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Intel did not offer financial forecasts for the entire year, as it usually does.
Alexander Koerner / Getty Images
In recent weeks, investors have rewarded
Intel.
The company recently announced a new chief executive and attracted a powerful activist shareholder.
Now, executives seem to have disappointed some who have become more positive about the company’s prospects. She said on Thursday that she would basically double her strategy of making chips internally, instead of having another specialist to make the semiconductors.
Intel shares (ticker: INTC) plunged 8.3% to $ 57.26 in Friday’s trading.
The much-loved incoming CEO, Pat Gelsinger, did little to help the shares in a conference call with analysts and investors on Thursday. In his opening comments, Gelsinger said that after reviewing Intel’s progress in improving its next-generation manufacturing technology, it would remain committed to building most of the company’s chips under its own roof. But at the same time, he said that to meet his needs, the veteran chip maker would have to look outside and hire more companies to help.
“Based on the initial reviews, I am satisfied with the progress made in the health and 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 breadth 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 Intel’s next-generation chips will be produced, but failed. There was also a lack of clarity about profit prospects.
Intel did not release financial forecasts for the entire year, as the company usually does on its fourth quarter calls, only informing investors that it expected $ 1.10 per share non-GAAP earnings on $ 17.5 billion in sales . The figure excludes the flash memory business, which Intel sold last year.
On the positive side, current CEO Bob Swan – whom the board is showing the door to on February 15 – explained that Intel engineers basically solved the performance problems that Intel has been facing with its so-called seven-nanometer manufacturing technology.
To increase the processing power of the chips and remain competitive in the semiconductor industry, companies must continually invent new ways to shrink the building blocks of the chip’s transistors and compress more of them into a piece of silicon.
It is now an atomic-level engineering problem, which makes chip making difficult, complex and expensive. AND
Semiconductor manufacturing in Taiwan
(TSM), an Intel rival and frequent business partner, is very good at making chips.
Chris Caso, an analyst at Raymond James, summed up the problem with Intel’s plan in an organized way: “The problem with this strategy is that even if Intel runs successfully at 7nm, they are still one node behind TSMC. And we don’t think [Intel] can deliver leadership products without leadership on transistors because this has never been done before. That keeps [Intel] behind the industry for another four years. “
The fact that Intel continues to manufacture its own chips sounded to Jefferies analyst Mark Lipacis, as an announcement that it has once again slipped into next-generation technology. Executives had already told investors that they planned to ship their next generation processors by the end of 2022. To tell investors that they would make their 2023 chips in-house would again suggest that their products are behind schedule.
While first-quarter forecasts looked good, Intel’s delay in offering real clarity about its manufacturing strategy until the end of this year makes the stock difficult to recommend, wrote analyst Mitch Steves of RBC Capital Markets. He values the shares as equivalent to a sale and reiterated the call because of the company’s lack of clarity about its future.
Intel’s shares fell nearly 10% last year, while the PHLX Semiconductor benchmark rose 60%.
Write to Max A. Cherney at [email protected]