Intel cuts annual forecast as PC
After missing expectations for second-quarter earnings as demand for its chips used in personal computers cools, Intel Corp. lowered its yearly sales and profit forecasts on Thursday, sending shares down 10%.
The company also foresaw current-quarter results that would fall far short of forecasts, blaming execution problems and the “sudden and fast decrease” in economic activity.
People are spending less on PCs now than they did during lockdowns, when many purchased computers for work and school as they stayed at home during the pandemic. This is due to runaway inflation and the reopening of offices and schools.
Chipmakers are also under pressure from a wave of COVID restrictions in China, a major PC market, and the conflict in Ukraine, which has caused supply-chain bottlenecks and further depressed demand. The IT research group Gartner predicts a 9.5% decline in PC shipments worldwide this year.
According to Intel Chief Executive Pat Gelsinger, “the economic transition was harsher and generated not only consumption shifts in the marketplace but also major moves in the inventory position of important customers.”
The business changed dramatically as a result of those factors, and our execution wasn’t great.
In contrast to its earlier prediction of $76 billion, Intel now anticipates fiscal 2022 sales between $65 billion and $68 billion. In addition, it predicted an adjusted profit of $2.30 per share, a decrease from the previous prediction of $3.60 per share.
However, despite this more challenging time, Intel would not postpone its $20 billion investment for a new mega chip facility in Ohio, Gelsinger told Reuters. Gelsinger remarked, “You just don’t construct plants like this just on a couple of quarter cycles.” “I need the ability to grow into this potential as the semiconductor business doubles over the next ten years.”
While the most recent recession severely hurt Intel, its rivals fared far better. Samsung Electronics Co. Ltd. and Taiwan Semiconductor Manufacturing Co. Ltd., which, while issuing advisories.
In addition to raising its full-year sales forecast, TSMC predicted that current quarter sales, if achieved, could be its highest in the previous 10 quarters.
Intel said sales from Datacenter and AI Group (DCAI) fell 16 percent to $4.6 billion, coming in lower than analysts’ target of $6.46 billion, despite strong growth analysts expect for the overall datacenter market.
According to analyst Ryan Reith of market research firm IDC, “OEMs have halted orders for 2H22,” and “Intel is heavily dependent on the PC industry, as well as data centres.” Peers Samsung and TSMC have far more experience in the mobile, automotive, etc.
The sale of the chips that power desktops and laptops accounts for about half of Intel’s revenue. The company forecast current quarter revenue in the range of $15 billion to $16 billion, which is also less than the average estimate of $18.62 billion, per Refinitiv.
Sales at Intel’s Client Computing Group (CCG), which supplies PC manufacturers and is the company’s largest source of income, decreased 25% to $7.7 billion in the reported quarter. Global shipments, according to IT research company Gartner