Intel Reports Growth In OC Chips But Forecast Lower Than Expected Profits

The huge rise in demand for personal computers prompted Intel Corp to raise its annual sales outlook for the current year on Thursday.

However its forecast for the second quarter profits was lower than expectations of the market as the company expects to continue its heavy spending to ramp up its manufacturing operations so that it is able to catch up with the production capacity of its rivals and making faster chips.

The company also missed first-quarter expectations in its closely watched data center chip unit.

In recent years, Intel has been troubled with new manufacturing technology which resulted in the company falling behind its rivals such as Advanced Micro Devices Inc and Nvidia Corp in development and use of technology for making smaller but faster semiconductor chips.

Intel has started to resolve its manufacturing problems, said Patrick Gelsinger, who returned to Intel as its chief executive of the company earlier this year. A large expansion plan of constructing new manufacturing units for the company in the United States and Europe was also announced in March by Gelsinger.

Intel has been able to beat out its rivals during a global chip shortage as it had operated its own factories, said the company which is amongst the very small number of companies in the processor chip industry that both designs and manufactures its own chips. However its sales could be hit this year because of shortfalls of other third-party components that are required for building complete computers.

According to data from FactSet, analysts had expected Intel to report first quarter revenues from its for PC chip business to be about $10.17 billion but the company reported sale revenues from this segment at $10.6 billion for the quarter, beating estimates.

The fact that Intel was able to complete the so-called organic substrates, which are materials used to package delicate silicon chips into tougher housings so they can tolerate being put onto circuit boards, in its own factories was partly responsible for the being able to exceed PC chip expectations, Gelsinger said in an interview to the media.

Intel was able to mitigate a global shortage of the substrate materials because of the changes and “generate millions of units of more supply”, Gelsinger said.

“We were able to satisfy our customer commitments, as we expect that we’ll be able to do through the rest of the year,” Gelsinger said. “If we are able to gain more leverage in our supply chain, which we have lots of tools to go do, I expect we’ll both have beat our guidance for the year and gain more market share for the year.”

But with the roll out of Covid-19 vaccines all around the world and workers returning to offices, the momentum in the PC segment is likely to wane, according to Angelo Zino, senior equity analyst at CFRA Research.

Intel said it expects 2021 adjusted revenue and profits of $72.5 billion and $4.60 per share, above analyst estimates of $72.32 billion and $4.58 per share, according to Refinitiv data.

(Adapted from Reuters.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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