Intel CEO Sees Prolonged Chip-Supply Constraints
By Paul Ziobro
Intel Corp.'s new chief executive said a global chip-supply
shortage could stretch two more years as the U.S. semiconductor
giant posted weaker quarterly earnings.
Pat Gelsinger said the supply constraints that have affected
some sectors of the global economy for months will continue until
more capacity comes online to meet chip demand for everything from
automobiles to electronics.
"This will take a while until people can put more capacity in
the ground, " he said in an interview. "It's just the way it is
when you're building new factories."
The CEO, who is fast-tracking efforts to re-energize the
company, said the outlook projecting sales of $77 billion this
year, $500 million higher than previously expected, is a "supply
constrained guide" for the year.
Intel on Thursday said first-quarter sales fell 1% to $19.7
billion. Net income, weighed down by costs of a legal settlement,
was $3.4 billion. Excluding the pending sale of its memory business
and other items, Intel said revenue was $18.6 billion and net
income was $5.7 billion. Wall Street on average expected the
company to report first-quarter sales to $18.6 billion, including
sales from the memory business, and net income of $4.3 billion,
according to analysts surveyed by FactSet.
Intel's stock fell around 1.3% in after-hours trading.
Mr. Gelsinger this month laid out an ambitious strategy for
Intel to become a major contract chip maker in addition to making
semiconductors to satisfy its in-house requirements. The plan
includes a $20 billion spending commitment to build two new
semiconductor plants in Arizona. "This is a pivotal year for
Intel," he said Thursday.
The CEO, on the job since February, also pledged to make some
production capacity available swiftly to help alleviate a broader
shortage of chips that has caused disruptions across a range of
industries, in particular car production.
The White House this month met with executives from the chip and
other industries to help determine what action it should take to
address the shortage and strengthen the domestic chip-building
industry. President Biden previously pledged to fix the chip
shortages and included $50 billion for the semiconductor industry
in his expansive infrastructure-spending package.
Intel's sales drop comes despite strong demand for chips
broadly. Vivek Arya, a semiconductor analyst at Bank of America,
said ahead of Intel's results that the company is being held back
by several factors. Among those are that a surge in demand for
personal computers is centered largely on lower-end devices like
Chromebooks, while Apple Inc. is ditching Intel for in-house chip
designs on some of its equipment. And after a strong year of
spending on data centers, outlays this year are expected to advance
at a slower pace, he said.
Mr. Arya expects Intel's sales growth to trail that of the
broader sector, which he projects will increase around 15% this
Mr. Gelsinger is trying to rebuild a company that has suffered
repeated setbacks in making its most advanced chip and that has
lost ground to Asian rivals. Mr. Gelsinger last month said the
company was making progress on its newest chips, though analysts
have said they want more detail.
Intel also has said it would increase outsourcing of some chip
production to keep pace, he said.
The company also is contending with increased competition.
Nvidia Corp. -- which last year overtook Intel as American's most
valuable chip company -- and Advanced Micro Devices Inc. have taken
market share. Nvidia this month also said it would start selling
central-processing units for data-centers, a market Intel has long
dominated. Intel this month introduced an enhanced data-center
Mr. Gelsigner said despite projecting slower sales growth than
its rivals, Intel aims to recapture lost ground. "We are out to
gain market share," he said.
Intel had $5.6 sales in the data-center business, missing
analysts expectation of $5.9 billion in sales. Profitability of
that business was hammered by research and development spending,
the company said, and costs associated with ramping up production
of a new chip.
Intel's effort to become a contract chip maker also isn't
without hurdles. The company has tried to break into that market
before, with little success. And its chief rivals, Taiwan
Semiconductor Manufacturing Co. and Samsung Electronic Co., are
readying their own multibillion-dollar spending plans to expand.
TSMC last week raised its capital-expenditure plan for this year to
$30 billion while lifting its sales forecast. Samsung has earmarked
$116 billion in investment by 2030 to diversify chip
Mr. Gelsinger has said Intel is planning additional chip
investments. The company could benefit from the bipartisan support
in Washington for U.S. chip companies. For instance, Intel is
bidding on a Pentagon contract to help fund domestic chip-making to
meet government security needs.
Intel said it expects revenue for the current quarter of $18.9
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
April 22, 2021 17:27 ET (21:27 GMT)
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