Intel foundry business continues to fall, to make Arm SoC on Intel 18A

Amid a PC slump, Intel posted a sharp fall in sales and profit as the chip giant is hopeful that the worst is over. Intel also confirmed the roadmap for five nodes is on track.

On April 27, Intel released its earnings report for the first quarter of 2023. Intel posted a revenue of US$11.7 billion, down 36.17% from a year ago, and registered a net loss of US$2.7 billion, the second quarterly loss in a row. Intel's Client Computing business saw a 37.59% decline in sales amid a PC slump where IDC data shows that global PC shipment declined by about 30% in the first quarter. Intel's foundry business witnessed a 58.3% annual drop, the largest fall among its businesses.

Intel expects its second-quarter revenue to be from US$11.5 billion to US$12.5 billion and a growth margin of 33.2% on a GAAP basis. According to Intel's press release, Intel increased the estimated useful life of certain production machinery and equipment from five years to eight years, hence expecting total depreciation expense in 2023 to be reduced by US$4.1 billion and result in an approximately US$2.3 billion increase to gross margin, a US$400 million decrease in R&D expenses, and a US$1.4 billion decrease in ending inventory values.

Intel CEO Pat Gelsinger said they remain cautious about the macroeconomic outlook and are focused on what they can control as they deliver on IDM 2.0. Intel CFO David Zinsner said that Intel exceeded its first-quarter expectations on the top and bottom line, adding that they are prioritizing the investments needed to advance its strategy and establish an internal foundry model.

Gelsinger said on the earnings call that Intel sees increasing stability in the PC market, which depleted a significant amount of inventory in the first quarter and is on track to be healthy by the end of the second quarter; however, the server and networking markets have yet to reach their bottoms as cloud and enterprise remain weak.

Gelsinger further said that Intel is quickly mastering EUV technology with Intel 4 as its first EUV node. Intel remains committed to delivering on five nodes in four years, achieving progress performance parity in 2024 and unquestioned leadership by 2025 with Intel 18A. Intel 7 is in high-volume manufacturing, and Intel is ramping up production wafer starts on Meteor Lake, which is based on Intel 4, with the product launch expected in the second half of the year. Meanwhile, Intel 3, Intel 20A, and Intel 18A are on track, said Gelsinger.

Meanwhile, Gelsinger revealed that the purpose his earlier trip to China was to work hard to complete the acquisition of Tower Semiconductor, which is reportedly delayed due to China's slow review.

According to Intel, Intel Foundry Services signed a multi-generation agreement with Arm to build low-power compute SoCs on the Intel 18A process, giving the design community a new foundry alternative and opening up new options and approaches for large ecosystem of Arm customers.

On the other hand, Mobileye continues to grow significantly faster than underlying automotive end-markets and reached record first-quarter revenue, up 16% annually with a 6% year-on-year increase in content per vehicle.

Source: Intel, April 2023

Source: Intel, April 2023