Intel Just Gave Investors Even More Reason to Worry
(Bloomberg Opinion) -- Intel Corp. investors could have used some upbeat news. They didn’t get it.
A month after Apple Inc. announced a plan to switch to its own chips over Intel’s for its Mac PCs and laptops, and just weeks removed from the stunning departure of its top chip architect, Intel has now revealed even more disappointing news: another chip delay.
On Thursday, Intel posted better-than-expected second-quarter results, reporting adjusted earnings per share of $1.23 while generating $19.7 billion of revenue in the quarter versus the $18.5 billion estimate. Sales guidance for the current quarter and the full year were also both higher than the average analyst forecasts.
While the near-term financial numbers were strong, the big story was Intel saying its future lineup of 7-nanometer chips — a new version of the central processing units it makes that serve as the general-purpose operating brains for desktop and server computers — will be delayed. The company said its CPU chips based on this manufacturing node will be released about six months later than its previous expectations, primarily due to problems with chip yields. On the call, Intel management said the first 7-nanometer desktop CPU is now expected to ship in late 2022. The stock tanked in after-market trading.
Intel investors have seen this movie before. The company suffered years of delays in bringing its current 10-nanometer chips to market, which allowed Taiwan Semiconductor Manufacturing Co. to surpass Intel in its semiconductor-making abilities. This in turn enabled Intel’s main competitor, Advanced Micro Devices Inc. — which designs its own semiconductors and pays TSMC to make them — to take market share by offering better-performing and lower-energy consuming chips. Intel’s latest chip will likely prolong that shift in market share.
Last month, I wrote about how Apple’s decision to use its own chips may pose a long-term threat to Intel’s server processor lineup. But more importantly, I said the departure of leading chip architect Jim Keller was even more worrisome for Intel’s future because the company needed an experienced hand to guide the final stages of development for its future designs. While we don’t know what exactly led to the 7-nanometer delay, it looks like the worst fears over Intel’s pipeline is now realized.
What now? There is one dramatic move Intel can make to right this ship. For all its troubles, the main problem hasn’t been Intel’s ability to design good processors, but in manufacturing them. It ought to follow what the hottest chip companies like AMD and Nvidia Corp. have done, and outsource its manufacturing to the best chip foundry in the world: TSMC. It’s a simple solution that would help get Intel back on track.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
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