Font size
Intel did not provide financial forecasting for the full year, as usual.
Alexander Koerner / Getty Images
In recent weeks, investors have been rewarded
Intel.
The company recently announced a new CEO and has attracted a powerful activist shareholder.
Now executives seem to have disappointed some who had become more positive about the company’s outlook. It said on Thursday that it would essentially double its strategy of producing chips in-house, rather than having another specialist make the semiconductors.
Intel (ticker: INTC) share fell 8.3% to $ 57.26 during Friday trading.
Beloved incoming CEO, Pat Gelsinger, did little to help the stock during a meeting with analysts and investors on Thursday. In his opening address, Gelsinger said that after reviewing Intel’s progress in perfecting next-generation manufacturing technology, he would remain determined to build the majority of the company’s chips under his own roof. But at the same time, he said that in order to meet its needs, the experienced chip maker should look outside and hire more companies to help.
“Based on the initial assessments, I am pleased with the progress made in health and recovery from the 7-nanometer program,” said Gelsinger. “I am confident that the majority of our products will be in-house produced by 2023. At the same time, given the breadth of our portfolio, it is likely that we will expand our use of external foundries for certain technologies and products. “
Investors wanted a clear decision on how Intel’s next generation chips will be produced, but they didn’t get one. There was also a lack of clarity about the profit outlook.
Intel has not released full-year financial forecasts, as the company usually does during its fourth-quarter phone calls, only telling investors it expected first-quarter non-GAAP earnings of $ 1.10 per share on a revenue of $ 17.5 billion. The number does not include the flash memory business, which Intel sold last year.
On the bright side, current CEO Bob Swan – to whom the board will show the door on Feb. 15 – explained that Intel’s engineers had essentially solved the yield issues Intel had with its so-called seven-nanometer manufacturing technology.
To increase chip processing power and remain competitive in the semiconductor industry, companies must constantly come up with new ways to shrink the transistor building blocks of chips and squeeze more of them onto a piece of silicon.
It is now an atomic level technical problem that makes chip manufacturing difficult, complex and expensive. And
Semiconductor manufacturing in Taiwan
(TSM), an Intel rival and frequent business partner, is very good at making chips.
Raymond James analyst Chris Caso nicely summed up the problem with Intel’s plan: “The problem with that strategy is that even if Intel runs successfully at 7nm, they are still a node behind TSMC. And we don’t think [Intel] can deliver leadership products without leadership in transistors because it has never been done before. That keeps [Intel] behind the industry for another four years. “
That Intel would continue to make its own chips sounded to Jefferies analyst Mark Lipacis as an announcement that it had again slipped on next-generation technology. Executives had previously told investors it plans to ship its next-gen processors by the end of 2022. Telling investors it would make its 2023 chips in-house would again suggest its products are delayed.
While the outlook for the first quarter looked bright, Intel’s delay in providing real clarity on its manufacturing strategy until later this year makes it difficult to recommend the stock, RBC Capital Markets analyst Mitch Steves wrote. He rates the stock as the equivalent of a sale and repeated that call due to the company’s lack of clarity about its future.
Intel’s stock is down nearly 10% over the past year, while the benchmark PHLX Semiconductor index is up 60%.
Write to Max A. Cherney at [email protected]