The COVID-19 pandemic has made personal computers more important than ever, and sales have skyrocketed for two years in a row. But the good times for PCs and chipmakers now seem to be fading fast. The drop in Chromebook sales last quarter has given way to an even bigger drop that is also hitting Windows makers, and today chipmaker Intel revealed a 25% decline in consumer chip sales. It says a “short-term cyclical downturn” is reducing the total PC market by about 10% this year.
“Some of our largest customers are reducing inventory levels at a rate not seen in the past decade,” Intel CEO Pat Gelsinger said during today’s earnings call.
Earlier this month, Gartner reported that the global PC market was already down 12.6% from a year ago. And today Apple also reported about a 10% drop in Mac sales, although Tim Cook suggested that he may have just sold his Mac inventory.
Back to Intel: Overall, the company is reporting a 22% drop in revenue to $15.3 billion for the second quarter of 2022, and its profits have actually turned negative – it’s lost half a billion dollars this quarter. That’s a 109% drop in profit from the $5.1 billion it had in the second quarter of 2021.
Intel plans to raise the prices of its chips later this year. Could this help? The company’s data center business also fell 16% in revenue and 90% in operating profit.
However, Intel’s losses are not all due to declining sales. In fact, the company’s slideshow shows that it lost half a billion dollars (operating loss) just to launch its disappointing first-generation GPUs. (During the earnings call, Gelsinger said the company won’t hit its GPU unit goal this year, but is expected to generate $1 billion in revenue by the end of the year. and Intel will ship A5 and A7 Arc desktop GPUs next quarter.)
It is also taking a loss of another $155 million to expand its foundry services business, which sees the company strike deals to produce chips for other companies including Qualcomm and MediaTek. Building chips for other companies is something the company has never done before, but is part of its new plan under Gelsinger.
Gross revenue aside, Intel today scored a major victory for this new strategy: Congress just passed the CHIPS Act that will approve $52 billion in funding for companies to manufacture chips in the United States. , and it is believed that a substantial part of this money will go to Intel. It seems extremely unlikely that the funding will actually solve the chip shortage or make the US a chipmaking powerhouse like its rivals in Asia, but Intel has promised (and temporarily withheld) factories and jobs based on the money. .
Intel also revealed today that it is exiting the Optane memory business – which it initially retained despite selling the rest of its SSD business to SK Hynix in 2020 – and confirmed that it has exited the business as well. of drones. Elon Musk’s brother Kimbal bought Intel’s drone lightshow business, The register reported earlier this month.
Intel also forecasts lower returns next quarter, but CFO David Zinsner suggests things could improve from there: “We expect the second and third quarters to be the company’s financial lows. .”
By comparison, Qualcomm announced yesterday that its phone chip business grew 59% in the last quarter to $6.1 billion.