2023-08-04 09:41:59
For decades, the American chip group Intel sat on the throne in the semiconductor sector. Over time, however, the company has been trumped by both domestic competitors such as AMD and Nvidia and Asian industry giants such as Samsung and Taiwan Semiconductor (TSMC). Accordingly, the Intel management has made it its task to want to build on earlier heydays.
When it comes to contract manufacturing, the so-called “foundry business”, there is hardly a way around TSMC today. AMD, on the other hand, has made a name for itself in the business with data centers, which are becoming increasingly important thanks to cloud computing, among other things, while Nvidia meanwhile dominates the news situation relating to the future market of artificial intelligence. In this environment, Intel is in danger of falling into oblivion. However, the group has made investments to return to the top.
Subsidies secure new plants
So far, these plans have not been well received on the stock market because they involve large expenditures. These would be even higher if Intel could not expect high subsidies for the construction of new production plants – also because after the outbreak of war in Ukraine and the trade dispute with China, the West would like to produce many more chips in Europe and the USA again.
The German federal government, for example, intends to inject up to almost 10 billion euros in subsidies for new plants in Magdeburg. Intel itself speaks of investing 80 billion euros in the European Union over the next ten years. These should take place along the entire semiconductor value chain.
It is precisely at this point that many stockbrokers criticize Intel, which has caused the Intel share price to fall in recent years. In mid-March 2021, Intel stock was just over $66. Prices are currently around $35.
—
— (–)
NASDAQLondonSwitzerland OTCTradegateXetraLang & SchwarzFrankfurtStuttgartBrusselsSwitzerlandSwitzerlandVienna
For detailed view
Intel’s competitor AMD has done well in the past by separating its chip contract manufacturing business under the Globalfoundries name. Instead, they focus on developing and testing chips. These are then manufactured by companies such as Samsung or TSMC.
However, Intel has not yet dared to take a similar step. However, the question arises as to which companies would want to have chips manufactured by Intel when they are competing with each other at the same time. At least there is some movement on this point. In a way, Intel has laid the foundation for a split: Contract manufacturing is to present its own profit and loss account in the future. This means that the development area is treated like an external customer who has to order the chips to be manufactured.
Weak PC market
Intel also has to deal with various problems in the short term. This includes the PC market, which is still weakening – even if a look at the results for the second quarter has shown that the bottom could soon be over here. All in all, the latest quarterly results were well received by the market. Probably also because few market participants no longer had too much confidence in Intel. Sales fell 15 percent year-on-year to $12.9 billion. Adjusted earnings per share were 13 cents. However, analysts had expected a loss of only around $12 billion in revenue.
In his analysis of the numbers, Barclays analyst Blayne Curtis, for example, said that a somewhat faster recovery in the PC market would have provided positive surprises in the results and the low expectations could be exceeded. But he also said he saw little evidence of stronger growth. Therefore, in the case of Intel shares, the “equal weight” rating remains, while the price target is only slightly raised from $30 to $32. Price phantasy somehow looks different, even if, over a decade, a EUR 10,000 position has become almost EUR 20,000 despite all the crises.
Good regional focus
Nevertheless: Barclays is not the only analysis company that is currently not feeling any major impetus in the Intel share. Ross Seymore, an analyst at Deutsche Bank, also only gives a “Hold” rating, while JP Morgan’s Harlan Sur even has an “Underweight” rating on the stock. Mizuho analyst Vijay Rakesh gives Intel shares at least a “neutral” rating, but sees “challenges” in the future market of artificial intelligence, of all things, while AMD would exert competitive pressure in other areas. This should probably make it difficult for Intel to return to the top of the world for the time being.
Christoph Scherbaum Published/Updated: , Recommendations: 18 Christoph Scherbaum Published/Updated: , Recommendations: 15 Christoph Scherbaum Published/Updated: , Recommendations: 6 Christoph A. Scherbaum Published/Updated: , Recommendations: 8
Without continuous investments, no state can currently be made in the chip sector. Still, investors are looking (more) closely, as this week’s look at German chip giant Infineon shows. In Intel’s case, investors must balance glorious history with future opportunities, and not all have yet. This illustrates the skepticism of many analysts. Still, the focus on the United States and Europe could play Intel into the cards should geopolitical uncertainties return.
#Intel #future #investments #chip #factories