Intel disappoints with sales – shares collapse

However, Gelsinger’s race to catch up with new plants in Europe and the USA as well as ultra-modern processes will devour many billions – and that scares investors. In after-hours trading on Thursday evening, the share price collapsed by nine percent. As early as the fourth quarter, profitability will suffer, the Intel management warned when announcing the latest results.

The earnings per share will probably decrease by 40 percent. “In the short term, we could have chosen a more conservative path with slightly better results,” said Gelsinger. But for him it is about long-term success, and for that he has to invest.

Next year Intel will invest 28 billion dollars, with a turnover of at least 74 billion dollars, explained CFO George Davis. That corresponds to almost 40 percent of the proceeds. For comparison: the German chip manufacturer Infineon wants to invest 20 percent of sales. That is already well above the 13 percent that the Dax group usually puts in factories and equipment.

But Intel is losing market share. This is shown by the figures for the third quarter. Sales have climbed by five percent to the equivalent of 15.5 billion euros. The profit shot up by half to six billion euros.

The rival Nvidia has recently grown more dynamically. In the quarter that ended on August 1, the revenues of the Californians increased by more than two thirds to the equivalent of around 5.6 billion euros. At the same time, profit has almost doubled to around 2.2 billion euros.

Apple breaks away from Intel

TSMC is also growing faster. The world’s largest contract manufacturer achieved record sales of a good eleven billion euros between July and the end of September, an increase of a good 16 percent. The profit climbed by 14 percent to the equivalent of 4.1 billion euros.

Intel specializes in processors, they are the brains of every computer. Infineon, Germany’s largest chip manufacturer, on the other hand, achieves most of its sales with so-called power semiconductors. They are required for the power supply of electric cars, computers or solar systems.

Another problem for Intel: More and more long-term customers are also building their own chips. At the beginning of the week Apple presented new notebooks with processors developed in-house. Step by step, the brand is replacing Intel semiconductors and will then be completely eliminated next year.

Despite the concerns of the stock exchange, the expert Shiv Tasker Gelsinger sees it on the right track: “He knows how to swear the whole company to his plans.” There is definitely a chance of overtaking the competitors again. “The technological lead in the chip industry is only ever enough for two or three years,” says the Capgemini consultant.

But it is important that Gelsinger does not lose any time. Tasker expects further competitors in Intel’s traditional business with processors for PCs, notebooks and servers. The cell phone chip specialist Qualcomm in particular has good chances, but Google and Amazon must also keep an eye on Intel.

The attackers would have an advantage because they are working with a fundamentally different technology, namely the architecture of the chip designer ARM. This allows more energy-efficient components to be designed. Intel, on the other hand, relies on the so-called X86 architecture, which has established itself in computers over the past few decades.

Intel also wants to become a contract manufacturer

Gelsinger has meanwhile massively rebuilt Intel internally. He created two new divisions: one should concentrate on software, the other on high-performance computers and graphics. Gelsinger has combined purchasing and production under one roof. At the same time, the CEO hired numerous external managers, some of whom, like himself, had already worked for Intel for many years.

In addition, the group owner has created its own division for contract manufacturing. Like TSMC, Samsung and Globalfoundries, Gelsinger also wants to produce chips for competitors. “This is a good strategy to get the most out of the capital invested,” says Capgemini chip expert Peter Fintl. Because in this way Intel could continue to use its factories, even if they are no longer suitable for the latest processor technologies.

Whether the Intel boss can implement his expansion plans also depends on politics. Only with government support could new plants be built in Europe and America, says Gelsinger: “We are in competition with Asian suppliers and have to be competitive.”

The chances are not bad that Gelsinger will receive subsidies in Europe. The member states would have to fully commit to the EU’s plan to increase the share of global semiconductor production to 20 percent by 2030, said Italian Prime Minister Mario Draghi this week. French President Emmanuel Macron also wants to support the industry.

The biggest advocate is EU Commissioner Thierry Breton. The Frenchman is vehemently in favor of setting up a state-of-the-art chip production facility in Europe and is urging a quick decision on subsidies. It would take five to seven years for the works to be finished. “So we have to start now.”

The reorganization at Intel demands further sacrifices

The subsidies are controversial because the European industry hardly needs chips like those manufactured by Intel. Instead, it employs more mature technologies. But spending tax money on it is grotesque, said Gelsinger. The European automakers would also need the most highly integrated semiconductors in a few years.

Meanwhile, Gelsinger is far from finished with the in-house renovation. On Thursday night, CFO Davis announced that he would be leaving in May. He was one of the few top managers who remained in office after the change in boss.

More: Boost for the share: Infineon wants to become more profitable with the concept of the virtual factory.