Intel Corporation (NASDAQ:INTC) Has Manufacturing Lead, Sizable Intellectual Property Portfolio

July 21, 2016

Co-Portfolio Manager Willem Schilpzand of Alpine Capital Research says Intel Corporation (NASDAQ:INTC) is one of the largest holdings in his portfolio because of the company’s manufacturing lead and sizable intellectual property portfolio.

Intel is an interesting case because we believe it really speaks to our focus on the long-term sustainable-cash-flow-generating power of the company, and having the patience to let corporate results unfold and the share price to eventually reflect this corporate performance.

We…look at Intel as a company that has two very positive things going for it that we believe should allow INTC to continue to be a winner in the semiconductor space in the future. Number one is its manufacturing advantage, and number two is its scale combined with its intellectual property portfolio.

We believe it is fairly well-accepted that Intel has the manufacturing lead. In short, we believe a manufacturing process lead allows Intel to put more transistors on a chip to make its performance faster at equivalent cost versus competitors, or allows INTC to put an equal amount of transistors on a smaller chip footprint and hereby reduce cost and improve power consumption statistics versus competitors.

The second part speaks to INTC’s scale and its intellectual property portfolio. The semiconductor business is very capital-intensive from both a capital expenditure and an R&D perspective. Intel spends approximately $8 billion per year to improve its manufacturing process and keep it ahead of competition, and INTC also spends approximately $12.5 billion per year on R&D. This is greater than $20 billion per year. Not only is this a massive amount, INTC has been making these investments for a very long time and has therefore built up a very sizable intellectual property portfolio.