Intel Corp shares on Thursday slumped after a surprise drop in data center sales and a tepid forecast added to concern that the company is losing its lead in processors.
The data center business, a major source of Intel profit, suffered a 10 percent decline in third-quarter revenue compared with a year earlier after a weak economy hurt sales to large companies and governments.
Sales to cloud computing providers would slow in the fourth quarter, Intel said.
Photo: AFP
Falling prices and narrowing profit margins reinforced concern that Intel is losing its lead in chip manufacturing technology, exposing the company to the strongest competition it has faced in more than a decade.
During a conference call, Intel chief executive Bob Swan said that he is still deciding how much production to outsource.
Executives also said that the COVID-19 pandemic had increased demand for cheaper chips and predicted those headwinds would pass.
Loop Capital Markets analyst Cody Acree said that he did not accept Intel’s use of the pandemic as a reason for the quarterly revenue decline, citing a boost in demand for PCs during the past few months.
“I didn’t hear any answers to the biggest questions,” Acree said.
Intel shares fell about 10 percent in extended trading on Thursday.
The company projected that fourth-quarter sales would decline at their worse rate in more than a decade. Gross margin, a key indicator of profitability, would end the year below 60 percent for the first time in seven years, it said.
The company experienced a very different third quarter compared with its expectations entering the period, Intel chief financial officer George Davis said.
“We saw a big change in our data center demand profile, with enterprise and government dropping 47 percent year-over-year after being up 30 percent for two consecutive quarters.” Davis said.
Average selling prices for Intel’s data center chips dropped 15 percent from a year earlier, suggesting competition is rising in a lucrative market that the company has long dominated.
Intel is in the midst of its worst crisis in at least a decade.
The company has been the largest chipmaker for most of the past 30 years by combining the best designs with cutting-edge factories. Most other US chip companies have shut, or sold plants and tapped other firms to make the components. Intel held out, arguing that doing both improved each side of its operation and created better semiconductors.
That strategy is now being questioned.
Revenue in the fourth quarter would be about US$17.4 billion, the Santa Clara, California-based company said in a statement.
That was in line with the average analyst prediction, but it would mean sales falling 14 percent year-on-year.
Swan in July announced delays to Intel’s 7-nanometer production process. Production techniques play a crucial role in the performance of processors and what it costs to make them.
Intel had led the US$400 billion chip industry in that area for three decades. Now rivals such as Advanced Micro Devices Inc can get products made with more advanced techniques by Taiwan Semiconductor Manufacturing Co (台積電).
The firm said that it would decide early next year whether to push forward with in-house 7-nanometer production or outsource it.
Swan said that it would probably be a mixture of the two.
Economics, timing and the performance of chips would determine the decision, the company said.
Third-quarter earnings per share, excluding some items, were US$1.11, while revenue was US$18.3 billion, down 4 percent year-on-year.
Analysts were looking for earnings per share of US$1.10 on revenue of US$18.2 billion.
SEMICONDUCTORS: The German laser and plasma generator company will expand its local services as its specialized offerings support Taiwan’s semiconductor industries Trumpf SE + Co KG, a global leader in supplying laser technology and plasma generators used in chip production, is expanding its investments in Taiwan in an effort to deeply integrate into the global semiconductor supply chain in the pursuit of growth. The company, headquartered in Ditzingen, Germany, has invested significantly in a newly inaugurated regional technical center for plasma generators in Taoyuan, its latest expansion in Taiwan after being engaged in various industries for more than 25 years. The center, the first of its kind Trumpf built outside Germany, aims to serve customers from Taiwan, Japan, Southeast Asia and South Korea,
POWERING UP: PSUs for AI servers made up about 50% of Delta’s total server PSU revenue during the first three quarters of last year, the company said Power supply and electronic components maker Delta Electronics Inc (台達電) reported record-high revenue of NT$161.61 billion (US$5.11 billion) for last quarter and said it remains positive about this quarter. Last quarter’s figure was up 7.6 percent from the previous quarter and 41.51 percent higher than a year earlier, and largely in line with Yuanta Securities Investment Consulting Co’s (元大投顧) forecast of NT$160 billion. Delta’s annual revenue last year rose 31.76 percent year-on-year to NT$554.89 billion, also a record high for the company. Its strong performance reflected continued demand for high-performance power solutions and advanced liquid-cooling products used in artificial intelligence (AI) data centers,
Gasoline and diesel prices at domestic fuel stations are to fall NT$0.2 per liter this week, down for a second consecutive week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) announced yesterday. Effective today, gasoline prices at CPC and Formosa stations are to drop to NT$26.4, NT$27.9 and NT$29.9 per liter for 92, 95 and 98-octane unleaded gasoline respectively, the companies said in separate statements. The price of premium diesel is to fall to NT$24.8 per liter at CPC stations and NT$24.6 at Formosa pumps, they said. The price adjustments came even as international crude oil prices rose last week, as traders
SIZE MATTERS: TSMC started phasing out 8-inch wafer production last year, while Samsung is more aggressively retiring 8-inch capacity, TrendForce said Chipmakers are expected to raise prices of 8-inch wafers by up to 20 percent this year on concern over supply constraints as major contract chipmakers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Samsung Electronics Co gradually retire less advanced wafer capacity, TrendForce Corp (集邦科技) said yesterday. It is the first significant across-the-board price hike since a global semiconductor correction in 2023, the Taipei-based market researcher said in a report. Global 8-inch wafer capacity slid 0.3 percent year-on-year last year, although 8-inch wafer prices still hovered at relatively stable levels throughout the year, TrendForce said. The downward trend is expected to continue this year,
RSS