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Intel did not provide financial forecasts for the full year, as is usually the case.
Alexander Koerner / Getty Images
In recent weeks, investors have rewarded
Intel.
The company recently announced a new CEO and attracted a strong activist shareholder.
Now, executives seem to have disappointed some who had become more positive about the company’s outlook. He said on Thursday that he would essentially double with his chip-making strategy inside, rather than having another specialist make the semiconductors.
Shares of Intel (ticker: INTC) fell 8.3% to $ 57.26 on Friday.
Pat Gelsinger, the CEO received, did little to help on Thursday with a call with analysts and investors. In his opening remarks, Gelsinger said that after analyzing Intel’s progress in refining its next-generation manufacturing technology, it will remain committed to building most of the company’s chips under its own roof. But at the same time, he said that in order to meet his needs, the veteran chip maker should look out and hire more companies to help.
“Based on initial analyzes, I am pleased with the progress made in health and the recovery of the 7-nanometer program,” said Gelsinger. “I am confident that most of our 2023 products will be manufactured in-house. At the same time, given the size of our portfolio, we are likely to expand our use of external foundries for certain technologies and products. ”
Investors wanted a clear decision on how to produce next-generation Intel chips, but did not receive one. There was also a lack of clarity on the profit outlook.
Intel did not issue financial forecasts for the full year, as the company typically does on its fourth-quarter calls, telling investors only to expect non-GAAP earnings in the first quarter of $ 1.10 a share on sales of 17 , $ 5 billion. The number excludes flash memory activity, which Intel sold last year.
On the plus side, current CEO Bob Swan – to whom the board points the door on February 15 – explained that Intel engineers have essentially solved the efficiency problems Intel faces with its so-called seven-nanometer manufacturing technology.
In order to increase the processing power of chips and remain competitive in the semiconductor industry, companies must continually invent new ways to shrink the building blocks of transistor chips and tighten them more on a piece of silicon.
It is now a problem of atomic engineering, which makes the manufacture of chips difficult, complex and expensive. And
Taiwan Semiconductor Manufacturing
(TSM), an Intel rival and frequent business partner, is very good at making chips.
Raymond James analyst Chris Caso clearly summed up the issue of Intel’s plan: “The problem with this strategy is that even if Intel runs successfully at 7 nm, they are still a node behind TSMC. And we don’t think [Intel] can deliver unmanned driving products in transistors because it has never been done before. That keeps it [Intel] behind the industry for another four years. ”
That Intel will continue to produce its own chips, it seemed to Jefferies analyst Mark Lipacis as an announcement that it has given up next-generation technology again. Executives have previously told investors that they plan to deliver state-of-the-art processors by the end of 2022. Telling investors that they will produce their chips in 2023 would again suggest that its products are delayed.
While first-quarter guidance looked good, Intel’s delay in providing real clarity on its manufacturing strategy until later this year makes the shares difficult to recommend, wrote Mitch Steves, an analyst at RBC Capital Markets. He assessed the stock as the equivalent of a sale and reiterated the call due to the company’s lack of clarity as to its future.
Intel shares have retreated by almost 10% in the last year, as the PHLX Semiconductor benchmark rose 60%.
Write to Max A. Cherney at [email protected]