Looking Ahead, Good News/Bad News for Intel

Posted on July 27, 2018 by Paul Thurrott in Hardware, Mobile with 11 Comments

Intel surprised Wall Street with better than expected quarterly earnings, but the ongoing “10-nanometer debacle” shaved almost 10 percent off the firm’s stock price. In the good news front: Qualcomm warned this week that Apple may drop its modem chips from future iPhones, leaving Intel as the sole supplier.

“After five decades in tech, Intel is poised to deliver our third record year in a row,” Intel CFO and Interim CEO Bob Swan said in a prepared statement yesterday. “We are uniquely positioned to capitalize on the need to process, store and move data, which has never been more pervasive or more valuable.”

Intel’s results are indeed impressive: The chip giant posted profits of $5.3 billion on revenues of $17 billion, improvements of 37 percent and 15 percent, respectively, over the same quarter one year ago. The firm said that its revenues from data center businesses grew 26 percent in the quarter while PC-centric revenues grew 6 percent, beating the market.

But Intel has been dogged by its inability to transition its CPUs from a 14-nm manufacturing process to a smaller and more efficient 10-nm process. And in a post-earnings conference call, the firm said that this transition would be delayed yet again, this time to late 2019. Worse, server-based 10-nm chips won’t ship until at least 2020.

As a result of this warning, various analysts have dropped their ratings for Intel’s stock, triggering a sell-off. And the stock price has plunged 8.7 percent since the earnings announcement, to $47.62 at the time of this writing.

Intel’s inability to deliver 10-nm chipsets in volume is understandably troubling. But that hasn’t stopped the company from consistently outperforming the PC market during the years-long sales downturn. And the arrival of more efficient PCs based on Qualcomm Snapdragon ARM chips hasn’t impacted Intel in the slightest.

Besides, there’s good news to be had, too: This week, Qualcomm said in its own post-earnings conference call that it expects chipmaking rival Apple to drop its modem chips from future iPhones. And that leaves Intel, the only other modem supplier for iPhone, in a great position.

“We believe Apple intends to solely use our competitor’s modems rather than our modems in its next iPhone release,” Qualcomm CFO George Davis said. Intel is the only other competitor that currently supplies modems for the iPhone.

This is obviously a huge win for Intel. But it is perhaps ironic that Intel’s modems are so inferior to those that Qualcomm makes that Apple actually slows down the Qualcomm modems so that all iPhones behave identically.

Obviously, Apple isn’t choosing Intel because it prefers inferior technology. Instead, the consumer electronics giant is embroiled in a years-long legal battle concerning mobile chipset patents. And with Apple the likely loser in this battle—the U.S. International Trade Commission (ITC) supports Qualcomm’s claims that Apple is violating its patents—the company is lashing out at Qualcomm by threatening to remove its chips from the iPhone.


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Comments (11)

11 responses to “Looking Ahead, Good News/Bad News for Intel”

  1. madthinus

    Intel is already producing some 10nm chips. In limited quanity since their yields has not been great to date. They have made NAND and Optane modules using 10nm for some time. In the end, their need to go to 10nm is more driven by profit than market pressure. Also, the Intel 10nm is not the same as a 10nm Samsung/Global Foundaries/TSMC process. So I am not so sure anymore that it is all doom and gloom for Intel. Last rumors I have read about their 7nm process is that it is shaping up much faster than 10nm did.

    The real area to watch Intel is in the datacentre market. AMD's first gen Epyc did not pose a huge threat there, but Epyc 2, because it can just drop into the same design, might be a bigger headache. It takes time to validate a CPU for datacentre, and now is about the time to start watching out for impact of marketshare movements between AMD and Intel in that market.

  2. ibmthink

    The 10 nm disaster continues. Intel hasn't been impacted by Windows on ARM yet, but its continued inability to deliver may present an opportunity for Qualcomm next year. At some point, the rumored Snapdragon 1000 will come along. Intel risks losing a huge chunk of the PC market to Qualcomm.

    The 14 nm production is at its limits, which is evident by all the heat and throttling issues of the current 8th gen chips.

    • Daekar

      In reply to ibmthink:

      I didn't realize anything except the i9 Macbook Pro had heat and throttling issues, and supposedly that is due to bad drivers or (as a technician I keep up with is claiming) poor hardware design. I have an 8th-gen quad-core in my newly-rebuilt PC and it's the most bang-for-buck I've ever gotten from an Intel chip - runs cool too, with the stock cooler. Who else besides Apple is having problems?

      • ibmthink

        In reply to Daekar:

        Its a mistake to only focus on the MacBook Pro and not the rest of the laptop market.

        The thing is that the 8th Gen CPUs can only achieve their max clock rates (and performance) by consuming far more energy than their TDP would normally allow. Its a trick to enable better performance without actually making the chips more efficient – because really those CPUs are the 2nd time that Intel released warmed up Skylake technology. The 14 nm process has been improved since Skylake, but there are limits.

        To achieve their maximum performance, CPUs like the Core i7-8550U have to consume 45 W (rated at 15 W TDP). The i9 can even consume 100 W. The lower end chips are not the problem, its the high-end CPUs. Most laptops that will ship with the i9 will never even come close to bring out its full potential, because these laptop designs are made for 45 W CPUs (its nominal TDP).

        It gets worse when you consider the sad state of the ultra-low-power Y series CPUs. This is an area where Intel simply can't use the trick to let the CPU consume more, which is why there hasn't been any progress in this class. This is the CPU class that would profit the most from the move to 10 nm chips, as Intel has planned to move them to quad core designs as well. Now that won't happen until late 2019 or early 2020.

        These CPUs aren't used in many laptops today, because their performance sucks. But potentially, with the move to four cores, it could enable the PC manufacturers to create new, innovative and fanless Ultrabook designs. This is a class of PC that Qualcomm wants to claim with the Snapdragon CPUs.

      • Martin Pelletier

        In reply to Daekar:

        I've seen that the 6 cores consume more than they should

  3. Stokkolm

    Paul, do you expect Apple to eventually announce that they have developed their own LTE modems?

  4. Waethorn

    The technology industry is in the shitter. From media manipulation on social networks, censorship, spying, consumer malaise in establishment software, as well as hardware upgrade cycles, and now hardware defects across the board, there isn't a bright light anywhere.

    • FalseAgent

      In reply to Waethorn:

      I don't think the technology companies are the problem, the problem is Wall Street. Facebook and Twitter are trying to do the right thing, but Wall Street doesn't reward that. Facebook has been warning that growth would need to slow down because it's unsustainable for a while now, but zero market correction happened.

      Microsoft still makes dough from Windows and Office but their stock price only goes up when Microsoft ignores all that and say stuff like "intelligent edge and cloud".

      Wall Street is a special type of cancer.

  5. Martin Pelletier

    AMD may have an opportunity to gain market share. The thing that worry me is the lack of info about their fixes on the new Spectre variant bugs that is showing lately that is hurting Intel. Since AMD must be compatible, they must have the same bugs.

    But seeing AMD using 7nm for Epic 2 and new GPU, they have a window to sell more and get more traction before Intel start to roll again stumping everything.

    Even nVidia are producing 7nm chips for their GPU.

  6. FalseAgent

    I think the desktop PC market will be well served by AMD, because they seem to be beating intel to 10nm designs at this point. Zen 2 processors on 7nm are expected to be released next year. If Intel misses this deadline, their sales will take quite a hit. If Intel meets this deadline, AMD would still have a more efficient chip than Intel.

    My only real worry is thin-and-light laptops and which still heavily rely on Intel.

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