Yesterday after the US stock market, $Intel(INTC)$, the former chip hegemon, released its third quarterly results that exceeded expectations. The company is expected to return to double-digit growth in the fourth quarter, triggering a 7.66% rise in after-hours shares.
Intel is the birthplace of Moore's law, once leading the chip market for decades. However, with the rise of $Taiwan Semiconductor Manufacturing(TSM)$, Intel's core business was eroded by $Advanced Micro Devices(AMD)$ and $NVIDIA Corp(NVDA)$, and chip manufacturing process improved slowly, dubbed by investors as "toothpaste factory".
Two years ago, Intel released IDM2.0 strategy, which plans to achieve a breakthrough of five nodes in chip manufacturing process in four years, and regain its hegemon position in the chip market by 2025.
As the semiconductor market suffered a downward cycle last year, Intel's core business declined sharply, the stock price plummeted. The capital market was skeptical of the four-year five-node plan. With the release of the third quarter results, Intel is expected to complete the feat.
Specifically, Intel's revenue in the third quarter was $14.158 billion, down 7.7% year-on-year, exceeding analyst expectations of $13.54 billion, and exceeding the 13.9 billion revenue ceiling given by management:
In terms of revenue growth, Intel's performance ushered in a significant inflection point. According to the fourth quarter of $14.6-15.6 billion revenue forecast, Intel will return to growth, and is expected to achieve double-digit growth!
By businesses, the core client computing business revenue in the third quarter was $7.867 billion, down 3.2% from the same period last year, and the decline was sharply narrowed compared with previous quarters, mainly due to the end of the global PC market destocking.
Data center business revenue was $3.814 billion, down 10.4% year on year, still weak. Network and edge business revenue was $1.45 billion, down 32% year-on-year. Autonomous driving business revenue was $530 million, an increase of 17.8% from the same period last year, which was significantly better than the 1.3% decline in the previous quarter.
Foundry business revenue was $311 million, a year-on-year surge of 298.7%, mainly because Intel implemented its open foundry strategy, packaging business improved rapidly in the third quarter:
Unlike AMD, NVIDIA and other competitors who are only responsible for design regardless of manufacturing business model, Intel has always adhered to the IDM strategy. That is, design-manufacturing is completed by itself.
Before the CPU market was eroded by AMD, mainly AMD gave up the IDM model, the manufacturing is entrusted to TSMC, relying on the latter's advanced manufacturing technology to obtain more advanced products, and then erode Intel's market share.
Therefore, the core of Intel's return to the dominance of the chip market lies in whether its manufacturing process can catch up with or surpass TSMC.
In its third quarterly results, management detailed the progress of the manufacturing process, its first intel 4 using EUV process has been mass produced. According to the evaluation of the research institute, the performance of this process is slightly better than that of TSMC 5 nm.
However, William Grimmi, Intel vice president and Logic technology Research and development product engineering manager, pointed out that the focus of the Intel 4 process is on power efficiency, and chips made with the Intel 4 process are most suitable for use in notebook computers.
The more advanced Intel 3 will start production by the end of the year, and the further Intel 18A has already received an advance payment from a customer, and two more customers are expected to sign with Intel. That means Intel's advanced manufacturing technology has been recognized by other customers.
With the support of advanced processes, Intel has launched better performance chips, and the era of superimposed AI PC is coming. Intel expects artificial intelligence to stimulate the long-dormant PC market.
According to preliminary statistics from Gartner, the global personal computer (PC) market shipped 64.3 million units in the third quarter of 2023, down 9% from the third quarter of 2022.
While the third-quarter results represent the eighth consecutive quarter of decline in the global PC market, Gartner expects the market to return to growth starting in the fourth quarter of this year and to grow by 4.9% in 2024!
By the end of the year, Intel will also install the world's first high numerical aperture EUV for commercial use. If Intel really achieves its goal of returning to the world's advanced chip manufacturing plant in 2025, the era of superimposed AI PC comes, Intel may return to chip hegemony!
If Intel really completes its 2025 return to the world's advanced chip manufacturing plant goal, the era of superimposed AI PC, Intel is fully likely to return to chip hegemon!
At present, Intel's valuation is significantly lower than the historical average, and it will set off a vigorous market after third-quarterly results:
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