Intel’s Data Center Spending Explained
Intel, one of the world’s leading manufacturers of semiconductor chips, has recently announced in its third quarter report that its spending budget for 2017 will be larger than anticipated. According to Barron’s, Intel is projected to spend 34% of its yearly revenue on operating expenses. During a time when analysts assumed Intel would be cutting back on spending, this announcement seems odd at first glance. However, when looking at Intel’s profit sources and the competition, this increase in spending is actually a savvy move.
Increased Data Center Spending
One of the driving forces in Intel’s economic power is found in its data center technology. Last year’s Intel 10-K report revealed that almost a third of the company’s revenue came from its data center segment. While Intel’s computing segment offered a much higher percentage of company revenue, computing also faces challenging competition from a multitude of computer technology companies. Intel’s data center group, on the other hand, has a portion in several different markets such as networking infrastructure and cloud servers and faces little competition, making it one of the most stable revenue sources for Intel.
Intel’s Data Center Competition
In reality, the only true competition to Intel’s data center technology is ARM architecture-based servers. ARM servers, which utilize Reduced Instruction Set Computer (RISC) technology, typically have been employed in small devices such as smartphones and tablets, and haven’t posed much of a threat to Intel’s data center powerhouse servers. However, technological advances in the near future could soon allow ARM-based tech to steal market shares from Intel, which would be a critical blow to Intel’s long game.
In light of this, Intel’s spending strategy makes sense. With such a profitable revenue stream from its different segments (not to mention its years as an established, trusted company), Intel has the ability to spend billions on research and development and still stay comfortably in the black. If Intel can continue to remain on the cutting edge of new technology, it will be able to outspend its competition in developing new and better products. Intel will spend money to stay elite, hoping always to stay one step ahead of ARM architecture.