Intel issues warning over falling sales in 2019 - but hints that 5nm chips could be on the way
CEO Bob Swan hints that the company's parallel 5nm process developments are on track - unlike its much-delayed 10nm manufacturing processes
Intel has issued a profits warning, after lowering its revenue and earnings forecasts for the second quarter and the rest of 2019.
In an earnings conference call on Thursday, the Santa Clara, California-based semiconductor giant reported its first dip in data-centre processor sales in seven years - aftter only last year indicating that it was struggling to keep up with demand from that market, prioritising data centre sales over the low-end PC market.
Intel's stocks dipped seven per cent in after-market trading on Thursday over the company's "cautious" outlook.
Intel said it earned revenue of $16.1 billion in the first quarter of 2019. Its data centre business earned $7.5 billion in the first quarter, while the PC-focused product lines brought in $8.6 billion in revenues.
The chipmaker now forecasts $69 billion in revenue for the current financial year, a revenue decline of three per cent compared to the previous fiscal year.
The forecast is specifically gloomy for the second quarter as the company expects to see a revenue drop of eight per cent compared to the second quarter of 2018. The company believes it may 'only' earn $15.6 billion in the second quarter, lower than analysts' estimates of $16.85 billion.
Intel's newly installed CEO Bob Swan said that the company has been forced to lower its revenue forecasts for the full year because of "headwinds" among customers in China and other parts of the world.
Intel's sales into the cloud computing market in China had more than doubled during the first three quarters of 2018, but turned negative after that.
Swan said that Intel is currently in the midst of a transition that will enable the company to expand its market reach by creating specialist chips for various niche segments, ranging from automotive to high-performance supercomputing devices, among others.
Swan added that, while the transition is ambitious, it will be a bumpy journey at the same time. According to Swan, Intel has started making 10nm chips for products that will be launched later this year, although leaked roadmaps indicate that mainstream availability could take longer than expected - assuming the leaks are authentic.
The shift to 10nm technology has strained Intel's margins. The company has experienced repeated delays and cost overruns in the development of its troubled 10nm process, and it has also been forced to spend more than anticipated on its R&D division.
Interestingly, perhaps, the company also claims that it has been developing 5nm technology in parallel and is on-track for its deployment in the near future.
"Our team is focused on expanding our market opportunity, accelerating our innovation and improving execution while evolving our culture," Swan said during the conference call.
"We aim to capitalise on key technology inflections that set us up to play a larger role in our customers' success, while improving returns for our owners," he added.
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