
Intel Corp’s future is looking a bit grim.
The chipmaker posted worse-than-expected sales results with adjusted revenue of $18.1 billion in the quarter ended in September, up 5% compared with the prior year, and below the $18.24 billion median estimate of analysts surveyed by Bloomberg. While earnings for the quarter came in above estimates, that was overshadowed by a disappointing outlook for the current quarter. After the results, Intel shares fell 9%.
Investors are right to be worried over the company’s fundamental predicament. The reality is the chipmaker’s problems are only going to get more challenging. In a robust industry environment where most of its peers are thriving, Intel is now projecting roughly flat growth for 2021.
In contrast, Advanced Micro Devices Inc and Nvidia Corp, for example, are expected to grow sales by more than 50% this year.
Some of Intel’s immediate troubles stem from the supply chain holdups that have slowed production of computers. But Intel faces a bigger problem: Its lineup isn’t competitive. Over the last several years, the company had repeated delays in moving to the latest chip manufacturing technologies. That has allowed Taiwan Semiconductor Manufacturing to surpass the company in its capability to fabricate chips at more advanced processes, enabling the Asia-based foundry’s clients — including AMD and Apple Inc — to design higher-performing, more power-efficient chips.
Intel is getting squeezed on multiple fronts. Take the high-profit-margin data center market, where it sells server chips to cloud-computing vendors and enterprises. According to Mercury Research, Intel lost about four percentage points of share to AMD in the server processor market for the second quarter, compared with the prior year. That trend is likely to accelerate, with third-party reviewers confirming AMD’s EPYC processor’s dramatic performance advantage over Intel’s products.
Then there is the PC business. This week, Apple Inc announced it will replace Intel chips in its high-end MacBook Pro laptops with the latest versions of its own in-house-designed processors. The new M1 Pro and M1 Max chips are based on the same Arm Ltd chip-architecture technology that powers the iPhone.
—Bloomberg