Intel (INTC) 10-K2023 FY Annual report

The order and presentation of content in our Form 10-K differs from the traditional SEC Form 10-K format. Our format is designed to improve readability and better present how we organize and manage our business. See "Form 10-K Cross-Reference Index" within the Financial Statements and Supplemental Details for a cross-reference index to the traditional SEC Form 10-K format.

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

The preparation of our Consolidated Financial Statements is in conformity with US GAAP. Our Form 10-K includes key metrics that we use to measure our business, some of which are non-GAAP measures. See "Non-GAAP Financial Measures" within MD&A for an explanation of these measures and why management uses them and believes they provide investors with useful supplemental information.

This Form 10-K contains forward-looking statements that involve a number of risks and uncertainties. Words such as "accelerate", "achieve", "aim", "ambitions", "anticipate", "believe", "committed", "continue", "could", "designed", "estimate", "expect", "forecast", "future", "goals", "grow", "guidance", "intend", "likely", "may", "might", "milestones", "next generation", "objective", "on track", "opportunity", "outlook", "pending", "plan", "position", "possible", "potential", "predict", "progress", "ramp", "roadmap", "seek", "should", "strive", "targets", "to be", "upcoming", "will", "would", and variations of such words and similar expressions are intended to identify such forward-looking statements, which may include statements regarding:

Such statements involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied, including those associated with:

Unless specifically indicated otherwise, the forward-looking statements in this Form 10-K do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-K are based on management's expectations as of the date of this filing, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable. We do not undertake, and expressly disclaim any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.

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

Availability of Company Information

Our 2023 results reflect the continued advancement of our transformational journey. We continued to prioritize investments critical to our IDM 2.0 transformation, achieved operational milestones, and executed disciplined expense management. To achieve our long-term financial model, we believe it is imperative that we drive to world-class product cost and operational efficiency. A key component of our overall strategy is our internal foundry model. Under this model, we intend to reshape our operational dynamics and establish transparency and accountability through standalone profit and loss reporting for our manufacturing group in 2024. We expect this model to enable increased efficiencies across a number of aspects of our organization that we believe are integral to achieving our financial and operational goals. At the same time, we continue to prioritize capital investments critical to our efforts to regain process leadership and establish a leading-edge, at-scale foundry business.

Technology permeates every aspect of our lives and is increasingly central to every aspect of human existence. As we look ahead to the next decade, we expect to see continued demand for processing power. Semiconductors are the underlying technology powering this digital expansion, and we are strategically positioning ourselves to create a resilient global semiconductor supply chain by investing in geographically balanced manufacturing capacity. The demand for compute is being accelerated by five superpowers: ubiquitous compute, pervasive connectivity, cloud-to-edge infrastructure, AI, and sensing. Together these superpowers combine to amplify and reinforce each other, and will exponentially increase the world's need for computing by packing even more processing capability onto ever-smaller microchips. We intend to lead the industry by harnessing these superpowers for our customers' growth and our own.

We are uniquely positioned with the depth and breadth of our silicon, platforms, and software, and packaging and process technology with at-scale manufacturing. With these strengths and the tailwinds of the superpowers driving digital disruption, our strategy to win is focused on four key themes: product leadership, open platforms, manufacturing at scale, and our people.

At our core is the x86 computing ecosystem, which supports an extensive and deep universe of software applications, with billions of lines of code written and optimized for x86 CPUs. We continue to advance this ecosystem with x86 microarchitectures focused on performance, which push the limits of low latency and single-threaded application performance, and microarchitectures focused on efficiency, which are designed for computing throughput efficiency to enable scalable multithreaded performance.

Beyond the CPU, we are delivering a growing family of xPU products, which encompass client and data center GPUs, IPUs, FPGAs, and other accelerators. The xPU approach recognizes that different workloads benefit from different computing architectures, and our broad portfolio helps meet our customers' increasingly diverse computing needs. As part of our strategy, we seek to develop and offer leading products across each of these architectural categories.

We also seek to address every phase of the AI continuum, including the largest, most challenging GenAI and large language models. We believe AI represents a generational shift in computing by expanding human abilities and solving the most challenging problems. We are in the early stages of realizing AI's full potential and GenAI is just the beginning. Our strategy is to bring AI to where the data is being generated and used and we believe we have a full spectrum of hardware and software platforms, offering open and modular solutions, for competitive total cost of ownership and time to value that customers need to win in this era of exponential growth and AI everywhere. We are infusing AI into Intel technologies, supporting today's GenAI workloads, fueling emerging usages like AI PC and AI at the edge, and pioneering innovations that we believe advance the future of AI in the next decade. We believe our leadership in IP, process, packaging, security, software, services, manufacturing, and foundry services positions us to realize AI's full potential to transform industries and solve the world's biggest challenges.

An open approach and deep engagement with the developer ecosystem are essential to lowering barriers to entry and unlocking AI innovations for developers and customers. We are expediting an open AI software ecosystem that we believe is needed to break down proprietary walls. We offer customers, partners, and developers early access and a rapid path to scale their AI solutions with the Intel Developer Cloud and integrated and scalable hardware and software systems and solutions.

We believe AI will only be truly accessible to all when its use is ethical and responsible. Partnering with industry leaders, we are working to deliver innovative ecosystem tools and solutions intended to make AI safer and more secure, and help address privacy concerns as AI scales exponentially. We are building platforms and technologies for the convergence of AI and security to help customers confidently secure diverse AI workloads across the data center, cloud, PC, and edge.

The Open System Foundry involves engaging with customers at multiple levels, from basic wafer manufacturing to helping define and implement their desired system architectures. We intend to build our customers' silicon designs and deliver full end-to-end customizable products built with our advanced packaging technology.

We believe our IDM 2.0 strategy enables us to deliver leading process technology and products to meet growing long-term demand using internal and external capacity, while leveraging our core strengths to provide foundry services to others and providing superior capacity, supply resilience, and an advantageous cost structure.

In the upcoming year, we plan to implement an internal foundry model, where our business units engage with our manufacturing group in an arm's-length fashion, similar to how fabless semiconductor companies engage with external foundries. The model is integral to our IDM 2.0 operational and financial strategies and aims to fully leverage our invested capital while serving a wide variety of chip customers worldwide.

Recent events, including the pandemic-related global chip shortage, made clear how supply chain disruptions can severely impact everyday life. The steady rise of chipmaking capacity in Asia has made the world vulnerable to continued and increasingly extreme shortages. We believe a secure, balanced, and resilient supply of semiconductors is essential to the interests of the entire global economy. With one of the most geographically balanced supply chains across North America, Europe and Asia, we plan to partner with the public sector to strengthen the resilience of the global semiconductor supply chain by investing in a more geographically balanced capacity. We believe our investments will help develop a more resilient supply chain for generations to come and hedge against geopolitical instability.

Fostering a culture of empowerment, inclusion, and accountability is also core to our strategy. We are committed to creating an inclusive workplace where the world’s best engineers and technologists can fulfill their dreams and create technology that improves the life of every person on the planet.

We are investing to position the company for accelerated long-term growth, focusing on both our core businesses and our growth businesses. In our client and server businesses, our strategy is to invest to strengthen the competitiveness of our product roadmap and to explore new opportunities. We believe we have significant opportunities to grow and gain share in graphics; mobility, including autonomous driving; networking and edge; AI; software; and foundry services.

We are focused on executing our product and process roadmap and accelerating our cadence of innovation. We have set a detailed process and packaging technology roadmap and announced key architectural innovations to further our goal of delivering leadership products in every area in which we compete. We are returning our culture to its roots in innovation and execution, drawing on principles established by our former CEO Andy Grove that emphasize discipline and accountability. This includes using OKRs throughout the organization to drive a common purpose.

To help us execute toward our IDM 2.0 strategy, we are leveraging our Smart Capital approach. This approach is designed to enable us to adjust quickly to opportunities in the market, while managing our margin structure and capital spending. The key elements of Smart Capital include:

We deploy various forms of capital to execute our strategy in a way that seeks to reflect our corporate values, help our customers succeed, and create value for our stakeholders.

Our commitment to corporate responsibility and sustainability leadership is deeply integrated throughout our business. We strive to create an inclusive and positive work environment where every employee has a voice and a sense of belonging, and we are proactive in our efforts to reduce our environmental footprint through efficient and responsible use of natural resources and materials.

We take a disciplined approach to our financial capital allocation strategy, which continues to focus on building stakeholder value and is driven by our priority to invest in the business and capacity and our capital needs. We also seek to pay competitive dividends, optimize our portfolio, look for innovative ways to unlock value across our assets, and, from time-to-time, engage in mergers and acquisitions. As we invest in our IDM 2.0 strategy and implement our next phase of capacity expansions and the acceleration of our process technology roadmap, our allocation priorities have shifted more heavily toward investing in the business and away from stock repurchases. In the long term, we will continue to look for opportunities to further our strategy through acquisitions while remaining disciplined on capital allocation.

Our first allocation priority is to invest in R&D and capital spending to capitalize on the opportunity presented by the world's demand for semiconductors. In 2023, we continued our focus on capital investment and the deployment of our Smart Capital strategy.

Our capital allocation strategy includes returning excess cash to stockholders. We achieve this through our dividend policy and, when permissible, stock repurchases. In 2023, we declared a reduced quarterly dividend on our common stock. This dividend reduction reflects our deliberate approach to capital allocation, is expected to support the critical investments needed to execute our business strategy, and is designed to position us to create long-term value. We expect future stock repurchases to continue to be curtailed during this time of meaningful investment in capital.

R&D investment is critical to enable us to deliver on our accelerated technology roadmap, introduce leading products, and develop new businesses and capabilities in the future. We seek to protect our R&D efforts through our IP rights and may augment R&D initiatives by acquiring or investing in companies, entering into R&D agreements, and directly purchasing or licensing technology.

We have intensified our focus on areas key to product leadership. Our objective with each new generation of products is to improve user experiences and value through advances in performance, power, cost, connectivity, security, form factor, and other features. We also focus on reducing our design complexity, re-using IP, and increasing ecosystem collaboration to improve our efficiency.

We own and develop significant IP and related IP rights around the world that support our products, services, R&D, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, mask works, and other rights. We actively seek to protect our global IP rights and deter unauthorized use of our IP and other assets.

We have obtained patents in the US and other countries. Because of the fast pace of innovation and product development, our products are often obsolete before the patents related to them expire, and in some cases our products may be obsolete before the patents are granted. As we expand our product offerings, particularly around our foundry business, we also seek to extend our patent development efforts. In addition to developing patents based on our own R&D efforts, we may purchase or license patents from third parties.

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

Efforts to protect our IP can be difficult, particularly in countries that provide less protection to IP rights and in the absence of harmonized international IP standards. Competitors and others may already have IP rights covering similar products. There is no assurance that we will be able to obtain IP rights covering our own products or that we will be able to obtain IP licenses from other companies on favorable terms or at all. For a discussion of IP-related risks, see "Risk Factors" within Risk Factors and Other Key Information. While our IP rights are important to our success, our business as a whole is not significantly dependent on any single patent, copyright, or other IP right.

As the guardians of Moore's Law, we continue to innovate to advance the design and manufacturing of semiconductors to help address our customers' greatest challenges. This makes possible new leadership products with higher performance while balancing power efficiency, cost, and size.

Our IDM 2.0 strategy allows us to deliver leadership products using internal and external capacity while leveraging our core strengths to provide foundry services to others. IDM 2.0 combines three capabilities. First, we will continue to build most of our products in our fabs. Second, we expect to expand our use of third-party foundry capacity to manufacture a range of modular tiles on advanced process technologies. Third, we are building a world-class foundry business with IFS, which we expect will combine leading-edge packaging and process technology, committed capacity in the US and Europe, and a world-class IP portfolio that will include x86 cores, as well as other ecosystem IP.

In 2023, our factories delivered continuous support to our customers as we ramped new process technologies and equipment for our products and expanded Open System Foundry offerings. We continue to work across our supply chain to minimize disruptions, improve productivity, and increase overall capacity and output to meet customer expectations.

Our global supply chain supports internal partners across architecture, product design, technology development, manufacturing and operations, sales and marketing, and business units, and our supply ecosystem comprises thousands of suppliers globally. Our mission is to enable product and process leadership, industry-leading total cost of ownership, and on-time and uninterrupted supply for our customers, delivered in a responsible and sustainable manner.

As of the end of 2023, we had nine geographically dispersed manufacturing sites in production. The following map shows the locations of these factory sites. Our manufacturing facilities are primarily used for silicon wafer manufacturing, assembling, testing, and advanced packaging. We operate in a network of manufacturing facilities integrated as though they were one factory to provide the most flexible supply capacity, allowing us to better analyze our production costs and adapt to changes in capacity needs. Our new process technologies, when ready for high volume manufacturing, are transferred from a central development fab to one or more of our manufacturing facilities. The network of factories and the development fab collaborate to continue driving operational improvements. This enables fast ramp of the operation, quick learning, and quality control.

We are expanding manufacturing capacity across multiple sites and geographies. These include silicon wafer manufacturing in Arizona, Germany, Ireland, Israel, Ohio, and Oregon and advanced packaging manufacturing in Malaysia and New Mexico. This year, we added Poland to our assembly and test expansion roadmap. These investments further our IDM 2.0 strategy and are expected to support a resilient semiconductor supply chain and to create the foundation for a next-generation chip ecosystem.

Our human capital strategy is grounded in our belief that our people are fundamental to our success. Delivering on our strategy and growth ambitions requires attracting, developing, and retaining top talent across the world. We are committed to creating an inclusive workplace where the world's best engineers and technologists can fulfill their dreams and create technology that improves the life of every person on the planet. We invest in our highly skilled workforce of 124,800 people (as of December 30, 2023) by creating practices, programs, and benefits that support the evolving world of work and our employees' needs.

Our human capital philosophy includes three pillars we believe are needed to position our talent strategy as a competitive advantage:

We invest significant resources to develop the talent needed to remain at the forefront of innovation and make Intel an employer of choice. We offer extensive training programs and provide rotational assignment opportunities and have updated our job architecture to help employees create custom learning curricula for building skills and owning their careers. To further support the growth and development of our people, we continue to increase mentoring in our technical community, drive engagement through employee resource groups, and promote health and wellness resources to all our people. Through our annual employee experience survey, employee inclusion survey, and manager development feedback survey, employees can voice their perceptions of the company, their managers, their work experiences, and their learning and development opportunities. Our employees' voices are important to enable our culture of continuous improvement, and as a result, we link a portion of our executive and employee performance bonus to year-over-year improvements of our employee experience survey results. Our performance management system is designed to support our cultural evolution and to increase our focus on disciplined OKRs.

We structure pay, benefits, and services to meet the varying needs of our employees, helping support employee financial well-being with competitive compensation, investment opportunities, and financial resources. Our total rewards package includes market-competitive pay, broad-based stock grants and bonuses, an employee stock purchase plan, healthcare and retirement benefits, paid time off and family leave, parent reintegration, fertility assistance, flexible work schedules, sabbaticals, and on-site services. Since 2019, we have achieved gender pay equity globally and we continue to maintain race/ethnicity pay equity in the US. We achieve pay equity by closing the gap in average pay between employees of different genders or race/ethnicity in the same or similar roles after accounting for legitimate business factors that can explain differences, such as location, time at grade level, and tenure. We have also advanced transparency in our pay and representation data by publicly releasing our EEO-1 survey pay data since 2019. We believe that our holistic approach toward pay equity, representation, and creating an inclusive culture enables us to cultivate a workplace that helps employees develop and progress in their careers at all levels. Our "hybrid-first" approach to working was informed by employees surveyed around the globe and involves the majority of our employees splitting their time between working remotely and in the office. Hybrid-first and remote work options cast a wider recruitment net and support our ambition to hire the best global talent. Currently, there is no company-wide mandate on the number of days per week employees should be on site or how they should collaborate. Our goal is to enable remote and on-site work where it drives the best output, while providing our employees with equitable access to systems, resources, and opportunities that allow them to succeed.

We are committed to providing a safe and injury-free workplace. We regularly invest in programs designed to improve physical, mental, and social well-being. We provide access to a variety of innovative, flexible, and convenient health and wellness programs, including on-site health centers, and we aim to increase awareness of and support for mental and behavioral health. In support of our RISE goals, we intend to continue our efforts to build our strong safety culture and drive the global expansion of our corporate wellness program through employee education and engagement activities.

We are committed to engaging in initiatives that support our communities and help us develop trusted relationships with our stakeholders. Proactive engagement with our stakeholders and investments in social impact initiatives, including those aligned with the United Nations Sustainable Development Goals, advance our position as a leading corporate citizen and create shared value for Intel, our global supply chain, and our communities.

We actively manage our supply chain to help reduce risk, improve product quality, achieve environmental and social goals, and improve overall performance and value creation for Intel, our customers, and our suppliers. To drive responsible and sustainable practices throughout our supply chain, we have robust programs to educate and engage suppliers that support our global manufacturing operations. We actively collaborate with other companies and lead industry initiatives on key issues such as improving transparency around climate and water impacts in the global electronics supply chain and, as part of our RISE strategy, we are advancing collaboration across our industry on responsible minerals sourcing. Through these efforts we help set electronics industry-wide standards, develop audit processes, and conduct training.

Our commitment to diversity and inclusion also extends to our suppliers. We believe a diverse supply chain supports greater innovation and value for our business. We have set additional spending targets with women-owned suppliers outside the US and with minority-owned suppliers globally to accelerate progress toward our goal to increase global annual spending with diverse suppliers to reach $2.0 billion in annual spending by 2030.

Driving to the lowest possible environmental footprint as we grow helps us create efficiencies, support our communities, and respond to the needs of our stakeholders. We invest in environmental projects and set company-wide environmental targets to drive reductions in greenhouse gas emissions, energy and water use, and waste generation. We build energy efficiency into our products to help our customers lower their own emissions, energy usage, and costs, and we collaborate with policymakers and other stakeholders to use technology to address environmental challenges.

In April 2022, we announced our new goal to reach net-zero greenhouse gas emissions in our operations by 2040, creating an important target to strengthen our commitment to sustainable business practices. We furthered our commitment in 2023 by announcing our goal to reach net-zero upstream Scope 3 greenhouse gas emissions by 2050. Our 2030 RISE goals continue to be important milestones to drive to higher levels of operational efficiency, including a goal of a 10% reduction in our greenhouse gas emissions on an absolute basis from a 2019 baseline by 2030. We continue to take action on emissions reduction strategies focused on emissions abatement, and to make additional investments in renewable electricity, process and equipment optimization, and energy conservation. In 2023, we linked a portion of the executive and employee performance bonus to our goal to reduce our 2023 Scope 1 and 2 greenhouse gas emissions by 130,000 metric tons carbon dioxide equivalent, compared to 2022. Our RISE strategy also focuses on addressing climate change impacts upstream and downstream in the value chain. This includes improving product energy efficiency and increasing our "handprint"—the ways in which Intel technologies can help others reduce their footprints, including Internet of Things solutions that enable intelligence in machines, buildings, supply chains, and factories, and make electrical grids smarter, safer, and more efficient.

In August 2023, we published our inaugural green bond report, which provides an update on the allocation of the net proceeds of the $1.3 billion principal amount of senior notes issued in 2022. We are using the proceeds from the green bond offering to fund projects that support our investments in sustainable operations, which can include items such as green buildings, energy efficiency, circular economy and waste management, greenhouse gas emissions reductions, water stewardship, and renewable energy.

We are a global IDM of CPUs and related solutions that we design, develop, manufacture, market, sell, support, and service. Our CPUs and related solutions are incorporated in computing and related end products and services, and utilized globally by consumers, enterprises, governments, and educational organizations. Our customers primarily include OEMs, ODMs, cloud service providers, and other manufacturers and service providers, such as industrial and communication equipment manufacturers and other cloud service providers who buy our products through distributor, reseller, retail, and OEM channels throughout the world. We market and sell these products directly through our global sales and marketing organizations and indirectly through channel partners. We manufacture our products at our fabrication and assembly and test facilities located throughout the world.

Our product offerings provide end-to-end solutions, scaling from data center to network, PCs, edge computing, and the emerging fields of AI and autonomous driving, to serve an increasingly smart and connected world. Products, such as our gaming CPUs, may be sold directly to end consumers, or they may be further integrated by our customers into end products such as notebooks and storage servers. Combining some of these products—for example, integrating FPGAs with Intel Xeon processors in a data center solution—enables incremental synergistic value and performance. In 2023 we launched new products, including the 13th Gen Intel Core mobile processor family, the 4th Gen Intel Xeon Scalable processors with Intel vRAN Boost, and the Intel Core Ultra processors, which feature our first integrated neural processing unit for power-efficient AI acceleration and local inference on the PC.

During 2023, we managed our business through the operating segments that are presented below and have included the 2023, 2022 and 2021 financial results for each segment."Note 3: Operating Segments" within the Notes to Consolidated Financial Statements of this Form 10-K reconciles our segment revenues presented below to our total revenues, and our segment operating income (loss) presented below to our total operating income (loss), for each of the periods presented. We have also included a discussion of our 2023, 2022 and 2021 consolidated results of operations and related information subsequent to the operating segment discussion below.

As we continue on our strategy to develop more competitive products and more capabilities for customers, we are designing our product roadmap to drive product leadership grounded in a philosophy of openness and choice. We deliver value to our customers by leveraging our engineering capabilities and working with our partners across an open, innovative ecosystem to deliver technology that drives every major vector of the computing experience, including performance, power efficiency, battery life, connectivity, graphics, and form factors, to create the most advanced PC platforms.

We continue to innovate beyond the CPU to deliver premium PC experiences with Intel Evo Edition laptops and Intel vPro Platforms. We worked with industry partners to co-engineer and deliver new experiences with Intel Evo Edition, which are designed to deliver key experience indicators such as responsiveness, battery life, intelligence collaboration, and Intel Unison Multi-Device Experience. Intel vPro is designed for enterprise needs and delivers increased productivity, connectivity, security features, and remote manageability.

We operate in a particularly competitive market. In processors, we compete with Advanced Micro Devices, Inc. (AMD) and vendors who design applications processors based on ARM architecture*, such as Qualcomm Inc. (Qualcomm), and Apple Inc. (Apple), with its M1 and M2 products. We expect this competitive environment to continue to intensify in 2024.

We remain committed to creating an open ecosystem to foster growth and technology innovations. We embrace and collaborate with a global ecosystem of industry partners to deliver leadership technologies together. We launched the industry's first AI PC Acceleration Program, designed to provide the software ecosystem with engineering tools and resources to enable AI on more than 100 million PCs through 2025. We also announced a collaboration with Microsoft to drive the development of AI on personal computing, with Intel Core Ultra processors and Windows 11 expected to scale across the ecosystem of Intel and Microsoft OEM and ISV partners.

During 2023, we continued to diversify our product strategy across nodes, advance our packaging capabilities with disaggregated silicon, and balance internal and external manufacturing. We increased our levels of operating inventory and worked with our customers to develop strategically located supply hubs that forward position inventory. In addition, we continue to invest in a globally diverse supply chain that enables us the flexibility and proximity to support customers. These have further enhanced the service and responsiveness we are able to provide our customers.

Operating income increased 17% year over year, and operating margin was 22% in 2023 and 18% in 2022.

Data is a significant force in society and is generated daily at an unprecedented pace. The desire to harness insights from data to drive better outcomes for businesses and society is ever expanding. AI is becoming pervasive in nearly all applications, creating the potential for intelligence everywhere, and enabling powerful new uses of compute resources across all market segments. The installed base of Intel Xeon processors, combined with our portfolio of heterogeneous compute solutions (FPGAs, GPUs, IPUs, and AI accelerators), we believe positions us to lead in this high-growth area. DCAI is integral to our growth in AI through deep investments in the AI ecosystem, developer tools, frameworks, networking and memory, technologies, and open standards to drive a scalable path forward.

We provide our customers with an extensive portfolio of silicon and software products, engineered to deliver workload-optimized performance. Our hardware portfolio comprises CPUs, GPUs, domain-specific accelerators, and FPGAs, designed to support the performance, agility, and security that our customers demand. Deployment of our silicon platforms is accelerated by a software development environment that enables workload mobility across our heterogeneous architectures and enables developers to execute their workloads on the hardware that best meets application requirements.

Our competitors include AMD, providers of GPU products such as NVIDIA, companies developing their own custom silicon, and new entrants and incumbents developing ARM- and RISC-V-based products customized for specific data center workloads. We expect this competitive landscape to continue.

The Intel Xeon Scalable processor family delivers advanced CPUs for the data center, the network, and the edge, driving industry-leading performance, manageability, and security with differentiated features and capabilities. In 2023, we launched the 5th Gen Intel Xeon Scalable processors, which utilize modular SoCs for increased scalability and flexibility to deliver a range of products that meet the growing scale, processing, and power efficiency needs for AI, cloud, and enterprise installations.

Our Intel Gaudi 2 AI deep learning processor is engineered to allow customers to benefit from the most cost-effective, high-performance training and inference alternative to comparable GPUs.

Our FPGA and structured ASIC portfolio enhances Intel's ability to meet the needs of customers in the data center, across the network, and at the edge. In 2023, we released 21 new products within our FPGA business. These include the Intel Agilex 9 and Intel Agilex 7 product families, which are intended to handle the increased demand for customized workloads, including enhanced AI capabilities, and to provide lower total cost of ownership.

Our Intel Xeon CPU Max Series, introduced in 2022, was the first and only x86-based processor with high bandwidth memory for HPC and AI workloads. The Intel Data Center GPU Max Series 1550 and 1100 are now broadly available through OEM systems. Our Intel CPU Max Series includes 64GB of on-package high bandwidth memory, which benefits data-intensive HPC workloads. Our Intel Data Center GPU Flex Series offers customers a flexible, general-purpose GPU for the data center and the intelligent visual cloud. We delivered and installed, in collaboration with Argonne National Laboratory (ANL) and Hewlett Packard Enterprise (HPE), the largest cluster of Max GPUs to the Aurora Supercomputer at ANL.

The ubiquity of Intel Xeon in the installed base, along with our heterogeneous compute solutions combined with software that unlocks the value of our hardware, enable our customers to develop highly differentiated solutions. Our integrated approach has created significant value for Intel, our customers, and our partners by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities to apply our technology to address our customers' and society's most complex issues.

Revenue was $15.5 billion, down $3.9 billion from 2022, driven by a decrease in server revenue. Server volume decreased 37% from 2022, due to lower demand in a softening CPU data center market. Server ASPs increased 20% from 2022, primarily due to a lower mix of hyperscale customer-related revenue and a higher mix of high core count products.

Revenue was $19.4 billion, down $3.3 billion from 2021, due to a decrease in server revenue, partially offset by higher other DCAI revenue. Server volume decreased 16% from 2021, led by enterprise customers in a competitive environment, and due to customers tempering purchases to reduce existing inventories in a softening data center market. Server ASPs decreased 5% from 2021, driven by a higher mix of revenue from hyperscale customers. Other DCAI revenue increased 18% from 2021 primarily driven by growth in our FPGA business.

We had an operating loss of $530 million in 2023, compared to operating income of $1.3 billion in 2022.

The Internet is undergoing a shift toward a cloud-to-edge infrastructure, combining unrivaled scale and capacity in the cloud with faster response times at nearby edges. As AI is transforming and automating every industry—from factories to smart cities to hospitals—the demand for high-performance computing at the edge has expanded exponentially. Networks are moving toward software, becoming more programmable and flexible.

With a greater emphasis on systems and solutions designed to harness the growth of data processed at the edge to yield insights, our competitive landscape has shifted beyond application-specific standard product vendors to include cloud, network, and AI computing platform providers.

Today, we speed the deployment of network and edge computing solutions based on our open software frameworks, AI-enabled platform solutions, and edge and network-optimized broad silicon portfolio to address a wide range of applications across several markets.

We deliver edge-optimized AI-enabled platforms for edge applications based on our Intel Xeon, Intel Core, and Intel Atom processor portfolio, which reduces operational complexity for our customers and helps our customers create, store, and process data at the edge so they can analyze it faster and act on it sooner. We also build differentiated networking offerings that keep pace with industry speeds and deliver unique features needed for the intelligent edge, such as networking offloads, time-sensitive networking, and scalable reliable transport.

Revenue was $8.4 billion, up $744 million from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Ethernet demand declined in Q4 2022 due to lower server demand, and edge demand declined in Q4 2022 due to macroeconomic factors.

In 2023, the automotive industry grew with an approximately 9% increase in global vehicle production year over year. We expect industry ADAS volumes to grow faster than overall global vehicle production in the coming years and anticipate long-term ADAS growth from increases in the percentage of vehicles that are equipped with basic ADAS features from the factory. Despite our expectation for a decline in Mobileye ADAS volumes in 2024 due to a correction of inventory with our customers, we continue to believe we will benefit from positive industry ADAS growth over the medium-term. In addition to potential volume growth, our portfolio of advanced solutions has the potential to drive higher average system price over time.

Beyond ADAS solutions, we believe that the availability of AVs will cause a significant transformation in mobility, including vehicle ownership and utilization. We expect that AV technology will eventually be accessed by consumers through shared-vehicle MaaS networks, as well as in consumer-owned and operated AVs. We are pursuing this market trend by using our eyes-on/hands-off Mobileye SuperVision solution as a baseline to scale to our eyes-off/hands-off Mobileye Chauffeur consumer AV product in a variety of operational design domains. As it relates to AMaaS, we intend to primarily go to market by supplying Mobileye Drive™ self-driving system to transportation network companies, public transit operators, and suppliers of AV-ready vehicle platforms. In some cases, we expect to bundle our Mobileye Drive self-driving system with Moovit’s urban mobility and transit intelligence application and its global user base.

We currently ship a variety of ADAS solutions to a large number of global automakers. We are recognized for our top-rated safety solutions globally, and since 2007, we have introduced numerous industry-first ADAS products.

We are building a robust portfolio of end-to-end ADAS and autonomous driving solutions to provide the capabilities needed for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies. We pioneered “base” ADAS features to enhance vehicle safety and to meet global regulatory requirements and safety ratings with our driver assist solution and we have since created a new category of ADAS with our Cloud-Enhanced Driver-Assist™ and premium driver assist offerings, such as Mobileye SuperVision. By leveraging Mobileye SuperVision’s full-surround computer vision and True Redundancy™, we are developing Mobileye Chauffeur, our consumer AV solution and Mobileye Drive, our eyes-off/hands-off autonomous driving solution designed for fleet deployment. Our current offerings to Tier 1 and OEM customers do not include cameras, radars, lidar systems, or other sensors (except in particular cases). We intend in the future to offer radar and lidar products that are currently in development stages.

The ADAS and autonomous driving industries are highly competitive. In the ADAS and consumer AV market, we face competition primarily from other external providers, including Tier 1 automotive suppliers and silicon providers, as well as in-house solutions developed by OEMs to a certain extent. Our Tier 1 customers may be developing or may in the future develop competing solutions. In the autonomous driving market, including AMaaS and consumer AV, we face competition from technology companies; internal development teams from the automakers themselves, sometimes in combination with investments in early-stage autonomous vehicle technology companies, Tier 1 automotive companies, as well as robotaxi providers.

The chip industry is undergoing a structural transformation driven by:

These transformational trends are driving significant semiconductor market growth in leading-edge silicon and packaging technologies, especially in systems of chips for AI applications. Customers have to make complex design choices at every level of the system, from packaging technologies, process nodes, interconnects, physical IP, and compute elements to software. The abundance of technology choices and optimizations is adding complexity in design, technology, integration, and manufacturing.

Our IDM 2.0 strategy includes our pursuit of these complex manufacturing and market growth opportunities by making significant capital investments in leading-edge semiconductor technologies in order to create foundry capacity and establish IFS as a major provider of foundry services that provides semiconductor manufacturing solutions for others and for ourselves. We have made and expect to continue to make significant capital investments in furtherance of this strategy.

We seek to address this tectonic shift in the chip industry by enabling our customers to create optimized systems of chips by combining the best technologies from Intel and the ecosystem. We believe Open System Foundry is a world-class foundry offering, delivered from a resilient, secure, and sustainable source of supply and complemented by access to the systems of chips capabilities from Intel. The basic foundry offering is advanced process technologies backed by an ecosystem of IP, EDA, and design services, which enable customers to design as they would with other foundries. The systems of chips capabilities include advanced packaging technologies, software to accelerate bring-up and integration of complex chips, and driving standards that will improve system performance.

With our IFS accelerator program members and the Arm and Synopsys agreements, we believe we are well on the way to building out a world-class foundry offering. With the rise of AI, our advanced packaging business is expected to be another unique advantage for Intel. Chips created with us or other foundries can be packaged using Intel's advanced packaging technologies, including 2D and 2.5D/3D solutions designed to enable large, highly scalable packages at competitive costs. We continue to drive technologies, capabilities, and standards needed to optimize systems of chips, including the Universal Chiplet Interconnect Express* standard for communication between chips in a system, which was demonstrated in silicon in 2023. We accelerate our customers' designs by providing services and software that leverage Intel's vast experience as a systems company.

We believe the Open System Foundry model delivers differentiated capabilities to help our customers lead in their industries while bringing stability to the global semiconductor supply chain. The momentum and customer commitments we are seeing demonstrate that our strategy and offerings are resonating, and we look to build on this success in 2024 and in future periods.

For additional key highlights of our results of operations, see "A Year in Review."

2023 revenue was $54.2 billion, down $8.8 billion, or 14%, from 2022. CCG revenue decreased 8% from 2022 primarily due to lower notebook and desktop volume driven by lower demand across market segments, partially offset by increased volume in the second half of the year as customer inventory levels normalized compared to higher levels in the first half. Notebook ASPs decreased due to the relative strength in the education market segment resulting in a higher mix of small core products combined with a higher mix of older generation products, and were partially offset by higher desktop ASPs due to an increased mix of product sales to the commercial and gaming market segments. DCAI revenue decreased 20% from 2022 due to lower server volume resulting from a softening CPU data center market, which was partially offset by higher server ASPs from a lower mix of hyperscale customer-related revenue and a higher mix of high core count products. NEX revenue decreased 31% from 2022 as customers tempered purchases to reduce existing inventories and adjust to a lower demand environment across product lines.

Incentives offered to certain customers to accelerate purchases and to strategically position our products with customers for market segment share purposes, contributed approximately $700 million to our revenue during Q4 2023, the impacts of which were contemplated in our financial guidance for Q1 2024, as included in our Form 8-K dated January 25, 2024.

2022 revenue was $63.1 billion, down $16.0 billion, or 20%, from 2021. CCG revenue was down 23% from 2021 due to lower notebook and desktop volume in the consumer and education market segments, and lower revenue due to the continued ramp down from the exit of our 5G smartphone modem business and lower demand for our wireless and connectivity products. Notebook volume decreased, driven by lower demand in the consumer and education market segments, while ASPs increased due to the resulting product mix. Desktop volume decreased, driven by lower demand in the consumer and education market segments while ASPs increased due to an increased mix of commercial products. DCAI revenue decreased 15% from 2021 due to lower server demand from enterprise customers, and due to customers tempering purchases to reduce existing inventories in a softening data center market. The decrease was partially offset by higher revenue from our FPGA business. Server ASPs decreased due to customer and product mix. NEX revenue increased 10% from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Mobileye revenue increased 35% from 2021, primarily driven by higher demand for EyeQ products and Mobileye Supervision systems. The decrease in our "all other" revenue was due to revenue from the divested NAND memory business of $4.3 billion recognized in 2021, for which historical results are recorded in “all other,” and $584 million of revenue recognized in 2021 from a prepaid customer supply agreement.

We derived most of our overall gross margin in 2023 from the sale of products in the CCG and DCAI operating segments. Our overall gross margin dollars in 2023 decreased by $5.2 billion, or 19%, compared to 2022, and in 2022 decreased by $16.9 billion, or 39%, compared to 2021.

Total R&D and MG&A expenses for 2023 were $21.7 billion, down 12% compared to 2022. These expenses represent 40.0% of revenue for 2023 and 38.9% of revenue for 2022. In support of our strategy, we continue to make significant investments to accelerate our process technology roadmap. This requires increased investments in R&D and focused efforts to attract and retain talent. We have implemented certain cost-cutting measures while we continue to improve our product execution.

The 2022 Restructuring Program was approved to rebalance our workforce and operations and to create efficiencies and improve our product execution in alignment with our strategy. In 2023, activity related to the 2022 Restructuring Program consisted of cash settlements of previously accrued employee severance and benefit arrangements, as well as incremental accruals throughout the year and was substantially complete as of December 30, 2023. The 2022 Restructuring Plan, in conjunction with other initiatives, reduced our cost structure and allowed us to reinvest certain of these cost savings in resources and capacity to develop, manufacture, market, sell, and deliver our products in furtherance of our strategy. The cumulative cost of the 2022 Restructuring Program as of December 30, 2023 was $1.3 billion.

Gains (Losses) on Equity Investments and Interest and Other, Net

Ongoing mark-to-market adjustments recognized in 2023, 2022, and 2021 were primarily driven by our investment in Montage Technology, Co. Ltd. (Montage).

In 2022, we recognized a gain of $1.0 billion from the first closing of the divestiture of our NAND memory business.

Provision for (Benefit from) Taxes

Our effective tax rate decreased in 2023 compared to 2022, primarily driven by our R&D tax credits, which provide a tax benefit based on our eligible R&D spending and are not dependent on lower income before taxes, and a higher proportion of our income being taxed in non-US jurisdictions. Our benefit from income taxes increased in 2023 compared to 2022 primarily due to a higher proportion of our income being taxed in non-US jurisdictions. The 2023 shift in income was attributable to the 2022 tax costs associated with the gains recognized from the equity sale of McAfee and the divestiture of our NAND memory business.

Our effective tax rate decreased in 2022 compared to 2021, primarily driven by a higher proportion of our income being taxed in non-US jurisdictions and a change in tax law from 2017 Tax Reform related to the capitalization of R&D expenses that went into effect in January 2022. In 2022 we recognized a benefit from taxes as compared to a provision for taxes in 2021 as the higher proportion of our income being taxed in non-US jurisdictions and the change in tax law from 2017 Tax Reform were only partially offset by the tax costs associated with the gains recognized from the equity sale of McAfee and the divestiture of our NAND memory business.

In 2021 the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

As we invest in multiple expansions, we expect our capital expenditures to continue to be higher than historical levels for the next several years. We expect to adjust the cadence of our investments based on the execution of our roadmap and changing business conditions. As of December 30, 2023, we had commitments for capital expenditures of $20.4 billion for 2024 and had $7.1 billion in capital expenditures committed in the long term. As of December 30, 2023, other purchase obligations and commitments in 2024 under our binding commitments for purchases of goods and services were $2.7 billion, with an additional $5.6 billion committed in the long term.

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services. For example, see "Note 19: Commitments and Contingencies" within the Notes to Consolidated Financial Statements for information about our lease obligations, which include supply agreements structured as leases; "Note 8: Income Taxes" within the Notes to Consolidated Financial Statements for information about our tax obligations, including impacts from Tax Reform enacted in 2017 for the one-time transition tax on previously untaxed foreign earnings; and "Note 13: Borrowings" within the Notes to Consolidated Financial Statements for information about our debt obligations. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included in the amounts above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons.

We maintain a diverse investment portfolio that we continually analyze based on issuer, industry, and country. Substantially all of our investments in debt instruments are in investment-grade securities.

In Q1 2023, we declared a reduced quarterly dividend on our common stock. This dividend reduction reflects our deliberate approach to capital allocation, is expected to support the critical investments needed to execute our business strategy, and is designed to position us to create long-term value. In January 2024, our Board of Directors declared a quarterly dividend of $0.125 per share on the company's common stock, which will be payable on March 1, 2024 to stockholders of record as of February 7, 2024. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.

For 2023 compared to 2022, the $4.0 billion decrease in cash provided by operating activities was primarily driven by lower 2023 net income after adjusting for non-cash items, partially offset by 2023 cash-favorable working capital changes compared to 2022.

For 2022 compared to 2021, the $14.0 billion decrease in cash provided by operating activities was primarily driven by lower 2022 net income after adjusting for non-cash items, including the gain on the sale of McAfee and the pre-tax gain from the divestiture of our NAND business, partially offset by 2022 cash-favorable working capital changes compared to 2021.

Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; proceeds from capital-related government incentives; and proceeds from divestitures. Our capital expenditures were $25.8 billion in 2023 ($24.8 billion in 2022 and $18.7 billion in 2021).

The increase in cash used for investing activities in 2023 compared to 2022 was primarily due to a lack of proceeds from the divestiture of our NAND business and from the sale of our remaining McAfee share that occurred in 2022, lower maturities and sales of short-term investments, and increased capital expenditures. These unfavorable cash flow impacts during 2023 were partially offset by higher 2023 proceeds from capital-related government incentives and by other cash favorable investment activities, including lower acquisitions during 2023.

The decrease in cash used for investing activities in 2022 compared to 2021 was primarily due to increased maturities and sales of short-term investments, proceeds from the divestiture of our NAND business, and proceeds from the sale of our remaining share of McAfee, partially offset by an increase in capital expenditures.

Financing cash flows consist primarily of payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, and proceeds from partner contributions and equity-related issuances.

The increase in cash provided by financing activities in 2023 compared to 2022 was primarily due to higher debt issuances along with lower repayment of long-term debt, decreased dividend payments to stockholders, and increased proceeds from sales of subsidiary shares, partially offset by commercial paper issuances in 2022 that were subsequently repaid in 2023. Our total dividend payments were $3.1 billion in 2023, compared to $6.0 billion in 2022. We have paid a cash dividend in each of the past 125 quarters.

Cash provided by financing activities in 2022 compared to cash used for financing activities in 2021 was primarily due to higher commercial paper and debt issuances, our 2022 curtailment of common stock repurchases, proceeds from the Mobileye IPO, and partner contributions for joint investments, partially offset by higher 2022 debt repayments.

Critical Accounting Estimates

The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make assumptions that are uncertain when the judgment is made, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we report in our Consolidated Financial Statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made.

Refer to "Note 2: Accounting Policies" within the Notes to Consolidated Financial Statements for further information on our critical accounting estimates, which are as follows, as well as our significant accounting policies:

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with US GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance. These non-GAAP financial measures are used in our performance-based RSUs and our cash bonus plans.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects. Beginning in 2023, income tax effects are calculated using a fixed long-term projected tax rate of 13% across all adjustments. We project this long-term non-GAAP tax rate on an annual basis using a five-year non-GAAP financial projection that excludes the income tax effects of each adjustment. The projected non-GAAP tax rate also considers factors such as our tax structure, our tax positions in various jurisdictions, and key legislation in significant jurisdictions where we operate. This long-term non-GAAP tax rate may be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or changes to our strategy or business operations. Management uses this non-GAAP tax rate in managing internal short- and long-term operating plans and in evaluating our performance; we believe this approach facilitates comparison of our operating results and provides useful evaluation of our current operating performance. Prior-period non-GAAP financial measures have been retroactively adjusted to reflect this updated approach.

Our non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with US GAAP, and the financial results calculated in accordance with US GAAP and reconciliations from these results should be carefully evaluated.