The data center business is the main source of Intels profits. As the weak economy affected sales to large companies and government customers, Intels revenue from the data center business group in the third quarter was $5.91 billion, down 7% year-on-year, 4.8% less than the markets expected $6.21 billion. Intel also expects orders related to cloud servers to slow down.
Some commentators believe that the financial report confirmed that Intel is still in the deepest crisis in at least a decade. In the past three decades, although other U.S. chip companies have either closed down or sold parts manufacturing plants, Intel has insisted that it can improve its operations and design and manufacture of semiconductors. Today, such a strategy is being questioned.
In a conference call after the earnings announcement, Intel chief executive Bob Swan said he was still deciding how many products to outsource. Executives also said the new crown epidemic increased the demand for cheap chips, which impacted the companys data center business and predicted that these adverse factors would pass.
Cody Acree, an analyst at loop capital markets, said he did not accept Intels blame for the decline in data center performance on the epidemic. He believed that the market demand for personal computers had increased in the past few months, which showed that the impact of the epidemic on market demand was not so big:
I didnt hear any answers to the biggest questions.
Chief financial officer George Davis said Intels cloud business is doing well, but it is likely to slow down in the next quarter. He also said demand for other types of data center customers (companies and governments) fell 47% in the third quarter after growth in the first half.
For Intel, gross margin is one of the most important indicators of market attention. According to Intels guidelines, the gross profit margin in fiscal year 2020 may be below 60% for the first time in seven years.
King Ngai Chan, an analyst at Summit insights group, said:
In 2021, the main problem facing Intel is still the pressure of gross profit rate, and the leading position is further weakened due to the delay of process node progress.
For many technology companies, as customers invest in equipment and software for telecommuting and education, the epidemic has brought more orders - PC shipments in the United States hit a 10-year high in the third quarter.
In addition, due to the gradual normalization of telecommuting, cloud service providers such as Amazon and Microsoft also see strong market demand.
Davis said on the conference call that the production of the new generation of advanced chips is growing, while the production cost is higher. The increasingly fierce competition and the ever-changing demand situation is a challenge for companies which are already facing increasingly fierce competition environment and internal chip production problems. The company is facing fierce competition from AMD, which is eating into Intels historically dominant market share in PCs and server CPUs. According to mercury research, AMDs share of personal CPU rose to nearly 20% in the second quarter. AMD is in talks with chip maker Xilinx Inc. to become a stronger competitor to Intel. Source: Wall Street news editor in charge: Zhong Qiming_ NF5619
Davis said on the conference call that the production of the new generation of advanced chips is growing, while the production cost is higher.
The competition is more intense
The ever-changing demand situation is a challenge for companies that are already facing increasingly fierce competition and internal chip production problems.
The company is facing fierce competition from AMD, which is eating into Intels historically dominant market share in PCs and server CPUs.
According to mercury research, AMDs share of personal CPU rose to nearly 20% in the second quarter. AMD is in talks with chip maker Xilinx Inc. to become a stronger competitor to Intel.