Intel Narrowly Misses Earnings Predictions, Pushes Ahead to 14nm
January 16, 2014 4:17 PM
Despite struggles with divide focus, production issues, Intel remains strongly profitable
pleasant surprise from Taiwan Semiconductor Manufacturing Comp
., Ltd. (
) (TSMC), many analysts were hoping for something similar from Intel Corp. (
), the U.S. chipmaking veteran that for decades has enjoyed a dominant position in the personal computer industry. Instead, Intel missed analyst estimates offering yet another indication of the lessening importance of the traditional PC and the growing role of mobile devices, a sector in which Intel struggled.
I. Swing and a Miss
In Q4 2013, Intel pulled in revenue of $13.8B USD, narrowly better than the $13.7B USD or $13.72B USD that analysts surveyed by
Thomson Reuters I/B/E/S
(respectively) estimated. Revenue was up 3 percent on a year-to-year basis (from Q4 2012).
The miss came in net profit, which came in at $2.63B USD, or $0.51 USD/share. Analysts had expected $2.68B USD ($0.52 USD/share), according to both
and Thomson Reuters I/B/E/S. Net income was up 6 percent on a year-to-year basis.
Most of that gain came from the data center group, which grew revenue 8 percent. The traditional PC Group was flat in revenue on a year-to-year basis.
Intel CEO Brian Krzanich brags about his company's next generation upcoming SoC product at IDF 2013 in Sept. [Image Source: WCCF Tech]
The "Other Intel architecture operating segment", which includes Intel's smartphone processor efforts grew even more -- 9 percent in a year-to-year basis. But that revenue growth did not necessarily grant profit -- growth in past years has come at the cost of
increasing net losses
from the unit, one of Intel's three core businesses. The quarterly gain was also not enough to stop Intel's yearly revenue total from dropping for a second year straight on mobile struggles.
Intel continued to share the wealth with shareholders, paying $1.1B USD in dividends. It also spent $528M USD to repurchase 22 million shares.
II. No XP Bump
Analysts were disappointed to see that the upcoming
for Microsoft Corp.'s (
still widely used Windows XP
wasn't driving fresh sales.
Alex Gauna, an analyst at JMP Group Inc. (
), comments to
The prevailing view coming in was that things are getting better. The quarterly result and forecast says that things are still not very good.
Chief Financial Officer Stacy Smith tries to cast a more cheery spin on the results, while admitting to PC declines, stating:
[Q4] was a return to financial growth for the company. Specific to the PC market, it is getting better. But, consistent with third-party estimates, we’re expecting a small, single-digit decline [in PC sales].
In a comment with
the Intel exec tried to reassert that PCs were still a "strong" market, blaming the U.S. government for a decline in orders. He comments:
The PC market was a little stronger than we thought. What's driving PCs right now are the innovative form factors we've been working on... We saw a tapering off in order patterns across certain customers in certain segments at the end of the quarter, and we think that was driven by the government shutdown and the uncertainty around the debt ceiling.
In terms of outlook, Intel plans to cut its capital spending to $11B USD this year and expects revenue to be flat at $48.3B USD. It also expects its gross margin -- a measure of profitability -- to drop from 62 percent in Q4 to 60 percent, on average in 2014. Intel expects a $1B USD quarter-to-quarter (QoQ) drop in revenue in Q1 2014, and also warned of a $200M USD restructuring charge, which should damage the net profit.
III. Intel's Process Lead May be Disappearing
Eroding Intel's margins in Q4 were higher than expected capital spending costs of $4.8B USD. Intel is currently in the process of transitioning its desktop and mobile chips to the 14 nm node. After the traditional tapeout and die fixes Intel hoped to proceed towards a volume release in Q3 2014 of
, the world's first 14 nm consumer CPU product. Instead, the die fixes didn't work as well as expected and Intel was forced to make further corrections and
to Q4 2014
Defects at 14 nm forced Intel to delay one of its processors. [Image Source: Intel]
TSMC is putting pressure on Intel, transitioning to 20 nm this quarter. Intel still has some advantages thanks to its 3D transistor technology, but TSMC is actually expected to produce processors on a smaller node than Intel for nearly four quarters, although the actual sales window will be shorter, given OEM integration times. Still it is likely we will see 20 nm TSMC product before we see 14 nm Intel product.
TSMC also had plans to tapeout 16 nm, 3D transistors next year. And Samsung Electronics Comp., Ltd.'s (
expected to tape out 20 nm this year
, reaching volume production next year.
[Image Source: Jason Mick/DailyTech LLC]
Intel is trying to expand
its contract fabrication abilities
, but it isn't necessarily in as strong a position as some might think. Intel recently announced it would
only be upgrading two of its facilities for 14 nm production
this year, upgrading several other facilities for 22 nm production. At 22 nm, Intel's older fabs will have a leg up on TSMC's older 28 nm fabs, but will be behind TMSC's latest 20 nm fabs.
With only two capable of 14 nm production, supply will be limited. Intel will be doing well to fully satisfy global PC demand; mobile efforts will likely stay stuck at the 22 nm node. That's not to say that we won't see 14 nm smartphone CPUs from Intel in late 2014 or early 2015. But even if we do see such chips, Intel is unlikely to be able to produce them at high enough volumes to serve top OEMs' flagship devices.
Intel promises it will move faster in the mobile market, with CEO Brian Krzanich stating:
Intel was slow to respond to the ultra-mobile PC trend. We will move Atom even faster to our leading-edge silicon technology.
But how he's going to accomplish this with only two 14 nm fabs for the near future appears unclear.
Intel's 14 nm yield is improving, but the company still is delaying the release of the new product a bit. [Image Source: Intel via ExtremeTech]
, who was appointed last May, has
a tough challenge ahead
as he tries to preserve the declining PC business, while growing Intel's embattled entrants in the booming mobile markets. As the fierce competition between Samsung and TSMC -- two companies solely focused on mobile -- has shown, it's hard enough to win market share even if you spend a lot and are solely focused on mobile. For Intel, whose focus is divided, it's a daunting challenge.
Another long-term problem is the path ahead after 7 nm transistors, which Intel plans to release in 2018. A die shrink or two more might be possible, but eventually you're running out of atoms to have a workable transistor.
Intel's node-size expertise will be less valuable than companies' like Samsung and Micron's chip-stacking expertise. [Image Source: Micron]
At that point the clearest direction would be to build 3D circuits with multiple layers. But companies
or Micron Technologies
) may suddenly gain the upper hand when that happens. Where Intel's expertise is in node shrinks, Samsung and Micron have become the experts in stacked chipmaking as that technology is already driving the push of DRAM and NAND circuitry to greater densities. Intel -- which also produces NAND -- has certainly spent some time researching the technology, as well, but has somewhat less experience with it.
At one time it would be simple to just say, "Oh, Intel will just spend more and eliminate this lead."
But in 2013 Samsung spent $22B USD on chipmaking capital expenses, precisely twice Intel's investment of $11B USD. And the talent gap is nowhere near what it once was, with many of the best U.S. chip designers having migrated to Samsung or TSMC.
“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads
TSMC: We're "Far Superior" to Intel and Samsung as a Partner Fab
January 17, 2014, 2:20 PM
Intel's Arizona Chip Plant Being Put on Hold
January 15, 2014, 10:42 AM
Samsung: Roadmap: Folding 4K Display Smartphones, Custom 64-Bit Cores, and LPDDR4
November 6, 2013, 3:32 PM
Intel to Play Fab for an ARM Chipmaker: Understanding What the Altera Deal Means
October 31, 2013, 5:16 PM
Intel's 14 nm Broadwell Chips are Bumped a Quarter Due to Defects
October 16, 2013, 4:01 PM
ASUS RT-AC5300 – Ultimate Game & 4K Streaming
April 18, 2017, 7:45 AM
HP Envy 17t Touch – All-Day Battery for All-Day Portability
April 13, 2017, 6:29 AM
ASUS Chromebook Flip C302CA – Your Versatile Flexible Companion
April 11, 2017, 6:14 AM
What is the best Processor for gaming? AMD or Intel
April 2, 2017, 6:30 AM
Arris Motorola SB 6141 – High Range of Compatibility and Internet Speeds
March 28, 2017, 7:55 AM
Comparison – Samsung Galaxy TabPro S Vs Microsoft Surface Pro 4
March 21, 2017, 7:40 AM
Most Popular Articles
Surface Pro 5 Rumors - New Release Date and Price
April 22, 2017, 6:45 AM
ASUS RT-AC5300 – Ultimate Game & 4K Streaming
April 18, 2017, 7:45 AM
Dell Inspiron 17 7000 – A Premium Laptop featuring 7th Gen Intel Core i7 in a 2-in-1 Frame.
April 19, 2017, 7:45 AM
Meet the Smartphone with four cameras - Alcatel Flashphone
April 5, 2017, 11:20 AM
Vivo V5 Plus – the Selfie Softlight is on You.
April 17, 2017, 7:05 AM
Latest Blog Posts
Samsung Galaxy S8 – Warning for Pet Owners
Apr 24, 2017, 5:59 AM
Sound Bars and the Costs?
Apr 23, 2017, 6:30 AM
Link your Brain to Your Computer – In Four Years…Maybe
Apr 22, 2017, 7:03 AM
Google Home can now identify users by their voice.
Apr 21, 2017, 7:15 AM
Amazon Lex – Now Available for Developers.
Apr 20, 2017, 6:58 AM
You can now use Instagram offline on your Android Smartphone
Apr 19, 2017, 8:00 AM
Now you can livestream to YouTube from your mobile device.
Apr 18, 2017, 8:05 AM
Google Home – Is It a Spy Device?
Apr 17, 2017, 7:30 AM
Apple added to self –driving test permit list
Apr 15, 2017, 6:21 AM
Project Scorpio – Coming on June 11
Apr 14, 2017, 6:20 AM
Looks Like Samsung Has Been Forgiven.
Apr 13, 2017, 6:50 AM
United Airlines - Blasted on China’s Social Network and the Stock Market
Apr 12, 2017, 6:50 AM
Amazon's Third-Party Sellers Hacked
Apr 11, 2017, 6:25 AM
Microsoft Surface Pro5 Details Revealed
Apr 9, 2017, 6:41 AM
Own An Android Phone? Then you could be hacked over Wi-FI
Apr 7, 2017, 6:47 AM
Apple confirms iOS 10.3 bug and its effect on iCloud Services
Apr 6, 2017, 6:30 AM
Apple Rolls Out New Version of Apple Music
Apr 5, 2017, 10:35 AM
Apple in the News
Apr 4, 2017, 9:03 AM
Apple iPhones Will Soon Feature Graphics Chips Designed BY Apple
Apr 3, 2017, 6:23 AM
AMD Ryzen Desktop Processors Performance
Apr 2, 2017, 6:30 AM
What makes a camera Lensless?
Apr 1, 2017, 7:45 AM
Google halts Android Wear 2.0 Update Due to Bug
Mar 31, 2017, 7:27 AM
More Blog Posts
Copyright 2017 DailyTech LLC. -
Terms, Conditions & Privacy Information