Chip shortage fails to prevent Intel from 'best year ever'

Tencent Technology News On January 27, Intel is still suffering from the negative impact of chip shortage. It's hard to take advantage of the huge demand for new PCs caused by the COVID-19 pandemic, because you can't just make laptops out of Intel chips. However, that didn't stop Intel from ushering in its best fiscal year ever. In its just-released fourth quarter 2021 earnings report, Intel reported its highest ever quarterly revenue and highest annual revenue of $19.5 billion and $74.7 billion, respectively, and even set four other revenue records. Intel's profit, however, wasn't as optimistic: net profit in the fourth quarter was down 21 percent year-over-year and full-year profit was down 5 percent from 2020.

Intel CEO Pat Gelsinger warned that a shortage of chips from other vendors limited the company's growth during Intel's third-quarter 2021 earnings report, which was announced in October last year, when the company announced that revenue from its customer Computing Group (CCG) actually shrank by 2 percent. Today, Intel's fourth-quarter earnings report shows that the situation has not improved: CCG revenue has fallen by 7% year-on-year, also dragged down by laptops. Intel's report shows that the laptop's revenue fell 16 percent year-over-year because it couldn't ship at will as it thought, and although it could make more money from each computer, the average selling price of these laptop components rose by 14 percent.

But the desktop business grew, and other divisions of the company compensated for the decline, with Intel's data center division revenue up 20 percent year-over-year to $7.3 billion. Smaller businesses such as Intel's IoT Group and Mobileye (its self-driving car company) also saw more demand, up 36 percent and 7 percent, respectively, in the fourth quarter of 2020 compared to the fourth quarter of 2020. This year, the two figures have increased by 33% and 43%, respectively.

"Our Data Center Group (DCG) recorded fourth-quarter revenue following a strong recovery in the corporate and government server businesses," Intel said. The Internet of Things segment (IoTG) delivered record quarterly results reflecting strong demand recovering from the impact of COVID-19. The Customer Computing Division (CCG) generated another $10 billion in the first quarter, proving that personal computers are more important than ever. ”

Last October, Gelsinger said chip shortages wouldn't end until at least 2023, which is a bit bad for Intel because personal computers are now undergoing a renaissance. 2020 is the first significant growth in the PC industry in a decade, and earlier this month, market research firm Gartner and IDC reported that PC sales increased by an additional 10%-15% in 2021, with PC shipments of more than 340 million units, and the demand was large enough that IDC analysts said that if it were not for the shortage of supply, demand could be higher.

But Intel doesn't automatically profit from all of its growth, and it's not just because of limitations from other vendors. These days, Intel also faces more fierce competition. Many of the best laptops now don't carry Intel chips at all, but Apple and AMD. This has happened many times in the last decade! AMD will further advance in the field of notebook chips this year, and Qualcomm will once again join the competition. These are tough times for Intel to lag behind in processor technology, even though our first review of Alder Lake may seem helpful.

Intel does have some interesting moves to turn its fortunes around, including investing tens of billions of dollars in more chip manufacturing facilities. For example, Intel invested $20 billion in a new investment in Ohio. In addition, Intel is also developing a standalone graphics processor called Intel Arc. It looks like a dark horse that is expected to shake up the GPU market for desktops and laptops later this year.

On the fourth-quarter earnings call, Gel singh also spoke about chip shortages, particularly its impact on laptops. "Shortages of substrates, components and chips limit our customers' ability to transport and complete systems across the industry," he said. This is felt most strongly in the customer market, especially in the laptop market, but the limits have also broadly affected other markets, including automotive, IoT, and data centers. ”

He added: "As we predict, these ecosystem constraints are expected to persist into 2022 and 2023 as this period of time gradually improves." Later, Gel singh suggested on a conference call that components such as power controllers and display cover controllers are hard to find.

Intel CFO David Zinsner also noted that sales of laptops may also be affected by "inventory consumption as original equipment manufacturers (OEMs) struggle to address inventory imbalances caused by ecosystem constraints that limit their ability to ship systems in certain market segments." We're curious if that means we'll see older, less popular laptops being sold again.

But Gelsinger said Intel "has begun to see inventories return to pre-outbreak levels" and said the company's laptop processor shipments have been strong. "Tiger Lake has shipped more than 100 million tablets, making it the fastest-growing laptop in our history," he said. Intel previously announced that Tiger Lake shipped 30 million units last March.

"According to the timeline we set in July, the R&D program for Intel4, Intel3, Intel 20A and Intel 18A remains on schedule or ahead of schedule," GelSinger said. He was referring to the company's roadmap to next-generation process nodes that are getting smaller and smaller.

The U.S. semiconductor giant is in a period of transition after lagging behind rivals in chip manufacturing, which have already snatched it market share in some semiconductor categories. Gel singh, who took over as CEO in February 2021, has been working to reverse the decline and said in December that his turnaround plan could take more than five years.

Intel has expanded the company's chip manufacturing capabilities at home and abroad over the past year. Recently, the company announced that it will build a new chip manufacturing plant in Ohio and expects annual sales in the semiconductor industry to double from $500 billion to $1 trillion. Gel singh said: "My purpose as CEO is to expand our share in this growing market. So I have to invest and expand our capacity faster than doubling. ”

Meanwhile, Intel's plan to invest tens of billions of dollars in new fabs isn't necessarily popular with financial analysts. On the conference call, the company had to repeatedly defend itself in response to sharp questions about falling profit margins. Intel said profit margins should pick up at the end of the five-year window. This will come after fabs in Arizona and Ohio start producing chips in 2024 and 2025, respectively. (Small)