Looking Ahead, Good News/Bad News for Intel
- Paul Thurrott
- Jul 27, 2018
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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.”
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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.