Business collapses: high losses at the chip company Intel

The shrinking PC business is hard on the US chip manufacturer Intel. The result: a loss of $664 million within three months. The prospects for the company also remain bleak for the time being.

The American chip giant Intel has been hit hard by the shrinking PC market and is also weakening in the data center business. In the two most important pillars of the group, sales fell by more than 30 percent in the past quarter. Operating profit collapsed by more than 80 percent.

The bottom line is that the company made a loss of 664 million dollars – after a profit of a good 4.6 billion dollars a year earlier, as the group announced yesterday after the US stock market closed. Group revenue fell 32 percent year over year to $14 billion last quarter. Operating income from Intel’s PC division fell to just $699 million – from around $3.8 billion a year earlier. The group cites investments in future chips and production processes as one of the reasons.

No improvement in sight

Intel boss Pat Gelsinger referred to the weak economy when presenting the bad figures. For the current quarter, he also gave no prospect of improvement. The group expects a loss of more than 600 million dollars in the current quarter. According to the forecast, revenues will be between 10.5 and 11.5 billion dollars. Analysts had expected significantly more. The reaction on the stock exchange was not long in coming: In yesterday’s after-hours trading, the share fell by almost ten percent.

Sharpest decline since the 1990s

In the PC chip business, Intel’s sales fell by almost 36 percent to $6.6 billion. According to calculations by the analysis company Gartner, sales of computers fell by a good 28 percent in the past quarter. That was the sharpest drop since the company first entered the market in the mid-1990s.

In the first few years of the corona pandemic, sales of computers – especially notebooks – had grown explosively. In the meantime, however, demand is falling sharply. Intel does not yet know when this dynamic will change.

“We stumbled, right? We lost shares, we lost momentum. We believe that will stabilize this year,” said CEO Gelsinger at a conference call on the numbers. The manager has been at the helm of the group since February 2021, since then Intel has had to endure severe losses on the stock exchange.

Competition for Intel is increasing

According to calculations by the market research company IDC, Intel still dominates the market for PC and server chips with a market share of over 70 percent. In 2017, however, this was still more than 90 percent.

On the other hand, competitors such as Advanced Micro Devices (AMD) have caught up strongly. According to IDC estimates, AMD now has a market share of 13 percent in the lucrative market for data centers. In this area, Intel’s revenues fell by around a third. Increasing competition is also coming from graphics chip maker Nvidia and previous customers like Apple or Amazon, who are developing their own chips.

Intel is also heavily behind schedule with some chip products, such as the microprocessor codenamed “Sapphire Rapids.” “Sapphire Rapids was about two years late, and that’s why AMD overtook them,” said Bob O’Donnell of TECHnalysis Research. Worse still for Intel, performance metrics released by the two companies show AMD’s latest server chip outperforming the Sapphire Rapids on “common workloads,” according to Bernstein analyst Stacy Rasgon. Against this background, the market should eagerly await the figures from Intel’s competitor AMD, which will present its figures next Tuesday.