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The Exiled · 29.10.2024., 19:24

Citiraj:

Inside Intel, CEO Pat Gelsinger fumbled the revival of an American icon

Citiraj:

Pat Gelsinger took the reins as Intel CEO three years ago with hopes of reviving the American industrial icon. He soon made a big mistake. Intel had a sweet deal going with Taiwan’s TSMC, the giant manufacturer of semiconductors for other companies. TSMC would make chips that Intel designed but could not produce. And it was offering deep discounts to Intel. Instead of nurturing the relationship, Gelsinger – who hopes to restore Intel’s own manufacturing prowess – offended TSMC by calling out Taiwan’s precarious relations with China. “You don't want all of your eggs in the basket of a Taiwan fab,” he said in May 2021, using industry jargon for a chip fabrication plant. That December, encouraging U.S. investment in U.S. chipmakers, he said at a tech conference: “Taiwan is not a stable place.”

In public, TSMC downplayed the comments, with its founder calling Gelsinger “a bit rude.” Privately, TSMC said it would no longer honor the discount: about 40% off the $23,000, 3-nanometer wafers on which TSMC would print chips for Intel. Intel had to pay full price, shrinking its profit margin on the deal. Gelsinger’s affront to Taiwan was part of a series of missteps during his time as Intel CEO. He inherited a troubled company that had lost its edge in manufacturing skills and had ceded to rivals the hugely lucrative markets for chips used in mobile phones and artificial intelligence. But Gelsinger compounded those problems.

Gelsinger set sky-high expectations for Intel’s manufacturing and AI capabilities among major clients but fell short, losing or canceling contracts or unable to deliver the promised products. He issued optimistic public projections for AI-chip deals that were far higher than Intel’s own internal sales forecasts, company insiders say. And like TSMC, Gelsinger sought to transform Intel into a "foundry," an operation that makes chips designed by other companies. But Intel’s efforts to regain manufacturing leadership with a chip-production process called 18A have faced delays and technical problems, with some customers so far declining to use it.

Izvor: Reuters

Citiraj:

Intel set for big drop in quarterly revenue as chipmaker struggles to bounce back

Citiraj:

Intel is expected to report its biggest quarterly revenue drop in five quarters on Thursday, potentially signaling more erosion of data center and personal computer market share for the once iconic American chipmaker. Shareholders have turned their focus to CEO Pat Gelsinger's attempts to salvage the company's lost market lead as losses mount at its contract manufacturing business, while Intel fails to capitalize on the generative AI-driven chip boom, after a series of missteps including passing on an investment in OpenAI. With Wall Street expecting Intel to report an 8% decline in revenue to $13.02 billion, according to data from LSEG compiled as of Oct. 26, investors want Gelsinger to provide clarity on his plans to get the company's latest manufacturing technology up and running.

Gelsinger, who took the CEO role in 2021, has cut jobs, suspended dividends and also landed a new chipmaking deal with existing customer Amazon.com - one of the company's first major deals for production on its latest 18A tech. But that has failed to soothe investors, with the stock down more than 50% this year. Intel's market value has also dipped below $100 billion. While some investors are seeking updates on Intel's progress in setting up advanced 18A manufacturing technology, which is set to launch in 2025, others want the company to spin off its manufacturing business, which would leave it with the chip design business.

Its foundry is expected to post an operating loss of $2.55 billion alone in the quarter weighed down by the capital-intensive process of running and expanding fabs. The chipmaker is expected to post a drop of more than 7 percentage points in adjusted gross margin to 37.9%, according to LSEG-compiled estimates. Margins are also likely to be pressured by a production ramp-up of Intel's chips for AI-powered PCs - which the company has been betting on to drive demand resurgence in the segment. But that recovery has yet to materialize, with sales in Intel's PC unit likely to decline over 6% in the third quarter.

The winner likely is AMD whose PC chip revenue is expected to grow more than 18% in the third quarter, according to estimates compiled by LSEG. AMD is set to report results for the third quarter after the close of markets on Tuesday. AMD is also chipping away at Intel's server market share. The Lisa Su-led company is expected to report a more than two-fold rise in data center revenue thanks to its AI chips, while Intel's data center revenue is expected to drop about 17%, the 10th consecutive quarter of declines. While Intel still has a big share of the server CPU market, demand has been shifting to AI graphics processors - where it has little presence.

Izvor: Reuters