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Intel CCG (PC) op margin down 7%. Server op margin down 10%!!!

VCT

Active member
Intel CCG (PC) op margin down 7%. Server op margin down 10%!!!

My personal opinion: CCG due to moving from 14nm to 10nm (Intel 7). Lower yield and higher depreciation.
Server: Lower price to compete with AMD and arm base competitors.
 

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count

Well-known member
The cost of catching up. Intel is now engaged in a price war with AMD, and is spending very heavily on R&D, recruitment, and retention. Shouldn’t be surprising that margins are down.
 

tooLongInEDA

Active member
Is the margin squeeze from higher R&D costs, lower volumes shipped or lower ASPs ? Or some combination of these ? That would tell us a bit more. Not good if it's lower ASPs.
 

lilo777

Active member
It looks like they got record revenues but not profits. So the volume should be fine but probably not ASP. Although higher expenses probably contributed to lower margins too. Data-center chip sales rose 20%. Normally that would indicate higher profits but that's not the case this time around.
 

tooLongInEDA

Active member
Checking the earnings call slides, APS were actually up across CCG (desktop/laptop) and DSG (servers) - CCG volumes were significantly down for laptops. So appears to be volume rather than pricing. But perhaps ASPs are not increasing quite as much as they should be in the current supply environment - certainly nowhere near as much as TSMC which is increasing revenues and profits much faster than wafer starts.
 

VCT

Active member
All ASP up while margin down. That tell us a lot about their Intel 7 yield and cost competitiveness.
 

hist78

Well-known member
Intel's Client Computing Group (CCG) sells processors for desktop and notebook computers. CCG last quarter revenue was down 7% over a year ago. This doesn't make sense if you consider Microsoft's earnings report released yesterday.

From that earnings report, Microsoft achieve 25% YoY revenue increase in the Windows OEM division for last quarter. Windows OEM license sales should be correlated to Intel's CCG sales. How can it be possible Microsoft Windows OEM got 25% revenue increase while Intel CCG's revenue dropped 7%?

Even if there's some category grouping difference between Microsoft and Intel, it should not be in opposite directions.

One of the possible explanation is that Intel cut their price significantly and/or gave a lot rebate/incentives to PC makers.
 

hist78

Well-known member
Checking the earnings call slides, APS were actually up across CCG (desktop/laptop) and DSG (servers) - CCG volumes were significantly down for laptops. So appears to be volume rather than pricing. But perhaps ASPs are not increasing quite as much as they should be in the current supply environment - certainly nowhere near as much as TSMC which is increasing revenues and profits much faster than wafer starts.
It doesn't add up. Microsoft's Windows OEM license revenue increased 25% Year over Year for last quarter.

Microsoft's Windows operating systems need a desktop PC or a notebook computer to install. Why Intel CCG's revenue went down 7% while Windows OEM license revenue went up 25%?
 
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Daniel Nenni

Admin
Staff member
This was the most interesting Q in the Q&A, for me anyway. The Ohio build is all about the CHIPs act and getting money from the Federal Government. Clever move of course. If the Feds don't give money to Intel there will be a fab shell to remind us all of the missed opportunity to make semiconductors great again, absolutely.

Ambrish Srivastava

Pat, I just wanted to check in on the expansion plans that you have. How much of that is dependent on the CHIPS Act passing and also from other incentives? And I asked that because I was listening to your presentation, I guess, earlier in the week at the Ohio site. And you did make a comment there urging attendees to make sure that they weigh into the standard they can to get the act passed. So I just was wondering how much of that of the expansion plans are dependent on the act here as well as in Europe, some government incentives.

Pat Gelsinger

Well, thank you for that question. It's one I hoped would be raised in the call. So thank you for that. And I'll just say overall, I mean, it was just a fabulous day in Ohio, right? The enthusiasm we've gotten. And as I said at the event, we're -- we help put silicon into Silicon Valley. We established the Silicon Forest in Oregon, the Silicon Desert in Arizona and now the Silicon Heartland. And the enthusiasm we've gotten from the leadership there, the governor, the congressional leaders and being able for this farm kit from Pennsylvania to stand on stage in the White House and say now it's my pleasure to introduce the President of the United States of America, just surreal. So just a fabulous day for Intel, our nation and our industry. Obviously, with the CHIPS Act going on the floor of the House, we're highly encouraged. And I spoke to Speaker Pelosi at length on this subject just yesterday as there you expect it will be debated on the floor next week. And hopefully, following what we expect will be passage in the House, a reconciliation process. So I'd say everybody is now more optimistic on this coming across the line in the near future.

Now obviously, I think we and others have viewed the passage of this as an accelerant for our investment plans. And as I've said very clearly, hey, we're going to build a site in Ohio. It could either be small or it could be big and fast. And with the passage of the CHIPS Act, it's going to be bigger, and we're going to build it out faster as a result. And we think that's good for our company. Even more important, it's good for our nation as we rebuild a resilient, globally balanced supply chain. And the events of just yesterday, getting the bill on the House floor, I think, is a very, very good sign for all that will get us across the line.

But even more so, right, we see acts in Europe that are gaining momentum as well in the EU CHIPS Act as well. And we've been quite involved in that domain, and we hope to see our expansion plans accelerate in Europe as well. So overall, all of these things will simply benefit the industry, but it certainly will accelerate our investment plans as it makes us more competitive globally to be for our products, but even more so for our foundry business as well. So thank you for that question.
 

hist78

Well-known member
This was the most interesting Q in the Q&A, for me anyway. The Ohio build is all about the CHIPs act and getting money from the Federal Government. Clever move of course. If the Feds don't give money to Intel there will be a fab shell to remind us all of the missed opportunity to make semiconductors great again, absolutely.

Ambrish Srivastava

Pat, I just wanted to check in on the expansion plans that you have. How much of that is dependent on the CHIPS Act passing and also from other incentives? And I asked that because I was listening to your presentation, I guess, earlier in the week at the Ohio site. And you did make a comment there urging attendees to make sure that they weigh into the standard they can to get the act passed. So I just was wondering how much of that of the expansion plans are dependent on the act here as well as in Europe, some government incentives.

Pat Gelsinger

Well, thank you for that question. It's one I hoped would be raised in the call. So thank you for that. And I'll just say overall, I mean, it was just a fabulous day in Ohio, right? The enthusiasm we've gotten. And as I said at the event, we're -- we help put silicon into Silicon Valley. We established the Silicon Forest in Oregon, the Silicon Desert in Arizona and now the Silicon Heartland. And the enthusiasm we've gotten from the leadership there, the governor, the congressional leaders and being able for this farm kit from Pennsylvania to stand on stage in the White House and say now it's my pleasure to introduce the President of the United States of America, just surreal. So just a fabulous day for Intel, our nation and our industry. Obviously, with the CHIPS Act going on the floor of the House, we're highly encouraged. And I spoke to Speaker Pelosi at length on this subject just yesterday as there you expect it will be debated on the floor next week. And hopefully, following what we expect will be passage in the House, a reconciliation process. So I'd say everybody is now more optimistic on this coming across the line in the near future.

Now obviously, I think we and others have viewed the passage of this as an accelerant for our investment plans. And as I've said very clearly, hey, we're going to build a site in Ohio. It could either be small or it could be big and fast. And with the passage of the CHIPS Act, it's going to be bigger, and we're going to build it out faster as a result. And we think that's good for our company. Even more important, it's good for our nation as we rebuild a resilient, globally balanced supply chain. And the events of just yesterday, getting the bill on the House floor, I think, is a very, very good sign for all that will get us across the line.

But even more so, right, we see acts in Europe that are gaining momentum as well in the EU CHIPS Act as well. And we've been quite involved in that domain, and we hope to see our expansion plans accelerate in Europe as well. So overall, all of these things will simply benefit the industry, but it certainly will accelerate our investment plans as it makes us more competitive globally to be for our products, but even more so for our foundry business as well. So thank you for that question.
Question: How much of that is dependent on the CHIPS Act passing and also from other incentives?

Did Pat Gelsinger really answer the question?
 

fansink

Member
Did Pat Gelsinger really answer the question?

I believe Pat answered that question candidly, he clearly said that depending on the amount of money the US government gives Intel, will result in the difference between a potato “chip” and a potato chip syndicate.
 

hist78

Well-known member
Question: How much of that is dependent on the CHIPS Act passing and also from other incentives?

Did Pat Gelsinger really answer the question?
An issue related to this question is Intel today announced they will increase stock dividend by 5%.

While Intel's 2021 GAAP net income has shrunk 5% from 2020 and Intel needs a lot of Capex for five new fabs, they still have the guts to increase dividends! I guess they already counted the taxpayers' money via CHIPS act into the planning. Free money and other people's money are always good!

Can Intel show us they are sincere and serious?
 

tooLongInEDA

Active member
According to Intel's presentation material listed below, PC related processors volumes decreased 18% Year over Year for the last quarter. But Microsoft's Windows OEM license revenue increased 25% Year over Year for the same quarter. I'm lost.

Nice work spotting that. Other commentary I've read hasn't caught this yet - they don't seem to look beyond the margins headlines. I can't square this apparent contradiction either ! Or could it be that MS volumes are increased by WinXP/7->10/11 upgrades ?

There are certainly a lot more AMD laptops around these days - I'm typing from one.
 

tooLongInEDA

Active member
An issue related to this question is Intel today announced they will increase stock dividend by 5%.

While Intel's 2021 GAAP net income has shrunk 5% from 2020 and Intel needs a lot of Capex for five new fabs, they still have the guts to increase dividends! I guess they already counted the taxpayers' money via CHIPS act into the planning. Free money and other people's money are always good!

Can Intel show us they are sincere and serious?
Glad I'm not a US taxpayer on the hook for underwriting Intel's dividend increases. Increasing dividends just doesn't feel right if you're taking huge taxpayer subsidies.
 

Barnsley

Member
Glad I'm not a US taxpayer on the hook for underwriting Intel's dividend increases. Increasing dividends just doesn't feel right if you're taking huge taxpayer subsidies.

During COVID didnt a lot US Firms use Taxpayers money for share buyback to bolster the price.
 

tooLongInEDA

Active member
During COVID didnt a lot US Firms use Taxpayers money for share buyback to bolster the price.
Can't speak for the US. A lot of UK companies cut dividends during Covid.

And the numbers here are on a totally different scale to any Covid grants.

It should not be government's job to subsidise shareholders - except in the US ever since Alan Greenspan (the "Greenspan put") it sometimes seems like it has been.
 
Glad I'm not a US taxpayer on the hook for underwriting Intel's dividend increases. Increasing dividends just doesn't feel right if you're taking huge taxpayer subsidies.
Subsidizing dividends for a failing multinational firm is* nothing compared to what Americans are used to underwriting with their taxes without the slightest clue or concern. Intel is positively hellbent on burning out faster and brighter than IBM microelectronics.
 
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