Intel Corp on Thursday raised its annual sales outlook on booming demand for personal computers, but its second-quarter profit forecast fell short of analysts’ expectations as the company spends heavily to get its manufacturing operations back on track and catch up to rivals with faster chips.
The company also missed first-quarter expectations in its closely watched data center chip unit.
Intel fumbled new manufacturing technology in recent years, causing it to fall behind rivals such as Advanced Micro Devices Inc (AMD) and Nvidia Corp in the race to make faster, smaller chips.
Patrick Gelsinger, who returned to Intel as its chief executive earlier this year, said that the chipmaker has begun to resolve its manufacturing problems, and last month announced a major expansion plan to build new factories in the US and Europe.
Intel, which is one of the few remaining companies in the processor chip industry that designs and manufactures its own chips, has said it has been able to beat out rivals during a global chip shortage by operating its own factories.
However, the company said that shortfalls of other third-party components needed to build complete computers could hold back its sales this year.
Intel said that its PC chip business sales reached of US$10.6 billion in the first quarter, ahead of analysts’ expectations of US$10.17 billion, data from FactSet showed.
The company exceeded PC chip expectations in part because it was able to finish in its own factories organic substrates, which are materials used to package delicate silicon chips into tougher housings so they can tolerate being put onto circuit boards, Gelsinger said.
The changes helped Intel mitigate a global shortage of the substrate materials and “generate millions of units of more supply,” he said.
“We were able to satisfy our customer commitments, as we expect that we’ll be able to do through the rest of the year,” he said. “If we are able to gain more leverage in our supply chain, which we have lots of tools to go do, I expect we’ll both have beat our guidance for the year and gain more market share for the year.”
However, Angelo Zino, senior equity analyst at CFRA Research, said that he expects PC “momentum to wane,” as COVID-19 vaccines roll out around the world and workers return to offices.
Intel said it expects adjusted revenue and profit of US$72.5 billion and US$4.60 per share, above analysts’ estimates of US$72.32 billion and US$4.58 per share, according to Refinitiv data.
The chipmaker forecast second-quarter adjusted revenue and profit of US$17.8 billion and US$1.05 per share, with sales above analysts’ estimates of US$17.59 billion, but profit below estimates of US$1.09 per share, Refinitiv data showed.
Intel chief financial officer George Davis attributed the lower profit to the company investing to ramp up its new 10-nanometer and 7-nanonmeter process technologies.
However, Summit Insights Group senior research analyst Kinngai Chan (陳金蓋) said that Intel’s margins are taking a hit in part because it cannot raise prices for new products to recoup manufacturing costs as it did in the past, because rivals like AMD have more competitive products.
Intel’s data center chip business posted first-quarter sales of US$5.6 billion, below FactSet estimates of US$5.89 billion.
Intel said that adjusted sales and earnings for the first quarter ended March 27 were US$18.6 billion and US$1.39 per share, higher than analysts’ estimates of US$17.89 billion and US$1.15 per share, according to Refinitiv data.
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