Bob Swan, then Interim Chief Executive Officer and Chief Financial Officer of Intel Corp., reacts during the inauguration of the company’s research and development facility in Bengaluru, India, on November 15, 2018.
Samyukta Lakshmi | Bloomberg | Getty Images
Pat Gelsinger, Intel’s new CEO, said Thursday that the company’s troubled 7-nanometer chip manufacturing technique is on track to make chips sold in 2023.
However, he warned that Intel is likely to be outsourcing more and more chips to outside foundries.
The remarks came in a earnings call with analysts covering the quarter ended last December. It’s the last full quarter under CEO Bob Swan before Gelsinger takes over on February 15.
Intel stock closed 6.46% on Thursday after the chipmaker reported earnings and sales that exceeded investor expectations and its own forecast, driven by strong PC sales. However, details of Intel’s earnings were released on Financial Cables a few minutes before market close. After that, Intel gave up most of its profits.
Here’s how Intel did it:
- Earnings per share (EPS): Adjusted for $ 1.52 versus $ 1.10 expected based on refinitive consensus estimates.
- Revenue: $ 20 billion versus $ 17.49 billion expected by refinitive consensus estimates.
- forecast: Revenue for the first quarter of 2020 of $ 18.6 billion and earnings per share of $ 1.03.
“I am pleased with the progress made in the health and recovery of the 7 nanometer program,” said Gelsinger. “I am confident that the majority of our 2023 products will be manufactured in-house. Given the breadth of our portfolio, it is likely that we will expand the use of external foundries for certain technologies and products.”
Intel’s troubled 7-nanometer technology has weighed on the company as it struggled to match the advances made by Asian chipmakers in chip manufacturing. Intel has both designed and manufactured its processors in the past. Competitors like AMD today typically use outside foundries to manufacture their designs.
Intel’s latest chips use a 14-nanometer or 10-nanometer process, while competing chips made by outside foundries like TSMC and Samsung currently use a 5-nanometer process. A smaller process is better because more transistors can fit in the same chip, increasing performance and efficiency, and creating a superior processor.
In December, activist hedge fund Third Point and its CEO Dan Loeb said in a letter to Intel’s board that the lag behind competitors was a critical vulnerability. He said Intel has fallen behind Asian chip foundries and urged Intel’s board of directors to make various changes to the company, including considering whether to outsource chip production or divest parts of the business such as acquisitions.
Intel customers like Apple, Amazon, and Microsoft have developed their own processors or have signaled that they intend to.
In the quarter ended December, Intel announced that the strength of PC sales helped it exceed expectations. It has been said that 33% more PCs with Intel chips were sold than at the same time last year, especially laptops. PC sales have been strong over the past year as people who work from home or go to school try to update their computers.
Intel increased its cash dividend 5% to $ 1.39 per share. However, the forecasts for revenue, earnings per share and operating margin for the first quarter were all lower than last year.
Revenue for the Intel data center group, which sells chips to companies that operate servers, declined 16% year over year for the quarter ended December.
Mobileye, its self-driving auto technology subsidiary, posted a 39% increase in revenue for the quarter year over year, according to Intel. Mobileye is still a small part of Intel, however – it had sales of $ 967 million in 2020, while Intel’s PC group had sales of $ 40.1 billion over the year.
Gelsinger, who most recently was CEO of VMWare, has a technical background and started his career at Intel. He is expected to push Intel to become more competitive in terms of chip manufacturing. Intel announced that it began manufacturing 10-nanometer chips during the quarter and that production will continue to increase this quarter.