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How Intel builds diversity into its supply chain with $2.2 billion spend

Madeline Bennett Profile picture for user Madeline Bennett May 12, 2023
Summary:
A clear focus on diverse suppliers benefits communities, but also adds resilience and value for Intel.

diversity

One important but not often discussed facet of diversity, equality and inclusion (DEI) is the supply chain. Tech companies have a real opportunity to foster more diversity in the sector by prioritizing – or at the very least considering – suppliers from underrepresented groups.

Companies that increase partnerships and investment in companies run by minorities see improvements in their financials and for the communities around them. According to Hootology research, consumers who perceive a brand as committed to diversity are 3.5 times more likely to purchase the brand's products or services compared to those who do not. Meanwhile, spending $1 million with diverse suppliers can create as many as 10 new jobs, according to research from Proximo.

However, this is an area where most organizations and especially the tech industry is lagging. Fortune 100 businesses procure only 10% of their supplies and services from diverse suppliers, and much of this is directed toward small businesses, irrespective of whether they are owned by underrepresented groups.

And tech fares the worst of all the different industries, according to analysis by Oliver Wyman and Proximo, spending only 3-5% on diverse suppliers, compared to the 10-12% invested by the top-performing telecoms sector.

Bucking the trend

Intel is looking to buck this trend by setting itself some public and ambitious targets around supplier diversity. Back in 2020, the firm announced it would double its spending on diverse suppliers to $2 billion annually by 2030. To qualify as a diverse-owned business, it must be 51% owned and operated by a person in certain categories: women, minority, veteran/service disabled, LGBTQI and diverse-abled – just being a ‘small business’ doesn’t count. 

Intel also stipulates that its top-tier suppliers must spend at least 10% of what Intel pays them with diverse suppliers.

However, Intel has already surpassed some of its goals, according to its 2022-23 Corporate Responsibility Report, released this week. The firm spent $2.2 billion on diverse suppliers in 2022, reaching its $2 billion goal eight years early. The $2.2 billion represents almost 15 x the annual total when the firm launched its supplier diversity program in 2015.

Intel has also already met three other milestones: spend $500 million annually with women-owned suppliers outside the US by the end of 2025; $800 million annually with minority-owned suppliers globally by the end of 2023; including $250 million with US Black-owned suppliers.

Supplier diversity is a core part of Intel's broader Corporate Responsibility strategy, as Jackie Sturm, Corporate Vice President of Global Supply Chain Operations at the firm, explains:

Responsible, inclusive and sustainable business is good business. It provides significant value to our supply chain through greater competition and innovation. We empower our diverse suppliers which, in turn, creates a more inclusive and equitable supplier ecosystem, provides opportunities for individuals from historically underserved groups, and creates stronger, more vibrant communities. By working with diverse-owned suppliers, we increase our resilience and generate new value within our global supply chain and the communities in which we operate.”

By way of example, Sturm recounts how when larger direct suppliers couldn’t deliver a critical component last year, a woman-owned supplier filled the gap to help Intel fulfil a customer commitment. 

Based on data from its supplier report cards, four out of every five diverse suppliers Intel is working with are exceeding the performance of their category competitors, and the rest are on par. Sturm adds:

This statistic further reinforces what we already know anecdotally: given the opportunity, diverse suppliers can deliver value and strengthen our supply base.

The future

Intel has also been working with its direct suppliers and others in the industry to expand supplier diversity programs throughout the semiconductor ecosystem. The total addressable market of chips is projected to approach $1 trillion by the end of the decade, offering huge potential for diverse suppliers and their communities. 

Now Intel has surpassed the 2030 target, the firm is working to set a new goal against a renewed timeline. In the meantime, it will continue to focus on maintaining progress and providing opportunities for diverse suppliers and subcontractors.

 The firm will continue to include internal diverse spending goals as part of its annual employee bonus structure, while its procurement teams will also carry on including at least one diverse-owned company in the bidding process for every new sourcing opportunity. 

For larger contracts where diverse supplier options aren’t available at the scale or level of expertise required, diverse spending expectations will continue to be included in the negotiations. This can sometimes result in a better outcome than expected or required: the first general contractor for Intel’s $20 billion-plus project to build two new chip factories in Ohio committed to 20% diverse spending, rather than the 10% outlined in Intel’s Supplier Diversity Policy. Sturm adds:

There is always more work to be done to ensure that we make a positive difference in our supply chain and our communities. As we have since 2015, we will continue to encourage and influence the semiconductor ecosystem to join us in having a more inclusive supply chain.

My take

The fact that technology companies perform the worst of all industries when it comes to spending on diverse suppliers is at odds with the amount of attention those same companies give – or at least say they give – to DEI strategies. 

Intel’s efforts to highlight supplier diversity as a key aspect of DEI is commendable, as is the fact the company is backing this up with a hefty increase in spending. This is especially so with a potential chip market value of $1 trillion by 2030 – far too large a pot of cash to just go to majority players. 

It would be good to hear more about similar supplier diversity efforts in other areas of technology, and for more companies to set and share goals of their own.

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