Intel Confidential1

International Air Cargo Forum and ExpositionInternational Air Cargo Forum and Exposition September 2006September 2006

Greg SkrovanGreg Skrovan Intel CorporationIntel Corporation

Intel Transportation Supply Chain

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The Intel you think of…

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The Intel that is a…

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Intel Supply Chain

Intel Supply Chain characteristics 10 fabrication plants, located in Ireland, Israel and USA 7 Assembly Test factories in Asia and Costa Rica 14 Distribution Centers throughout the world, including

four retail boxing lines The manufacturing cycle of a typical Intel product includes at

least one round world trip Intel ships ~1.9 million shipments per year averaging

550 kilos per day Intel Supply Chain has ~2,500 people in 14 countries.

Supplier Fabrication Plant Assembly Test Boxing,Storage and

Cross docking

Customer

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The Intel NetworkEuropeEurope

AmericaAmerica

AsiaAsia

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Intel’s Influence in the Supply Chain

Leader in internet negotiations; used for virtually all freight Leader in internet negotiations; used for virtually all freight contracts and negotiations.contracts and negotiations.

Instrumental in establishing the High Tech Shippers Coalition Instrumental in establishing the High Tech Shippers Coalition as a forum for influencing governmental policies.as a forum for influencing governmental policies.

Helping to establish direction for RosettaNet proliferation Helping to establish direction for RosettaNet proliferation through leadership in RosettaNet consortium. through leadership in RosettaNet consortium.

An original founder of Technology Asset Protection An original founder of Technology Asset Protection Association (TAPA) and active in leadership positions in all Association (TAPA) and active in leadership positions in all geographies.geographies.

Transportation Materials & Manufacturing Engineering group Transportation Materials & Manufacturing Engineering group has patented thermo-forming solutions that have saved has patented thermo-forming solutions that have saved millions in freight and packaging costs.millions in freight and packaging costs.

• Intel was ranked number 11 of the “Top 25 Supply Chain Intel was ranked number 11 of the “Top 25 Supply Chain Companies” by AMR Research in 2005.Companies” by AMR Research in 2005.

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Freight Spending and Geo Demand

Imbalance between billings and consumption drives freight costs

Air cargo represents 78% of freight spending

59% of freight spends originate in Asia (~20% from China 3PL’s)

Challenges: – Align the “right service / mode”

to the Business Unit needs

– Comprehend total landed costs in supply chain decisions

Q2 Billings Revenue

51%

12%

18%

19%

IJKK

EMEA

ASMO

APAC

Q2 Billings Revenue

51%

12%

18%

19%

IJKK

EMEA

ASMO

APAC

Q2 Consumption Revenue

33%

26%

8%

33%

Q2 Consumption Revenue

33%

26%

8%

33%

Network Complexity

Emerging Markets: Increase in smaller orders to

more remote locations. Unstable logistics

infrastructures.– Security risks– Delivery reliability – IT / systems– Accessibility to tier 2 cities

Global Freight Profile: Trade imbalance impacting

costs and delivery reliability. Higher fuel costs passed

through to shippers.

IntraAmericasIntraAmericas27%27%

IntraAsiaIntraAsia24%24%

IntraEuropeIntraEurope11%11%

TransPacificTransPacific

3%3%

14%14%

20052005

Intel Global Freight Profile by WeightIntel Global Freight Profile by Weight

88

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Emerging Markets

Latin America (LAR)– LAR sourced primarily via Miami 3PL (84% of 3PL volume)

– Direct shipments to LAR limited to MNC’s only

– Direct shipments expected to increase by 50% ‘05 to ‘06

China – Lift capacity remains major issue

– Linearity in uplift capacity (3X demand to supply Sept-Dec)

– Limited landing rights in China

– U-turn requirements for intra-China shipments

– Non-direct flights between Taiwan and China

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Challenge to the Air Cargo Industry

Constantly seek out new ways to improve reliability– Global consistency with materials handling; i.e. Emerging Markets– Practice Business Continuity religiously; terror, hurricanes, etc – Face complexities and challenges as opportunities to get better, not as

immovable barriers that halt progress or raise costs– Adequate and affordable lift capacity from growth and emerging markets

Cost efficiency and effectiveness– Segmented services (one solution does not fit our BU needs)– Fuel efficiency and environmental awareness– Seamless inter-modal capabilities with customer transparency– Educate shippers on ways to make your life easier (bid timing, etc)

Work as an industry to create breakthrough innovations, standards and leverage your collective power. – Increase collaboration with supply network partners– Industry associations / leverage your positions government, regulations.

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Back-up

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Intel Supply Chain Vision

Mission: Increase customer and Intel success by Mission: Increase customer and Intel success by optimizing supply and demand, and delivering optimizing supply and demand, and delivering valued supply chain solutionsvalued supply chain solutions

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

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Vision - TransPerfectionVision - TransPerfection “Perfecting the Business of Global Transportation”“Perfecting the Business of Global Transportation”

Global Transportation & Logistics Outsourcing

Establishing Cutting-Edge

Transportation Management

Systems

Providing the Right Service at the Right Cost at the Right Time

Evolving aCulture of Controls

Ensuring Clean, Visible Data for

Value-Add Information

Investing in the Growth of our

People

Mission:Mission:Deliver a Supply Chain Advantage to Intel by:

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Supply Network Trends – Environmental ScanD.A.R.T. Board

Distribution

Availability

Regulations

Technology

DistributionDistribution Availability of Logistics SupplyAvailability of Logistics Supply

Regulatory RequirementsRegulatory Requirements

1.1. Air Freight Capacity:Air Freight Capacity: Capacity constraints impact delivery performance and drive costs up.

2.2. Fuel:Fuel: High fuel prices and lack of management strategies impact distribution decisions.

3.3. Ocean Port Congestion:Ocean Port Congestion: Increased ocean volumes causing long wait times at ocean ports (particularly in China, Japan & West Coast US).

1.1. Security:Security: Challenge network reliability and shipment integrity (e.g., TSA).

2.2. Customs:Customs: EM challenges & inspection of cargo on PAX.

3.3. Environmental and Packaging:Environmental and Packaging: Requirements becoming more strict

4.4. Trucking Regulations:Trucking Regulations: Affecting labor and profitability.

5.5. Lithium Ion Batteries:Lithium Ion Batteries: Restrictions could impact future shipments

1.1. RosettaNet:RosettaNet: Enable “plug-and-play” startups and improve data quality.

2.2. RFID: RFID: Offers benefits for operations management and security.

1.1. Globalization:Globalization: Growth in emerging markets challenges logistics capabilities, increases security risks, and drives up costs.

2.2. Inventory Management:Inventory Management: Increased requests for consignment, leaner inventory models, SKU proliferation.

3.3. Network Complexity:Network Complexity: Increased outsourced manufacturing, fragmentation of disti channel, direct- and drop-ship models, exponential lane pair growth.

TechnologyTechnology

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Business Trend Summary- More intense, not new….

Trend 1: Market and service requirements growing

Trend 2: Supply Chain complexity accelerating

Trend 3: Increased customer expectation:

responsiveness/expectations/power

Trend 4: Getting more difficult to manage affordability

Trend 5: Our growth is in emerging markets