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Intel released third quarter revenue and earnings

hist78 said:
The YoY revenue decline is not a good sign.
Click to expand...

Especially during a semiconductor shortage where companies are selling everything they can make. Can Intel not make them or not sell them?

AMD's earnings announcement is next week. AMD expects third-quarter 2021 revenues to be around $4.1 billion with a year-over-year growth of 46% and quarter-over-quarter improvement of 6%. Interesting times, absolutely.
 
The earning presentation can be viewed here:


Intel's attributed the 5% YoY drop in the notebook segment to industry wide component shortage. At the same time Intel's desktop related sales jumped 20% YoY. But desktop computer platform shares a lot components and/or factories with notebooks'. How can one could sells 20% more and one dropped 5% due to component shortage? Let's see what the upcoming AMD earning report will say.
 
1. Margin will drop to 51%-53% (from nearly 60% in the past) in the next 2 years. Intel claim the margin will back to normal 2 years later (but analyst doubt)...........That's the main reason for the stock price fall.
2. Pat said foundry margin can easily pass 50%.
3. Intel will move 5 nodes within 4 years so Intel needs so much CAPEX. ( I really don't understand why Pat set such incredible high bar to himself.)
 
VCT said:
1. Margin will drop to 51%-53% (from nearly 60% in the past) in the next 2 years. Intel claim the margin will back to normal 2 years later (but analyst doubt)...........That's the main reason for the stock price fall.
2. Pat said foundry margin can easily pass 50%.
3. Intel will move 5 nodes within 4 years so Intel needs so much CAPEX. ( I really don't understand why Pat set such incredible high bar to himself.)
Click to expand...

During the conference call, Intel avoided to talk about what net profit margin will look like. For the new IFS to achieve gross margin > 50% is a sure thing because Intel has CCG (Client Computing Group, for notebook and desktop) and DCG (Data Center Group) to share or to hide the true cost. It's like Samsung uses their memory division's profit and scale to grow Samsung's foundry business. The question is how long and how deep Intel needs to stay on tis route.

Intel introduced a new terminology today, the so called "smart capital". According to Pat:

"There are three elements to smart capital. First, we're focused on aggressively building our shelf, which are the smaller portion of the overall cost of a fab, but have the longest lead time.

Having available shelf space gives us flexibility in how and when we bring additional capacity online. Second, we will make effective use of external foundries, leveraging some of their unique capabilities to ensure we're delivering leadership products. We are already one of the largest foundry customers and in this quarter we announce the key products such as Meteor Lake and Ponte Vecchio will leverage third-parties for some of their tiles.

Finally, we expect our plans to benefit from investments from governments who understand that a healthy semiconductor industry is vital to their economic well-being and national security. With bipartisan support in both houses, we're hopeful that chips act will be passed by the end of this year, allowing us to accelerate decisions for our next U.S. site."

For #1 element of smart capital: I don't know the detail history about building a fab. But I thought to build a bigger building in order to do multiple phases of capacity deployment has been a common practice among foundries for a long time. How can it be so new to Intel?

For #2 element of smart capital: All fabless or fab lite semiconductor companies have been doing it for years.

For #3 element of smart capital: It's nothing to do with smartness. It's a spoiled and grown-up kid asking for more money. Intel gets a lot taxpayers' money over the years. In the conference call they didn't explain what caused the Q42021 $300 million write-off for Intel Federal Business. And no analyst asked Pat about that either. The rumor is that it's related to the troubled Intel/Cray Exascale Supercomputer project at Argonne National Laboratory. Hope someone knows what exactly it is.

 
VCT said:
1. Margin will drop to 51%-53% (from nearly 60% in the past) in the next 2 years. Intel claim the margin will back to normal 2 years later (but analyst doubt)...........That's the main reason for the stock price fall.
2. Pat said foundry margin can easily pass 50%.
3. Intel will move 5 nodes within 4 years so Intel needs so much CAPEX. ( I really don't understand why Pat set such incredible high bar to himself.)
Click to expand...
TSMC's gross margin is currently around 50% so that is the current benchmark. I don't know HOW Pat can say Intel's margin would easily pass 50% if TSMC can already make chips cheaper than Intel. If what Pat saying is true, wouldn't he have to charge his costumers A LOT higher than TSMC to reach his desired margin? Perhaps Pat is looking forward to Intel 18A and assuming Intel will have the process node lead at that time?

As with many here, I'm curious to see if Intel can actually get Intel 4, Intel 3, Intel 20A and Intel 18A working these next few years! It's like real-life drama that will affect the entire industry.
 
Pat is simply not credible and that's all there is to it. You listen to the call and what he's saying isn't lining up. Intel will not achieve 50% margin on the foundry business, that makes no sense.

"Smart capital" is a joke. Building a fab is expensive and takes a long time. They should not be misleading investors or themselves about what the pull is going to be.

Finally, AMD is ripping away marketshare and it's really starting to hurt. When AMD was 5% of the market, improving their share to 10% means a 5% loss of share to Intel, and as long as the market is growing faster than 5% it can be hidden. Now AMD is 20%+ and their market share gains are accelerating to the point where Intel is losing share faster than the market is growing. Not to mention Apple M1 also taking share on the notebook side.

Intel's slow burn risks turning into an implosion.
 
Also,

With today's decline, Intel slipped below AVGO in market cap as I predicted would happen. It wasn't long ago that Intel was talking about making a hostile bid for Broadcom... now Broadcom is the larger company.

I predict that both QCOM and AMD will also become larger than Intel in market cap in a few years.
 
count said:
Also,

With today's decline, Intel slipped below AVGO in market cap as I predicted would happen. It wasn't long ago that Intel was talking about making a hostile bid for Broadcom... now Broadcom is the larger company.

I predict that both QCOM and AMD will also become larger than Intel in market cap in a few years.
Click to expand...
To keep things in perspective, INTC has 3x higher revenues than AVGO, 6x AMD revenues and 2x QCOM revenues (so, about the total sum of the three). Market cap simply reflects the fact that Intel is going to raise the capex in the near future. That's a risky strategy for sure so the investors should react appropriately but if Intel succeeds their market cap may go up and be the sum of the three aforementioned companies.
 
lilo777 said:
To keep things in perspective, INTC has 3x higher revenues than AVGO, 6x AMD revenues and 2x QCOM revenues (so, about the total sum of the three). Market cap simply reflects the fact that Intel is going to raise the capex in the near future. That's a risky strategy for sure so the investors should react appropriately but if Intel succeeds their market cap may go up and be the sum of the three aforementioned companies.
Click to expand...
Revenue is a lagging indicator, while market cap is usually a leading indicator of a companies future prospects.
 
count said:
Revenue is a lagging indicator, while market cap is usually a leading indicator of a companies future prospects.
Click to expand...
Also the stock price usually indicates what investors think company will be at in like 5-7 years in advance. And Intel isn't going to 200 billion anytime soon. From this perspective even AMD and Nvidia are overpriced, but they are taken as growth stocks.
 
count said:
Pat is simply not credible and that's all there is to it. You listen to the call and what he's saying isn't lining up. Intel will not achieve 50% margin on the foundry business, that makes no sense.

"Smart capital" is a joke. Building a fab is expensive and takes a long time. They should not be misleading investors or themselves about what the pull is going to be.

Finally, AMD is ripping away marketshare and it's really starting to hurt. When AMD was 5% of the market, improving their share to 10% means a 5% loss of share to Intel, and as long as the market is growing faster than 5% it can be hidden. Now AMD is 20%+ and their market share gains are accelerating to the point where Intel is losing share faster than the market is growing. Not to mention Apple M1 also taking share on the notebook side.

Intel's slow burn risks turning into an implosion.
Click to expand...
Also from financial side. Intel's long-term debt stands at 30 billion while AMD's debt is basically non-existent. It is interesting to see how company like AMD can do so much damage to Intel. I want to see how Intel will compete with stronger AMD in 5 years.
 
Pat said margin will improve 2-3 years later.
But with lower margin (50%) foundry business. It will be more difficult for Intel to improve it's margin.

Maybe they see better cost for outsourcing to TSMC and improve Intel product margin?
 
count said:
Revenue is a lagging indicator, while market cap is usually a leading indicator of a companies future prospects.
Click to expand...
That's nonsense. Market cap reflects sentiment of the investors. It does not indicate anything else. It seems like you are saying that investor sentiment is a leading indicator which implies your belief that investors actually understand something about that Intel management does not. Investors simply are not willing to take the risk associated with higher capex. That makes sense but it does not prove that Intel strategy is doomed. If Intel succeeds, the investors will raise the stock price (and the market cap) in a week. Did you notice how Trump's SPAC shares rose by 100% just today? That's how "investors" think.
 
lilo777 said:
That's nonsense. Market cap reflects sentiment of the investors. It does not indicate anything else. It seems like you are saying that investor sentiment is a leading indicator which implies your belief that investors actually understand something about that Intel management does not. Investors simply are not willing to take the risk associated with higher capex. That makes sense but it does not prove that Intel strategy is doomed. If Intel succeeds, the investors will raise the stock price (and the market cap) in a week. Did you notice how Trump's SPAC shares rose by 100% just today? That's how "investors" think.
Click to expand...
I caveated myself with "usually". Companies with good growth prospects are valued more than companies who don't have growth prospect. There are bubbles and aberrations that pop up, but these exceptions correct themselves in the fullness of time.

People said I was talking nonsense when I suggested TSMC would be more successful than Intel when TSMC market cap crossed Intel as well. Now there is no debate. At times people have also commented on the valuation of other growth stocks like NVidia, Apple, Tesla making talking about how those stocks were expensive when they were a fraction of their current price as well. Lets wait 5 years and see.

I'm quite confident that AMD will defeat Intel because AMD has the right products, the right leadership, and the right business model. Intel does not.
 
VCT said:
Pat said margin will improve 2-3 years later.
But with lower margin (50%) foundry business. It will be more difficult for Intel to improve it's margin.

Maybe they see better cost for outsourcing to TSMC and improve Intel product margin?
Click to expand...
The second element of Pat's "Smart Capital" is outsourcing to foundries. Who knows how much volume and products Intel will outsource. Intel might already decided it and it may be much bigger than people thought. But they just don't want to talk about it right now.

See my previous comments about the smart capital.
 
Intel margins will have to be lower when they start using TSMC for full chips. My bet is that Intel will outsource > 50% of their wafers to TSMC starting in 2024.
 
Intel Pat Gelsinger just went on CNBC to reiterate to the market that "Intel 10 is healthy, Intel 7 is in production, Intel 4 is looking good...we're ahead of schedule on Intel 3, Intel 20A and Intel 18A. Our next FIVE process nodes that they were all on or ahead of schedule..."
Pat's response to his skeptics start at the 1:40 mark.
 
prime007 said:
Intel Pat Gelsinger just went on CNBC to reiterate to the market that "Intel 10 is healthy, Intel 7 is in production, Intel 4 is looking good...we're ahead of schedule on Intel 3, Intel 20A and Intel 18A. Our next FIVE process nodes that they were all on or ahead of schedule..."
Pat's response to his skeptics start at the 1:40 mark.
Click to expand...

That's a decent interview, Pat comes off as a straight shooter, and from what I hear he is. Let's hope they don't stumble and Pat has to eat his words. It really is a good thing for the industry, Intel back in the competitive game. AMD, Nvidia, and TSMC are all on notice and the result will be better products for us common folks, absolutetly.
 
I was so shocked about Pat's roadmap the his crazy confidence and optimistic . So I went watching his previous interview in VMware.

 
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