Intel announced their results yesterday for last quarter (and the year). And they were good financially. As Brian Krzanich said:The fourth quarter marked a strong finish to a great year. We began 2014 expecting roughly flat year-over-year revenue and operating income. Instead the company’s full year revenue grew 6% touching all time record of $55.9 billion. At the same time, operating income rose 25%.
We initially forecasted revenue growth [for the datacenter group] in the low to mid teens with operating profit growing faster than revenue. We exceeded those higher expectations and revenue is up 18%. The operating profit expanded by a remarkable 31%.
They beat Q4 guidance slightly and EPS by quite a lot and margins were up (all good). But Q1 guidance going forward was to lower expectations. In particular they forecast gross margins at around 60% compared to 65.3% this quarter. That is a big drop. Analysts hate this, but I think it is inevitable that as Intel starts to get traction in IoT, tablets and even mobile then margins have to go down from what you can get for top-of-the-line microprocessors for the datacenter business. Stacey, the CFO, said it was connected to 14nm ramp and margins should be up a little later in the year. So 14nm is still a bit behind on yield I’m guessing.
And they do seem to be doing something in IoT. As Brian said:Finally, you see us moving quickly to wearables, to our growing portfolio of collaborations with Google Glass, fashion and fitness brands like Fossil, Oakley, Opening Ceremony and SMS Audio along with our own products like the Basis Peak and the Curie Module, a computers the size of a button.
As always here at Semiwiki we are less interested in the financial stuff than the other color. After all we all know Intel is a powerhouse in servers and datacenters. How are they doing in mobile? How are the process ramps going? There was lots of information in the call and especially in the replies to the questions.
Firstly tablets. Intel planned on shipping 40 millions chips (along with around $50 per chip in negative revenue) to establish themselves in the market. They ended up shipping 46 million and established themselves as “one of the industries largest merchant silicon providers”. Although “merchant” is a bit of a stretch when you are losing money and making it up on volume. Going forward they expect to grow about as fast as the tablet market does, but since almost all forecasts are flat to down (iPad sales actually fell last quarter) that is not a high growth market. Of course if they can keep their market share now that they have 14nm product, and if 14nm is really a lot cheaper they can increase their profitability. It is not clear (and nobody asked) if they are still shipping negative revenue on their current chips, essentially buying market share.
Intel merged mobile with laptops into MCG (mobile and communications group). Mobile was losing $1B per quarter and will presumably continue to lose a lot of money since Brian said in the questions that:Stacy and I are committed to drive $800 million out of this business for ’15.
But in subsequent questions a lot of that was the expectations of cutting back on negative revenue. So best case is that they are only going to lose $800M per quarter.
Brian was asked about 10nm. He replied:We are timing on 10-nanometers. We are not going to come out with—we’ll be introducing a 10-nanometer to the marketplace in general, probably until the end of this year. So we will give, as we go through the year, probably by the investor meeting in November, we’ll give you an outlook on how and what timing is for 10-nanometers.
So that’s clear then!
Brian also talked about Broadwell versus similar products at the same stage of their life. His reply is again a bit opaqueI would take you back to the graph I showed at the investor meeting because I actually showed a non-normalized cost that showed Broadwell relative to other products at the same stage of manufacturing. And so what that chart shows is the churn up in the first half of this year. So the early stage of the Broadwell ramp because of some of the old issues that we’ve talked about, it is higher. On a non-normalized basis, it’s a higher cost. But by the time we get into the back half of the year on a non-normalized basis, Broadwell actually is less expensive than those other products at the same stage of their life.
I think that means that currently yields on 14nm are still not where they want them to be but by the end of 2015 they expect per transistor costs for 14nm to be below 22nm.
So how are they doing in mobile (not tablets, real mobile) where they have a product called SoFIA. Actually it is a series, the current one being SoFIA 3G (so basically already pretty obsolete), then a SoFIA LTE modem (I don’t know if this means that they will have their LTE modem on an Intel process, currently it is TSMC). Anyway, they have finished internal qualification, and now need to go to the carriers for their certification (what used to be called “type approval”). They don’t expect to ramp until the second half of the year. So it is going to be at least another year before we have a clue whether Intel is really in or out of mobile.
SeekingAlpha transcript of the call is here.