Intel sales forecast points to difficult second half of 2021 amid supply constraints

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Intel CEO Patrick Gelsinger attends a meeting with French President Emmanuel Macron (not shown) during the meeting of international business leaders at the fourth edition of the “Choose France” summit in Versailles, France on June 28, 2021. Photo taken on June 28, 2021. Stephane de Sakutin / Paul via Reuters

(Reuters) – Chip maker Intel Corporation (INTC.O) said Thursday that it continues to face supply chain constraints and provided a weak annual sales forecast pointing to a weak year-end.

The 2021 forecast for revised sales of $73.5 billion was higher than Wall Street’s expectations, seemingly driven by a strong second quarter ending June 26 and a modestly better-than-expected third quarter, indicating weakness in the fourth quarter. The results led the shares to decline by 2.8% in after-hours trading after the results.

Intel, one of the few remaining processor chip companies that designs and manufactures its own chips, has been able to weather supply chain problems better than some competitors, and is also building a chip-making business for others, called a “foundry” company.

Intel CEO Pat Gelsinger declined to comment on a recent report that Intel is looking to buy GlobalFoundries for $30 billion to bolster the foundry’s efforts, but told Reuters he expects industry consolidation to continue and that “mergers and acquisitions will continue to be part of our strategy” to build The company’s foundry business.

Intel raised its previous annual forecast of $1 billion from $72.5 billion earlier and exceeded expectations of $72.80 billion, according to Refinitiv IBES data. Intel expects adjusted third-quarter revenue of about $18.2 billion, slightly higher than estimates of $18.09 billion, according to Refinitiv data.

Logan Burke, an analyst at Edward Jones, said, “I think investors are expecting more from semiconductor companies in this environment, even though they have increased revenue guidance, it was only a 1% increase. The bulk of the change in earnings guidance was due to the lower tax rate.

Gelsinger said Intel could sell more chips if it could produce more chips. Although the company operates its own factories, it still faces supply restrictions from suppliers of materials and equipment.

“We are helping them build the factories as quickly as possible,” Gelsinger told Reuters. “But it’s going to be one of those things that only takes a few years to fully meet this explosive demand that we’re seeing, and we have better tools to address it than others.”

But some analysts disagree with Intel’s rosy view of the final demand. Citing a minor forecast this week from Texas Instruments Inc (TXN.O), Summit Insights Group analyst Kinngai Chan disputed Gelsinger’s view of the market and said Intel is likely to continue to “defend itself” against competitors like AMD with chips. better.

“We think the entire semiconductor supply chain will catch up in the fourth quarter of 21 because we believe there is a rampant double-demand in the supply chain coupled with moderation in market demand,” Chan said.

For the just-ended second quarter, Intel reported adjusted sales of $18.5 billion, well above analysts’ estimates of $17.80 billion, according to Refinitiv data.

Taking into account the second and third quarters, CFRA Research analyst Angelo Zino said that Intel’s slightly higher forecast for the full year indicates a shortfall in fourth-quarter sales versus previous forecasts — even though the fourth quarter is usually one of the better. Quarters where consumers are grabbing laptops and computers as holiday gifts. Intel has revealed that a one-time fee of $300 million will accrue in the fourth quarter, saying it is related to its business of selling supercomputers to the federal government.

However, Gelsinger told investors on a conference call that he expects the PC market to continue growing until 2022, contrary to expectations of some analysts.

Revenue from the company’s higher-margin data center business declined 9% to $6.5 billion in the second quarter, while revenue from its personal computing business rose 6%, beating Refinitiv’s estimate.

On an adjusted basis, the company earned $1.28 per share in the second quarter, compared to estimates of $1.06, according to Refinitiv data.

Additional reporting by Shafi Mehta in Bengaluru and Stephen Niles in San Francisco; Editing by Shunak Dasgupta and Diane Kraft

Our Standards: Thomson Reuters Trust Principles.

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