Intel Corporation (NASDAQ: $INTC): Changing Out the Conductor in Semiconductors

Intel

Intel has a new CEO and has survived earnings, but it’s been on a losing  streak. People are asking if it can return to its status as the world’s dominant semiconductor and CPUs firm, and only one man has the answer.

For a while now, the previously dominant computer chip company, Intel, has been on the backfoot; Intel Corporation (NYSE: $INTC) recently announced that they would be delaying their next round of semiconductors until 2022, setting them back behind competition such as AMD and Nvidia by more than a year. The stock plummeted 21% within a week of that announcement. However, Intel’s prospects seem more hopeful in context of recent developments.

Intel surpassed expectations by 27.6% on earnings, while beating total revenue estimates by 12.7%. Intel amassed a total revenue of $20 billion, which contributes to their feat of maintaining five consecutive years of record revenue counts. They also increased their dividends, which signify a solid cash base for the company and will draw in more investors.

Intel’s FY2020 results. Intel had their Q4 2020 earnings call on Jan 21.

How did Intel’s stock price do after earnings then? 

While the stock rallied during market hours, Intel gave back nearly all their gains in after-hours trading. This probably was because Intel’s earning results were leaked early by a cyberattack; while Intel isn’t completely sure about the specific cause of the release, it has been confirmed that a private infographic outlining Intel’s performance was made public without authorization. While this doesn’t speak to Intel’s technical ability, a lack of cybersecurity certainly does not catalyze investor confidence.

Besides that fiasco, the lack of next-generation semiconductors is still a big red flag for investors Intel just began releasing their 10 nanometer chips last year, and will not have 7nm chips out until 2022. To put that into perspective, firms like AMD and TSMC are already caught up to date on their chips that are 7 nanometers; TSMC, in fact, has already released a 5nm chip and is also working on a 3nm chip. This fact places Intel both in last place and several steps behind its rivals.

Intel is not only behind in the race for quality but also in the race for quantity; they’re facing a multi-front war in both their supply and demand. Last year, Apple announced that they would no longer be using Intel as a supplier and instead would be working with TSMC, the very competitor that is surpassing Intel; Intel is facing increasing pressure to quit their own manufacturing processes altogether and become customers of companies like TSMC. 

Pat Gelsinger, former CEO of VMware

Under new management

This is the situation that Pat Gelsinger, former CEO of VMware, is stepping into when he becomes the next Intel CEO on February 15. While Intel is surviving and is still the largest semiconductor company by sheer size, it’s literally years behind in the semiconductor race, and no one likes being handed a baton while in last place. 

Equity analysts, financial professionals, and other tech firms are expressing concerns, skepticism, and caution with regard to Intel’s future performance. Alan Priestly of Gartner cautions Intel as “competition now is much stronger than it ever has been.” Wayne Lam of CCIS Insight thinks Intel is close to “giv[ing] up” and outsourcing manufacturing to rival companies. 

 

“I think if [Intel] cannot get back on track, the competition now is much stronger than it ever has been, ever. So the competition will continue to gain share at Intel’s expense.” –  Alan Priestley, Vice President Analyst at Gartner.

Programming a better future, one line at a time

However, not all is lost. CEO of cloud software firm Fortanix, Ambuj Kumar, expresses his confidence in Gelsinger’s leadership and his ability to “lead Intel’s product development” to greater opportunities. And Gelsinger seems to draw on that same confidence; Gelsinger joined the earnings call on Jan 21st and made it unequivocally clear that he plans to make Intel the dominant, “unquestioned leader in process technology.”

As a former customer of Intel, Gelsinger has been well aware of Intel’s performance, and already has plans for business development; he plans to outsource production of certain lines of technologies in order to double down on Intel’s in house production of 7nm chips, which Gelsinger says are already regaining “health and recovery.” 

Intel is far from being the dominant semiconductor and microprocessor firm that it used to be. Rivals have been streaking past Intel for years, and the stumble on 10nm and 7nvm chips does not help. Still, Intel has found itself a new anchor runner, and with the baton in his hand, Pat Gelsinger and Intel may clinch the race in the end.

Christopher Koh
Christopher Koh

Christopher is a current 3rd year student at UCLA, pursuing a Bachelor’s in Economics and Political Science, and is seeking a career in buy-side finance. He works as an analyst for Internet Bull Report at UCLA, is the Director of Investments for the Business Law & Investing Society, and also worked as an investment banking analyst for Genz & Associates. Christopher’s passions include stocks, martial arts, and philosophy, and he spends most of his free time reading, cooking, and doing due diligence for his own stock portfolio.

No Comments Yet

Comments are closed