Connect with us

International Circuit

Intel Says Customers Stockpiling Chips On U.S.-China Tension, Hikes Forecast

Intel Corp forecast current-quarter profit and revenue above estimates and raised its full-year revenue forecast on Thursday, allaying concerns about a global semiconductor sales slowdown and curbs on U.S. sales to China’s Huawei Technologies Co Ltd.

The chip industry is in a slowdown, with research firm Gartner forecasting a 9.6% drop in global semiconductor revenue in 2019, to $429 billion. U.S.-China trade tensions, including tariffs on some products and the restrictions on sales to Huawei, are pressuring chipmakers.

But those factors did not trouble Intel, which was the second chipmaker this week to beat analysts’ earnings estimates. On Tuesday, Texas Instruments Inc said U.S.-China trade tensions were not hampering its ability to conduct business in China.

Intel’s chief financial officer, George Davis, told Reuters the company had resumed some product sales to Huawei that comply with U.S. regulations. Tariff threats between the United States and China actually helped second-quarter sales by about $400 million, Intel executives said.

“Customers concerned about supply risk in the second half of the year related to those items pulled in some demand into the second quarter,” Davis said in an interview. “It isn’t a net add to the full year (forecast), but it certainly de-risks some of the full year.”

Intel reported second-quarter revenue of $16.5 billion and adjusted earnings of $1.06 per share. Analysts on average had expected revenue of $15.7 billion and adjusted earnings of 89 cents per share, according to IBES data from Refinitiv.

But it was the company’s forecast that drove up shares, with third-quarter revenue and profit forecast to be $18 billion and $1.24 per share, above analysts’ estimate of $17.72 billion and $1.16 per share.

The company estimated 2019 revenue of $69.5 billion, instead of the $69 billion it told investors to expect in April. Chief Executive Bob Swan told investors on a conference call that Intel has two factories now producing 10-nanometer chips – the next generation of manufacturing technology which Intel has struggled to bring online – and said plans to produce 7-nanometer chips by 2021 remain on track.

“We’re most impressed by progress on 10-nanometer ramp,” Abhinav Davuluri, an equity analyst with Morningstar, said.

Intel also said it planned to sell the majority of its modem business to Apple Inc for $1 billion. About 2,200 Intel employees will join Apple, which will acquire a trove of patents under the deal.

Davis told Reuters the payment was all cash. Intel will retain the rights to make non-smartphone modems for self-driving cars and PCs under the deal.

The company estimated a $500 million after-tax gain from the sale of the modem business.

After years of acquisitions outside its core area of processing chips under previous leaders, Swan has set a goal of becoming more disciplined about spending, slowing investments in areas like memory chips and shedding struggling businesses.

Dan Ives of Wedbush Securities said the sales were a step in the right direction.

“We believe further divestitures of non-core businesses would certainly make (Intel) look more attractive, while allowing management to more closely focus on improving core operations increasing the likelihood of future execution, but we are not yet convinced management will move in this direction,” he said in a note.

Revenue in Intel’s client computing business, which caters to PC makers and remains the biggest contributor to sales, rose to $8.84 billion, beating FactSet estimates of $8.13 billion.

Revenue from Intel’s higher-margin data center business rose to $4.98 billion, above estimates of $4.89 billion according to FactSet.

Intel, the biggest provider of processor chips for PCs for decades, has come to count on data center chips for most of its revenue growth.

Net income fell to $4.2 billion, or 92 cents per share, in the second quarter, from $5 billion, or $1.05 per share, a year earlier. Net revenue fell 3% to $16.5 billion.―Reuters

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!