yes. For the first question, the answer is we jointly develop this technology together, just like we have all the previous technologies to and Micron has the ability to bring that technology to market as well. As far as bringing manufacturing house, what I actually said was, to If we have the ability to bring that technology in house, if it makes sense.
To come back over here.
Trey, looks like we have another So
it would be if we wanted to bring in an intel factor, we can. It depends on
a lot of factors whether we would do that.
To Thanks, Gus. Herman, I'm thinking about your go to market strategy with Spreadtrum and Rockchip. To What's to prevent the 2 partners from undercutting each other on price if you're both going to sell the same parts and or prevent to spread from like just taking your IP and the LTE modem and then integrating with ARM and going off in their own direction.
To So the every project that we do with them is a project on which we mutually agree. So that speaks to can they take that IP and go? No, they can't because we own that IP, and they work in our environment. To The other part of the question was, do they ship the same? That would give you insight into what kind of contract do we have with whom.
But as you could see from that what we have reviewed today, we are working with Rockchip on the Sofia 3GR, and we are working with to Spectrum on the Sofia LTE. So there is no overlap. But even if there was one, yes, it's always an open market, and people compete in an open market.
To
to pull up into the back. Thanks, Gary.
To Thank you. It's Brett Simpson, Arete. Herman, just a quick question on the modem road map. We've heard from some of your competitors like MediaTek to That they feel having EBITDA is quite important to address the China market. What's your strategy for Intel to address CVDL.
And will you be launching 6 modems next year? Thank you.
So the Our strategy has been that we integrate the technologies that we thought have a real great market. To And so we have integrated TDS CDMA. That is a very, very large market in China. We see, on the other hand, that, for example, to American operators are speaking about going LTE only without any fallback solution. So It's a pretty mixed bag on what you're looking here and you have to pick your choices on what you invest.
All right. I think we'll try to sneak one more in. Trey, do we have
one? Great. Thank you.
Right in the middle.
To Rob, throughout today, we've heard
a lot about Moore's Law
and how important it is. So just wondering, how do you justify the to How do you look at NAND long term in that Gordon Moore exited DRAM to 35 years ago, because I don't know why, but he's a lot smarter than I
am. Me too. So
to So why is
that a good use of capital? What's different about NAND versus DRAM long term?
To Yes. So the question we have to ask ourselves is, can we have a competitive advantage and can we sustain that competitive advantage? And is there something unique about our position related to the other people in the industry? And my view is that 1, we're very good at Moore's Law. We know how to advance Moore's Law and these kinds of technologies.
And we've demonstrated that over the last 6 years to so that the methodologies, how we do process technology development, etcetera, is an advantage that Intel owns. To Secondarily, our unique insight into where computing is going for NAND in compute markets, not for NAND in its generic purposes, but For the markets that Intel serves. And then finally, a unique insight into how platforms work and being able to optimize across platforms is an advantage for us as well. To And so that if we can demonstrate and sustain that advantage, it's an excellent investment because it's adjacent to to the other platform technology that we're working on and our customers, etcetera.
Great. All right. That wraps up the formal presentations for the day. Thank you to everyone for joining us here. Thank you to everyone on the web for joining us virtually.
I'd like to join all invite all of you who are here in the room to join us for a reception. That's held in the same area where we did lunch earlier today and the executive team will be there for informal networking. Thank you all.