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Intel released Q2 2022 Earnings with Net Loss and Declined Revenue

This is… wow.

External factors combine with the execution chickens coming home to roost?

SPR delayed, Alchemist massively delayed and rolling out incredibly slowly, Intel 4 targeting a launch on a client product which is the main market in free fall…

What a horrible confluence of factors. Stock is going to get torches in the short term, but honestly… where’s the turnaround execution? Delayed on DC, delayed on GPUs, and heck, even delayed on MobileEye IPO.

How long is this tunnel and is there even light at the end of it?
 
I'm looking through the Intel earnings call slides. Not pretty. All in Intel blue. But many places that should be red.

"IFS revenue down 54% YoY driven by lower sales of mask writing tools"

What does this mean ? I thought foundries sold wafers. This implies over half of the previous quarter IFS sales were "mask writing tools" ?!

How is it possible to lose over half your sales in the foundry business in today's market conditions ?
 
This is… wow.

External factors combine with the execution chickens coming home to roost?

SPR delayed, Alchemist massively delayed and rolling out incredibly slowly, Intel 4 targeting a launch on a client product which is the main market in free fall…

What a horrible confluence of factors. Stock is going to get torches in the short term, but honestly… where’s the turnaround execution? Delayed on DC, delayed on GPUs, and heck, even delayed on MobileEye IPO.

How long is this tunnel and is there even light at the end of it?

It's really ugly.

 
How long is this tunnel and is there even light at the end of it?
If you go to Intel.com and look at the Products tab, I see a really nice 2015 list of products, with some interesting narrow segment products that don't generate a lot of revenue. Like eASICs and Ethernet Switches. The breadth of products is impressive, and there are even some good high level architecture strategies thrown in, like OneAPI, OpenVINO, P4, and CXL. But overall, I'm not excited at all by that product list. If there is light, all I'm seeing is a 5 watt incandescent night light.
 
Another oddity : "Optane inventory impairment" has taken 3.6% off the gross margins. No further explanation on this (yet). Inventory seems to have gone up pretty much across the board.
 
Another oddity : "Optane inventory impairment" has taken 3.6% off the gross margins. No further explanation on this (yet). Inventory seems to have gone up pretty much across the board.
That may actually be a +3.6% margin gain due to "inventory impairment" ... who can tell when there's so much obfuscation going on ?
 
I'm looking through the Intel earnings call slides. Not pretty. All in Intel blue. But many places that should be red.

"IFS revenue down 54% YoY driven by lower sales of mask writing tools"

What does this mean ? I thought foundries sold wafers. This implies over half of the previous quarter IFS sales were "mask writing tools" ?!

How is it possible to lose over half your sales in the foundry business in today's market conditions ?
Intel acquired IMS Nanofabrication(A leading mask writing tool company) in 2016. It could be counted in IFS business. I can expect the leading companies like TSM and Samsung would try to find second source when the acquisition happened and the sales reduction will be the consequence.
 
As of today, out of 17 major semiconductor companies (Excluding equipment, software, and materials manufacturers) that have announced their Q2 2022 earnings, Intel is the worst one in terms of YoY growth. Several of them are doing very well in the Q2 2022.


 
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A strange thing in the Intel earning call is the Sapphire Rapids pre-production charges. One analysist asked about it and Pat Gelsinger and David Zinsner (CFO) explained it briefly. Instead of treating some Sapphire Rapids parts already manufactured as inventory, Intel decided to write them off. They explained that it was caused by problems from Sapphire Rapids' design/quality/manufacturing. If I remember the Q&A discussion correctly, Intel was forced to "tapeout" again to correct those Sapphire Rapids problems.


At the clock: 45:36 and 54:00
 
Last edited:
Francisco Maya will figure it out.
 
Last edited by a moderator:
I think it is as I said in a post on this forum. Intel is spread too thin and they cannot focus on anything. Intel is not that big to invest in an aggressive node roadmap, new GPUs, new server products, desktops CPU's etc. AMD will soon be half of Intel in terms of revenue and if Intel will continue with its current plan the situation for them will further degrade.
 
I guess Pat will stop the chip shortage narrative? I can't wait for AMD, NVDA, and GF to report. It will be an interesting comparison.
 
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Best question from the Q&A:

Vivek Arya
So thanks for taking my question. Pat I’m curious why didn’t Inter choose to negatively pre-announce given the extent of the shortfall. I mean, I can understand the PC market being weak but for data center to be almost 25% below expectations. That seems very strange to me. So I’m just curious why Intel took these actions, and then when we look at your data center revenue especially in the reported quarters. Most enterprise and cloud customers reported their sales and spending kind of in line with expectations. So is it mostly competitive pressures? If you could just help us understand what the thought process was for Q2? Thank you.

I'm guessing he will not be called on again!

Another good question:

Stacy Rasgon
Hi, guys. Thanks for taking my question. I’m a little confused. You said that Sapphire Rapids was on time and it’s ramping in volume in the second half, but you also said data center growth in the second half was going to be pretty muted off of a base that’s really low. And then you also said that data center pricing improvements in the second half would be less than what you’re seeing in clients. So doesn’t really sound likes Sapphire Rapids ramp is helping at all. What is going on with that? Like, how should I be thinking about the impact of that Sapphire Rapids ramp? Is that ramps into volume? Or is it the question is like most of the volume coming into 2023 or why isn’t it having more of an impact in the second half. Is it ramps?

Pat Gelsinger
Yes. We said in the prepared remarks that it’s later than we were expecting Sapphire Rapids, it’s ramping later. We have some SKUs out, which is good, but the main SKUs are not out. And they happen later in the year. And of course, they’ll contribute way more significantly to next year than they’re going to contribute to this year. We do see an opportunity in the client space, given our Alder Lake position for pricing increases that are really passing on inflation. And we know customers understand that obviously our competitive position is not as strong in the DCI business. And so there are opportunities to adjust pricing, but not across the board, so that is impacting us a bit.

Stacy Rasgon
But you’re basically saying that’s Sapphire Rapids is effectively a first half 2023 volume ramp. That seems to be what you’re saying. Yes.

Pat Gelsinger
I think there’s some ramps this year and then mostly at ramps next year. Yes.

Translation, Intel is shipping chips from R&D and not a HVM in a dedicated fab. So in reality HVM is 2023 so the chip is late. Pat got busted on this one.

And the final one which ended the Q&A on a sour note:

William Stein
Great. Thanks for taking my question. It relates to that last topic of the timeliness of delivery of new products. So while Sapphire Rapids is delayed, sounds like something on the order half the year. Pat, in the press release, it noted that the later nodes are still on track or ahead of track, I think was the language. As outsiders, what can we look to sort of judge and determine whether Intel is continuing to be on pace as we progress through the quarters, aside from just the sort of summary statements and the press release. Is there some other metric you could disclose of there some way we can better understand whether Intel is getting back on track and keeping these commitments to deliver these products as you’ve scheduled it. Thank you.

Pat Gelsinger
Yes. Maybe as we just run through the five nodes quickly Intel 7 done, volume shipments, we said five nodes, four years, Intel 7, 35 million units, you can go rip one apart. I’m sure our competitors have done, tear downs on it done. Intel 4, right, we’ve said is, hey, Meteor Lake looking good. At this point, it’s now broadly sampled to customers. So it’s looking very healthy as well. Also, we had the independent analysis of our detailed updates that we gave at the VLSI conference recently. And if you go look at some of the reports from that, people were pleasantly surprised. They said, oh, Intel 4, it looks as good as some of the three nanometer competitors.

So this is looking pretty good. So certainly we’ll be giving more of those technical updates going forward on the real performance. Also, we’ve given updates on Granite Rapids, one of the lead vehicles of Intel 3. We also have said that, we’ll give you updates on 20a and 18a test chip updates and others. We’ll also have independent assessments of those as we announce foundry customers, right, which will be another point to validation that you’ll see.

So we’re going to keep giving you more and more points of validation as we go along for, trust me, these are analyzed, the performance of each one of these process nodes, the defect density of each of these process nodes, the maturity of the design collateral, the residents from the foundry customers for each one, it’s being scrutinized extraordinarily well. And with that, I think you’ll get more and more confidence that what we’re saying is not only verified by us, but independently by industry sources as well.

So with that, let me just wrap up our time. First, I’d like to say, thank you. We’re grateful for you joining us today, opportunity that you’ve given us to update you on our business. We summarized three key messages as we finish. We’re not satisfied with the quarter and the financial results that we gave you today. We have growing confidence in the strategy and we are optimistic finally about the future.

We deserve some tough questions this quarter, but also appreciate that they’re fair and relevant to the business. Transformations are not easy, but nothing worthwhile ever is. And despite the headwinds that we’re seeing, we demonstrated substantial progress in IFS, NEX business records, PSG record in that business, the chips passage today huge, clear customer wins like AWS and Meta and NVIDIA. And for the last question, great progress on our TD milestones and our manufacturing milestones. With that, we look forward to updating you again next quarter. Thank you.

Operator
This concludes today’s conference call. Thank you for participation. You may now disconnect.
 
I guess Pat will stop the chip shortage narrative? I can't wait for AMD, NVDA, and GF to report. It will be an interesting comparison.

Among 17 major semiconductor companies that have released Q2 2022 earnings data so far, Intel is at the bottom in terms of YoY revenue growth. And 14 out of these 17 are getting double-digit YoY growth. It seems those macroeconomics, supply chain constraints, and geopolitics factors mentioned by Intel are hitting Intel particularly harder than anyone else. Does it make sense?

****

Q2 2022 Revenue (Excluding equipment, software, and materials manufacturers):

Company Name: (% YoY), (% QoQ), (% current quarter vs previous quarter guidance)
~ Sorted by % YoY, high to low

Renesas Electronics: 72.83%, 8.62%, 1.13% ~ 3.25%
Silicon Laboratories: 55%, 13%, 0.8% ~ 5%
UMC: 41.54%, 13.61%, N/A
TSMC: (36.6% in US$/43.5% in NT$), (3.4% in US$/8.8% in NT$), (9.03% ~ 13.44% in US$)
Qualcomm: 36%, -2%, 0.6% ~ 8% (Q3 FY2022)
SK Hynix: 34%, 14%, N/A
Melexis NV: 31%, 13%, 3.16% ~ 5.56%
STMicroelectronics: 28.3%, 8.2%, 10.5%
NXP: 27.6%, 6%, 1% ~ 6%
Realtek: 18%, 2.5%, N/A
Samsung Memory: 18%, 5%, N/A
Micron Technology Inc.: 16.44%, 10.91%, -16.67% (Fiscal Q3 2022 ended 6/2/2022)
Allegro MicroSystems: 16%, 8.74% , 1% ~ 5.6% (Q1 FY2023)
Texas Instruments: 14%, 6%, -5% ~ 2%
Macronix International: -1%, -2%, N/A
Nanya Technology: -20.4%, -9.6%, N/A
Intel: -22%, -16.85% , -12% ~ -17%

Source:
Post in thread 'Semiconductor Companies Q2 2022 Revenue Growth (Excluding equipment, software, and materials manufacturers)' https://semiwiki.com/forum/index.ph...-and-materials-manufacturers.16307/post-54005
 
Best question from the Q&A:

Vivek Arya
So thanks for taking my question. Pat I’m curious why didn’t Inter choose to negatively pre-announce given the extent of the shortfall. I mean, I can understand the PC market being weak but for data center to be almost 25% below expectations. That seems very strange to me. So I’m just curious why Intel took these actions, and then when we look at your data center revenue especially in the reported quarters. Most enterprise and cloud customers reported their sales and spending kind of in line with expectations. So is it mostly competitive pressures? If you could just help us understand what the thought process was for Q2? Thank you.

I'm guessing he will not be called on again!

Another good question:

Stacy Rasgon
Hi, guys. Thanks for taking my question. I’m a little confused. You said that Sapphire Rapids was on time and it’s ramping in volume in the second half, but you also said data center growth in the second half was going to be pretty muted off of a base that’s really low. And then you also said that data center pricing improvements in the second half would be less than what you’re seeing in clients. So doesn’t really sound likes Sapphire Rapids ramp is helping at all. What is going on with that? Like, how should I be thinking about the impact of that Sapphire Rapids ramp? Is that ramps into volume? Or is it the question is like most of the volume coming into 2023 or why isn’t it having more of an impact in the second half. Is it ramps?

Pat Gelsinger
Yes. We said in the prepared remarks that it’s later than we were expecting Sapphire Rapids, it’s ramping later. We have some SKUs out, which is good, but the main SKUs are not out. And they happen later in the year. And of course, they’ll contribute way more significantly to next year than they’re going to contribute to this year. We do see an opportunity in the client space, given our Alder Lake position for pricing increases that are really passing on inflation. And we know customers understand that obviously our competitive position is not as strong in the DCI business. And so there are opportunities to adjust pricing, but not across the board, so that is impacting us a bit.

Stacy Rasgon
But you’re basically saying that’s Sapphire Rapids is effectively a first half 2023 volume ramp. That seems to be what you’re saying. Yes.

Pat Gelsinger
I think there’s some ramps this year and then mostly at ramps next year. Yes.

Translation, Intel is shipping chips from R&D and not a HVM in a dedicated fab. So in reality HVM is 2023 so the chip is late. Pat got busted on this one.

And the final one which ended the Q&A on a sour note:

William Stein
Great. Thanks for taking my question. It relates to that last topic of the timeliness of delivery of new products. So while Sapphire Rapids is delayed, sounds like something on the order half the year. Pat, in the press release, it noted that the later nodes are still on track or ahead of track, I think was the language. As outsiders, what can we look to sort of judge and determine whether Intel is continuing to be on pace as we progress through the quarters, aside from just the sort of summary statements and the press release. Is there some other metric you could disclose of there some way we can better understand whether Intel is getting back on track and keeping these commitments to deliver these products as you’ve scheduled it. Thank you.

Pat Gelsinger
Yes. Maybe as we just run through the five nodes quickly Intel 7 done, volume shipments, we said five nodes, four years, Intel 7, 35 million units, you can go rip one apart. I’m sure our competitors have done, tear downs on it done. Intel 4, right, we’ve said is, hey, Meteor Lake looking good. At this point, it’s now broadly sampled to customers. So it’s looking very healthy as well. Also, we had the independent analysis of our detailed updates that we gave at the VLSI conference recently. And if you go look at some of the reports from that, people were pleasantly surprised. They said, oh, Intel 4, it looks as good as some of the three nanometer competitors.

So this is looking pretty good. So certainly we’ll be giving more of those technical updates going forward on the real performance. Also, we’ve given updates on Granite Rapids, one of the lead vehicles of Intel 3. We also have said that, we’ll give you updates on 20a and 18a test chip updates and others. We’ll also have independent assessments of those as we announce foundry customers, right, which will be another point to validation that you’ll see.

So we’re going to keep giving you more and more points of validation as we go along for, trust me, these are analyzed, the performance of each one of these process nodes, the defect density of each of these process nodes, the maturity of the design collateral, the residents from the foundry customers for each one, it’s being scrutinized extraordinarily well. And with that, I think you’ll get more and more confidence that what we’re saying is not only verified by us, but independently by industry sources as well.

So with that, let me just wrap up our time. First, I’d like to say, thank you. We’re grateful for you joining us today, opportunity that you’ve given us to update you on our business. We summarized three key messages as we finish. We’re not satisfied with the quarter and the financial results that we gave you today. We have growing confidence in the strategy and we are optimistic finally about the future.

We deserve some tough questions this quarter, but also appreciate that they’re fair and relevant to the business. Transformations are not easy, but nothing worthwhile ever is. And despite the headwinds that we’re seeing, we demonstrated substantial progress in IFS, NEX business records, PSG record in that business, the chips passage today huge, clear customer wins like AWS and Meta and NVIDIA. And for the last question, great progress on our TD milestones and our manufacturing milestones. With that, we look forward to updating you again next quarter. Thank you.

Operator
This concludes today’s conference call. Thank you for participation. You may now disconnect.

Why Intel didn't pre-announce the significant and negative earnings? I guess Intel and Pat Gelsinger don't want to give any talking points to those Congressmen and Senators who opposed CHIPS Act.

But I believe by doing so Intel damaged its truthfulness and creditability for years to come.
 
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