Intel said Thursday that it has made substantial progress addressing serious manufacturing problems with its next generation of microprocessor, a crisis that helped prompt the company to replace its CEO earlier this month.
As the chipmaker told employees last week, Intel will postpone a decision on whether to outsource its leading-edge manufacturing to rivals in Asia until incoming CEO Pat Gelsinger has had a chance to review the company’s options.
On Thursday, though, Gelsinger told investment analysts that he is “confident the majority of our 2023 products will be manufactured internally.”
While Gelsinger said Intel likely will outsource more chips to contractor manufacturers, his comments Thursday are another signal that he is unlikely to fundamentally upend Intel’s operations when he takes over on Feb. 15.
Investors and analysts have suggested Intel should consider spinning off or selling the company’s factories, a step Intel has steadfastly resisted despite major delays to each of three consecutive generations of chip technology.
Instead of a radical change, Gelsinger appears committed to rebuilding Intel’s engineering. Chip industry trade publication AnandTech reported this week that retired Intel researcher Glenn Hinton will be returning to the company and Gelsinger said Thursday there will be more such announcements soon.
“We need to become more agile in a very competitive market,” Gelsinger told Wall Street analysts on Intel’s quarterly earnings call. “Intel culture and values must be healthy and vibrant.”
Intel is a year behind in developing its forthcoming generation of 7-nanometer microprocessors, the latest in a string of setbacks in the company’s chip development process. Last fall, Intel said that if its factories cannot reliably deliver new chips the company may outsource its leading-edge chips to a contract manufacturer -- presumably either Taiwan Semiconductor Manufacturing Co. or Samsung.
That would have a profound effect in Oregon, where Intel engineers and manufactures each new generation of chip technology. The company is Oregon’s largest corporate employer, with 21,000 workers in Washington County.
On Thursday, though, outgoing CEO Bob Swan claimed “tremendous progress” in fixing the problems with the 7nm processors. He said the company has made fundamental changes to the chips and the manufacturing process to address the problems.
“By rearchitecting these steps we have been able to resolve the defects,” Swan said.
While Intel’s technology development process has faltered, its sales are unexpectedly strong. The company said Thursday that strong PC demand helped boost revenue last quarter:
- Fourth-quarter sales were $20.0 billion, flat from a year earlier but well above the $17.4 billion Intel had forecast. Annual sales were $77.8 billion, up from $72 billion in 2019.
- Quarterly profits totaled $5.8 billion, or $1.42 a share. That compares to $6.9 billion, $1.58 a share, in the fourth quarter of 2019. Full-year profits were $20.9 billion, $4.94 a share. In 2019, profits totaled $21.0 billion, $4.71 a share.
- Intel said it expects sales of $18.6 billion in the current quarter, down from sales of $19.8 billion in the first quarter of 2020. The company did not issue a full-year forecast, a change from past practice, but said it will do so no later than April, when it reports first-quarter results.
Intel released its results shortly ahead of schedule, just before financial markets closed. Intel shares finished the day up 6.5% at $62.46. That’s the stock’s highest point since June.
Shares are up 17% since January 13, when the chipmaker unexpectedly announced that former Intel chief technology officer Gelsinger will return to the company, 12 years after he left. Gelsinger is currently CEO of VMware.
Intel’s technology development has faltered repeatedly in the time Gelsinger has been away. TSMC and Samsung have exceeded Intel’s manufacturing technology, while chip engineering companies AMD, ARM Holdings and NVIDIA have produced a string of innovations that threaten Intel’s market position.
The opportunity to restore Intel’s leadership was a major factor in his decision to return to Intel after turning down past overtures, Gelsinger told analysts Thursday.
“This is a national asset,” he said. “This company needs to be healthy for the technology industry, for technology in America.”
-- Mike Rogoway | mrogoway@oregonian.com | twitter: @rogoway | 503-294-7699
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