Intel profits cut by component shortages and Chinese video game crackdown

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Intelligence Corp.

INTC 1.14%

disappointed investors even as it posted stronger earnings in the third quarter as component shortages weighed on computer shipments and China’s crackdown on computer games hurt sales of server chips.

Intel, which powers many personal computers, on Thursday reported third-quarter revenue of $ 19.2 billion, up 5% from the previous year, generating net profit of $ 6.8 billion of dollars. Adjusted sales, excluding revenue from memory operations that Intel sells to South Korean firm SK Hynix Inc., reached $ 18.1 billion, below Wall Street’s forecast of $ 18.2 billion .

Intel shares, which closed up 1.14% Thursday, fell more than 8% after-market on results.

Analysts, ahead of the results, warned that PC sales would suffer as parts shortages hamper computer sales.

Intel CEO Pat Gelsinger said there are “inventory and supply challenges” for power controllers and Ethernet components that limit the ability of his customers to buy more laptops and servers despite a significant delay.

Sales fell 10% for the unit, which includes chips for laptops. The impact was partially offset by strength in Intel’s office business and higher prices amid high demand as vendors shipped higher-value devices.

The chipmaker said sales of its data center unit rose 10% to $ 6.5 billion, in part thanks to the resumption of the economic effects of the pandemic. The result, however, did not live up to Wall Street forecasts.

Mr Gelsinger said some data center customers serving the Chinese video game market were adapting their operations after the country started cracking down on the time children spend playing video games. China said in August it was placing limits on young players to tackle what it called youth video game addiction.

“We expect this to recover,” Gelsinger said.

The chip shortage is expected to slowly start to improve over the next year, Mr Gelsinger said, even if he sticks to his projection it could possibly extend into 2023.

The time lag between a company ordering a chip and its delivery has climbed to an average of 22 weeks, Susquehanna analyst Christopher Rolland said, adding that the length of time is the longest since he started tracking data in 2013. .

The number of semiconductors in a modern car, from ignition to brake system, can exceed a thousand. As the global chip shortage continues, automakers from General Motors to Tesla find themselves forced to adjust production and rethink the entire supply chain. Illustration / video: Sharon Shi

Last month, Gelsinger pledged to invest up to $ 95 billion in new chip production capacity in Europe, adding to more than $ 20 billion in investment in U.S. factories that he detailed earlier as Intel tries to meet the increased demand for semiconductors and become one of the leading contract chip makers. . Semiconductor manufacturing in Taiwan Co.

, the world’s largest contract chip maker, announced this month that it will build a new chip manufacturing plant in Japan, and Samsung Electronics Co.

and manufacturer of memory chips Micron Technology Inc.

are among others with expansion plans.

To provide short-term relief, Gelsinger said Intel was working with automakers particularly affected by the shortage. The company, he said, would dedicate the manufacturing capacity of one of its factories in Ireland to the automatic chip business and create a chip design team to help others tailor their designs so they can use them. Intel’s manufacturing capabilities.

Intel, for the current quarter, said it expects revenue of $ 19.2 billion. Wall Street is forecasting sales of $ 19.4 billion over the period. Annual sales are expected to reach $ 77.7 billion, Intel said.

Intel also said CFO George Davis plans to retire in May. The company said it was moving an Investor Day scheduled for November to next year pending the arrival of a new CFO.

On the call, Davis said adjusted sales next year are expected to reach at least $ 74 billion, above analysts’ expectations, with revenue growth accelerating in subsequent years. Profitability, he said, would affect margins over the next two to three years as the business invests before growing again. Capital spending could reach $ 28 billion in 2022, he said, and potentially increase further in subsequent years.

Write to Meghan Bobrowsky at [email protected]

Corrections and amplifications
Intel shares closed up 1.14% on Thursday. An earlier version of this article incorrectly said Wednesday. (Corrected October 21)

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