Intel's new CEO says troubled chip project is recovering, may still outsource some manufacturing
Pat Gelsinger, Intel's incoming CEO, said on Thursday that the company's troubled 7-nanometer chip manufacturing technique is on track to be used to make chips sold in 2023.
However, he warned that Intel will still likely outsource an increasing amount of chip manufacturing to external foundries.
The remarks came in an earnings call with analysts covering the quarter ending last December. It's the last full quarter under CEO Bob Swan before Gelsinger takes over on February 15.
Intel stock closed up 6.46% on Thursday after the chipmaker reported earnings and revenue that exceeded investor expectations and its own forecast, driven by strong PC sales. Details of Intel's earnings became available on financial wires minutes before the markets closed, however, after which Intel gave up most of its gains.
Here's how Intel did:
- Earnings per share (EPS): $1.52, adjusted, vs $1.10 expected by Refinitiv consensus estimates.
- Revenue: $20 billion, vs $17.49 billion expected by Refinitiv consensus estimates.
- Forecast: Q1 2020 revenue of $18.6 billion and EPS of $1.03.
"I am pleased with the progress made on the health and recovery of the 7-nanometer program," Gelsinger said. "I am confident that the majority of our 2023 products will be manufactured internally. At the same time, given the breadth of our portfolio, it's likely that we will expand our use of external foundries for certain technologies and products."
Intel's troubled 7-nanometer technology has weighed on the company as it has struggled to match Asian chipmakers' advances in chip manufacturing. Intel has historically both designed and manufactured its processors. Competitors like AMD now typically contract with external foundries to manufacture their design.
Intel's latest chips use a 14-nanometer or 10-nanometer process while competitor chips manufactured by external foundries such as TSMC and Samsung are currently using a 5-nanometer process. A smaller process is better because more transistors can fit into the same chip, boosting power and efficiency and producing a superior processor.
In December, activist hedge fund Third Point and its CEO Dan Loeb said the 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 several changes to the company, including considering whether to outsource chip production or divesting parts of the business, such as acquisitions.
Intel customers such as Apple, Amazon, and Microsoft have developed their ownprocessors, or have signaled they intend to do so.
In the quarter ending in December, Intel said strength in PC sales helped it exceed its own expectations. It said that 33% more PCs with Intel chips were sold than during the same time last year, especially laptops. PC sales have been strong over the past year as people working or attending school from home look to upgrade their computers.
Intel increased its cash dividend by 5% to $1.39 per share. However, its forecasts for revenue, EPS, and operating margin for Q1 were all down year-over-year.
Sales for Intel's data center group, which sells chips to enterprises that run servers, were down 16% in the quarter ending in December compared to a year ago.
Intel said that Mobileye, its subsidiary working on self-driving car technology, saw sales rise 39% during the quarter compared to the same time last year. But Mobileye is still a small part of Intel — in 2020 it reported $967 million in sales, versus Intel's PC group, which reported $40.1 billion in sales during the year.
Gelsinger, who was most recently the CEO of VMWare, has a technical background and started his career at Intel. He's expected to push Intel to become more competitive in terms of chip manufacturing. Intel said that it had started production of 10 nanometer chips during the quarter, and that it will ramp up manufacturing more this quarter.
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Intel Reports Q4 2020 Earnings: 2020 Delivers A Profitable Pandemic
Earnings season is once more upon us, and once again leading the charge is Intel, who this afternoon reported their Q4’2020 and full-year 2020 financial results. The 800lb gorilla of the PC world has seen some unexpectedly strong quarters in 2020 following the coronavirus outbreak, and despite all of the uncertainty that entails, it’s ultimately played out in Intel’s favor. As a result, they’re closing the book on yet another record year, making for their fifth in a row.
Starting with quarterly results, for the fourth quarter of 2020, Intel reported $20.0B in revenue, which is a drop of $0.2B over the year-ago quarter. Intel saw a very good Q4 a year ago, and while Q4’20 is once again their strongest quarter of the year, Intel’s momentum as a whole is starting to back off on a quarterly basis. More significantly, Intel’s net income has dropped 15% YoY, with Intel booking $5.9B there.
Driving this drop – besides the ongoing market distortions caused by the coronavirus pandemic – is a combination of softer gross margins, increased R&D spending, and increased taxes. Intel’s famous gross margin remains below their historical 60% benchmark, coming in at 56.8% for the quarter as Intel continues to ramp up their 10nm capacity. Meanwhile Intel’s tax rate has shifted significantly from 14.4% to 21.8%, eating into the company’s overall net income. Still, at $5.9B for the quarter, Intel is hardly one to complain.
|Intel Q4 2020 Financial Results (GAAP)|
|Gross Margin||56.8%||53.1%||58.8%||+3.7 ppt||-2 ppt|
|Client Computing Group||$10.9B||$9.8B||$10.0B||+11%||+9%|
|Data Center Group||$6.1B||$5.9B||$7.2B||+3%||-16%|
|Internet of Things Group||$777M||$677M||$1.16B||+15%||-16%|
|Non-Volatile Memory SG||$1.2B||$1.2B||$1.2B||Flat||-1%|
|Programmable Solutions Group||$422M||$411M||$505M||+3%||-16%|
Breaking things down on a group basis, many of Intel’s internal reporting groups have shrunk over the year-ago quarter, buoyed by a handful of other groups. Data center revenue was down 16% to $6.1B, with both platform volumes and ASPs dropping versus the year-ago quarter. Intel cites the competitive marketplace and “cloud digestion cycle” for the difference, though Ice Lake Server only now shipping probably doesn’t help things.
The story is similar for Intel’s IoT, memory, and programmable solutions (FPGA) groups, all of which are down versus Q4’19. Reasons there vary from lower demand for ioT and programmable hardware, to lower ASPs on memory.
The big winner for the quarter is once again Intel’s client computing group, which was up 9% year-over-year to $10.9B of revenue for the quarter. Despite Intel’s efforts to pivot to being a data-centric company, the manufacturer’s client products remain the single largest piece of the company, so results here can make or break a quarter. In this case sheer demand for PC hardware in the face of the pandemic has driven revenue to new highs, with laptop volumes up 30% over last year. This was more than enough to offset both the drop in desktop sales – down 6% year-over-year – and a drop in laptop ASPs as consumer demand has shifted to Chromebooks and other lower-end hardware.
Full Year 2020
Shifting over to full year results, despite the initial uncertainty that came with the coronavirus outbreak, Intel ended 2020 beating expectations and setting revenue records for the fifth year in a row. Overall the company booked $77.9B in revenue for the year, 8% more than 2019. Intel’s overall net income didn’t get the same kind of kick – dogged by issues similar to their Q4 earnings – but the company is still going out on $20.9B in net income for the year, a 1% drop from 2019.
|Intel FY'2020 Financial Results (GAAP)|
|FY 2020||FY 2019||FY 2018||Y/Y|
|Gross Margin||56.0%||58.6%||60.2%||-2.5 ppt|
|Client Computing Group||$40.1B||$37.1B||$37.0B||+8%|
|Data Center Group||$26.1B||$23.5B||$23.0B||+11%|
|Internet of Things Group||$3.0B||$3.8B||$3.5B||-21%|
|Non-Volatile Memory SG||$5.4B||$4.4B||$4.3B||+23%|
|Programmable Solutions Group||$1.9B||$2.0B||$2.1B||-7%|
Gross margins for the entire year were 56%, reflecting the cost of Intel’s 10nm ramp-up and other fab matters. This was down 2.5 percentage points from 2019.
Looking at Intel’s individual business groups, for the year both the client and data center groups did very well for themselves. Client revenue was up 8% to $40.1B, coming in on the back of higher laptop sales. And that growth really is all from laptops; desktop revenue was down for the year, and even “adjacencies” (Wi-Fi adapters and the like) were down a bit versus 2019.
Meanwhile data center revenue was up 11% to $26.1B, with Intel coincidentally reporting that they shipped 11% more data center chips than in 2019. On the whole, data center growth was driven by cloud and communication service providers, both of whom ramped up their hardware purchases to meet service demands during the pandemic, while enterprise and government sales dipped on the year. Meanwhile it’s interesting to note that on both a quarterly and yearly basis, Intel’s ASPs for the data center group are down; despite the volume, they face an increasing amount of competition.
2020 was also a good year for Intel’s Mobileye and non-volatile storage groups. The automotive segment of the company continues to grow year-over-year (even with the pandemic), adding another 10% to its revenues for 2020. Meanwhile Intel’s storage business set a new record for revenue, growing on the backs of higher bit shipments as well as product launches like Intel’s “Crow Pass” 3rd generation Optane products for enterprise use.
Otherwise the laggards for the year were Intel’s ioT group and programmable solutions group. The IoT group has taken the pandemic on the chin, as IoT device sales have been soft. Meanwhile programmable solutions has been pinched by carriers’ move to 5G and overall declining revenues.
Though we tend not to focus too much on Intel’s future earnings forecasts, their predictions for Q1’2021 warrant a quick look. After 5 years of record revenues, Intel is likely to be facing some tougher years ahead, and their projections reflect this. For Q1 the company expects revenue to drop 12% versus Q1’2020. Even excluding Intel’s NAND memory business, which is being sold off to SK Hynix, and Intel is still looking at a 6% revenue drop on a yearly basis. In particular, the company expects its revenues from its data-centric businesses to drop 15%, leaving client revenue to hold the line.
The good news for Intel is that their next generation of products are close-to or have begun shipping. Rocket Lake, Intel’s upcoming desktop CPU platform, is shipping for revenue this quarter. So are Ice Lake Xeons. And the products to come after those – Alder Lake for clients and Sapphire Rapids for servers – are already both sampling to customers.
The catch, however, is that Intel is still in the midst of their fab woes. Though the company is making progress on their 7nm process, all guidance from Intel right now suggests that this process won’t be ready at scale until 2023 – two years from now. In the interim Intel will be rolling out more 10nm SuperFin capacity and their Enhanced SuperFin will follow, but Intel won’t be making a big leap forward in fab tech for their products for the next couple of years. At least, not with internally-built chips.
Previously the company had stated that they would discuss outsourcing plans as part of today’s earnings release. But following the surprise hire of Intel veteran Pat Gelsinger to be the company’s new CEO, Intel has put a pause on that announcement. The company is still evaluating the use of external fabs and will have something to announce in the future, but just not today.
In the meantime, it sounds like Gelsinger has hit the ground running. To quote our own Dr. Ian Cutress “[It] sounds like Pat already has his foot in the door. Currently in a state of transition. Feb 15th is more the date of a complete Bob [Swan] exit.” Similarly, in Intel’s earnings call today, Gelsinger commented that he’s been examining Intel’s progress on 7nm manufacturing, and that he’s “pleased” with the progress made thus far. Consequently, with 2023 shaping up to be Intel’s big year for 7nm, Gelsinger also said that he expects the majority of Intel’s 2023 products to be fabbed internally.
Source: IntelSours: https://www.anandtech.com/show/16440/intel-reports-q4-2020-earnings-2020-delivers-a-rather-profitable-pandemic
SANTA CLARA, Calif., July 23, 2021 — Intel Corporation reported second-quarter 2021 financial results.
“There’s never been a more exciting time to be in the semiconductor industry. The digitization of everything continues to accelerate, creating a vast growth opportunity for us and our customers across core and emerging business areas. With our scale and renewed focus on both innovation and execution, we are uniquely positioned to capitalize on this opportunity, which I believe is merely the beginning of what will be a decade of sustained growth across the industry,” said Pat Gelsinger, Intel CEO. “Our second-quarter results show that our momentum is building, our execution is improving, and customers continue to choose us for leadership products.”
Q2 2021 Financial Highlights
- Second-quarter GAAP revenue of $19.6 billion, flat year over year (YoY), and non-GAAP revenue of $18.5 billion, up 2% YoY, which exceeded April guidance by $700 million.
- Second-quarter GAAP earnings-per-share (EPS) was $1.24; non-GAAP EPS was $1.28, which exceeded April guidance by $0.23.
- Exceeded Q2 guidance for revenue, EPS, and gross margin; record Q2 revenue in PC and Mobileye businesses.
- Raising full-year 2021 guidance. Now expecting GAAP revenue of $77.6 billion and non-GAAP revenue of $73.5 billion; GAAP EPS of $4.09 and non-GAAP EPS of $4.80.1
|Q2 2021||Q2 2020||vs. Q2 2020||Q2 2021||Q2 2020||vs. Q2 2020|
|Revenue ($B)||$19.6||$19.7||flat||$18.5||$18.2||up 2%|
|Gross Margin||57.1%||53.3%||up 3.8 ppt||59.2%||56.3%||up 2.9 ppt|
|R&D and MG&A ($B)||$5.3||$4.8||up 11%||$5.1||$4.6||up 11%|
|Operating Margin||28.3%||28.9%||down 0.6 ppt||31.6%||31.0%||up 0.6 ppt|
|Tax Rate||11.9%||14.0%||down 2.1 ppt||11.9%||14.1%||down 2.3 ppt|
|Net Income ($B)||$5.1||$5.1||down 1%||$5.2||$4.9||up 6%|
|Earnings Per Share||$1.24||$1.19||up 4%||$1.28||$1.14||up 12%|
In the second quarter, the company generated $8.7 billion in cash from operations and paid dividends of $1.4 billion.
Business Unit Summary
|Key Business Unit Revenue and Trends||Q2 2021||vs. Q2 2020|
|Internet of Things|
Second-quarter revenue exceeded April guidance led by continued strength in Intel’s Client Computing Group (CCG) and strong recovery in both Intel’s Internet of Things Group (IOTG) and the Enterprise portion of its Data Center Group (DCG).
The PC and Mobileye businesses both achieved record Q2 revenue. In the second quarter, PC platform volumes were up 33 percent YoY and Mobileye closed 10 additional design wins for more than 16 million total lifetime units.
▪ Announced a $3.5 billion investment to equip Intel’s New Mexico operations for the manufacturing of advanced semiconductor packaging technologies, including Foveros.
▪ Launched 12 new processors for client, including 11th Gen Intel Core with Intel Iris Xe graphics and Intel Xeon W-11000 series processors with more than 300 designs expected this year.
▪ Announced partnership with Microsoft including Intel Bridge Technology to deliver better mobile experiences on Windows-powered PCs.
▪ Leading cloud service providers, including Alibaba, Baidu, Microsoft, and Oracle are offering services based on the latest 3rd Gen Intel Xeon Scalable (“Ice Lake”) processors.
▪ Unveiled the Intel Network Platform and expanded networking leadership product portfolio with new FPGA, software, and Ethernet solutions.
▪ Announced partnership with Ericsson to expand cloud radio access network to increase 5G performance.
▪ Mobileye and ZF were selected by Toyota Motor Corp to develop advanced driver assistance systems.
▪ Announced Mobileye as the only company holding an autonomous vehicle testing permit in New York.
▪ Announced new organizational changes and welcomed renowned technologists to strengthen execution and innovation in critical business areas.
As part of its IDM 2.0 strategy, Intel is accelerating its annual cadence of innovation with new advancements in semiconductor process and packaging. Join the public webcast at newsroom.intel.com at 2 p.m. PDT on Monday, July 26, for more information on Intel’s process and packaging roadmaps.
Additional information regarding Intel’s results can be found in the Q2’21 Earnings Presentation available at:
Intel’s guidance for the third quarter and full year includes both GAAP and non-GAAP estimates. Our Non-GAAP measures exclude the NAND memory business, which is subject to a previously-announced pending sale, as well as certain other items. Reconciliations between GAAP and non-GAAP financial measures are included below. Intel’s guidance includes a one-time tax benefit to EPS of approximately $0.10 in Q3.
|Revenue||$19.1 billion||$18.2 billion|
|Earnings per share||$1.08||$1.10|
|Revenue||$77.6 billion||$73.5 billion|
|Earnings per share||$4.09||$4.80|
|Full-year capital spending||$19.0-20.0 billion||$19.0-20.0 billion^|
|Free cash flow||N/A||$11.0 billion|
Actual results may differ materially from Intel’s Business Outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.
Consolidated Condensed Statements of Income and Other Information
|Three Months Ended||Six Months Ended|
|(In Millions, Except Per Share Amounts; unaudited)||Jun 26, 2021||Jun 27, 2020||Jun 26, 2021||Jun 27, 2020|
|Cost of sales||8,425||9,221||17,244||17,033|
|Research and development||3,715||3,354||7,338||6,629|
|Marketing, general and administrative||1,599||1,447||2,927||2,988|
|Restructuring and other charges||346||9||2,555||171|
|Gains (losses) on equity investments, net||295||267||663||156|
|Interest and other, net||(96)||(29)||(252)||(342)|
|Income before taxes||5,745||5,935||9,651||12,549|
|Provision for taxes||684||830||1,229||1,783|
|Earnings per share—basic||$||1.25||$||1.20||$||2.08||$||2.53|
|Earnings per share—diluted||$||1.24||$||1.19||$||2.06||$||2.50|
|Weighted average shares of common stock outstanding:|
|Three Months Ended|
|(In Millions)||Jun 26, 2021||Jun 27, 2020|
|Earnings per share of common stock information:|
|Weighted average shares of common stock outstanding—basic||4,049||4,246|
|Dilutive effect of employee equity incentive plans||35||38|
|Weighted average shares of common stock outstanding—diluted||4,084||4,284|
|Cumulative shares repurchased (in billions)||5.8||5.5|
|Remaining dollars authorized for buyback (in billions)||$||7.2||$||19.7|
|Employees (in thousands)||113.7||110.8|
Consolidated Condensed Balance Sheets
|(In Millions)||Jun 26, 2021||Dec 26, 2020|
|Cash and cash equivalents||$||4,746||$||5,865|
|Work in process||5,968||5,693|
|Assets held for sale||5,817||5,400|
|Other current assets||2,421||2,745|
|Total current assets||49,372||47,249|
|Property, plant and equipment, net||58,166||56,584|
|Other long-term investments||1,262||2,192|
|Identified intangible assets, net||8,018||9,026|
|Other long-term assets||5,356||5,917|
|Accrued compensation and benefits||3,176||3,999|
|Other accrued liabilities||12,048||12,670|
|Total current liabilities||24,836||24,754|
|Income taxes payable||4,172||4,578|
|Deferred income taxes||3,271||3,843|
|Other long-term liabilities||5,329||3,614|
|Common stock and capital in excess of par value, 4,057 issued and outstanding (4,062 issued and outstanding as of December 26, 2020)||26,655||25,556|
|Accumulated other comprehensive income (loss)||(1,095)||(751)|
|Total stockholders’ equity||85,207||81,038|
|Total liabilities and stockholders’ equity||$||154,597||$||153,091|
Consolidated Condensed Statements of Cash Flows
|Six Months Ended|
|(In Millions; unaudited)||Jun 26, 2021||Jun 27, 2020|
|Cash and cash equivalents, beginning of period||$||5,865||$||4,194|
|Cash flows provided by (used for) operating activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Restructuring and other charges||2,555||171|
|Amortization of intangibles||897||865|
|(Gains) losses on equity investments, net||(555)||(92)|
|Changes in assets and liabilities:|
|Accrued compensation and benefits||(836)||(1,025)|
|Prepaid supply agreements||(1,571)||(161)|
|Other assets and liabilities||(259)||(762)|
|Net cash provided by operating activities||14,294||17,315|
|Cash flows provided by (used for) investing activities:|
|Additions to property, plant and equipment||(7,574)||(6,676)|
|Additions to held for sale NAND property, plant and equipment||(682)||—|
|Purchases of available-for-sale debt investments||(2,000)||(4,558)|
|Maturities and sales of available-for-sale debt investments||2,126||1,303|
|Purchases of trading assets||(14,637)||(11,429)|
|Maturities and sales of trading assets||12,936||7,430|
|Net cash used for investing activities||(9,451)||(14,346)|
|Cash flows provided by (used for) financing activities:|
|Issuance of long-term debt, net of issuance costs||—||10,247|
|Repayment of debt and debt conversion||(500)||(2,775)|
|Proceeds from sales of common stock through employee equity incentive plans||589||512|
|Repurchase of common stock||(2,415)||(4,229)|
|Payment of dividends to stockholders||(2,821)||(2,811)|
|Net cash provided by (used for) financing activities||(5,962)||1,573|
|Net increase (decrease) in cash and cash equivalents||(1,119)||4,542|
|Cash and cash equivalents, end of period||$||4,746||$||8,736|
Intel (Nasdaq: INTC) is an industry leader, creating world-changing technology that enables global progress and enriches lives. Inspired by Moore’s Law, we continuously work to advance the design and manufacturing of semiconductors to help address our customers’ greatest challenges. By embedding intelligence in the cloud, network, edge and every kind of computing device, we unleash the potential of data to transform business and society for the better. To learn more about Intel’s innovations, go to intel.com.
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2020 intel earnings
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