Despite recent gains fueled by government backing and AI optimism, Intel’s future remains uncertain as the company grapples wiht manufacturing challenges and a disappointing revenue outlook.the chipmaker’s stock fell as much as 12% on Thursday following a revenue forecast that fell short of Wall street expectations, highlighting the fragility of its ongoing turnaround strategy.
Revenue Miss Underscores Manufacturing Concerns
Intel anticipates revenue between $11.7 billion and $12.7 billion for the quarter ending in March, a figure below the $12.6 billion predicted by analysts.A company executive expressed disappointment,stating they were “not able to fully meet the demand in our markets,” despite acknowledging the launch of a new personal computer chip as an “important milestone.” While the company reported $13.7 billion in revenue for the quarter ending in December – slightly exceeding expectations of $13.4 billion – the forward-looking guidance has rattled investors.
The 18A Challenge: Yields and Costs
A key component of Intel’s revitalization plan centers on its new 18A manufacturing process for high-end chips. However, the company is currently struggling to achieve satisfactory “yields” – the percentage of functional chips produced. According to one analyst,raising the yield from 18A is critical to completing the company’s turnaround. While yields are currently “in line with our internal plans,” the Intel chief conceded they are “still below what I want them to be.” The rollout of 18A is also driving up costs in the short term, though Intel anticipates thes costs will decrease with increased production volume.
Future of 14A and Key Customer Acquisition
The company has even warned it could abandon its next-generation 14A manufacturing technology if it fails to secure commitments from major clients like Apple and Qualcomm. Though, during a recent call with analysts, the Intel chief struck a more optimistic tone, noting that several “big customers” are currently evaluating 14A. The company anticipates firm supply decisions from these clients beginning in the second half of this year,extending into the first half of 2027.
US Government Support and the AI Race
Intel’s ambition to establish a US-based alternative to Taiwan Semiconductor Manufacturing Company (TSMC) in the advanced chip manufacturing arena has garnered significant support from the White House. Former President Donald Trump recently celebrated the launch of the US-made Panther Lake chip, claiming the government has already profited “tens of billions of dollars” from its 10% stake in Intel, acquired in August. Further bolstering Intel’s position, the company secured $2 billion from SoftBank and a $5 billion investment from Nvidia during the last quarter. Intel’s foundry business generated $4.5 billion in revenue, exceeding the expected $4.2 billion.
Financial Performance and Industry Headwinds
despite these investments, Intel reported a net loss of $591 million for the December quarter, falling short of consensus estimates. The company is also facing capacity constraints at TSMC, where it still relies on outsourcing some chip production. Furthermore,a broader industry shortage of memory chips,driven by demand from AI data center builders like Micron,Samsung,and SK Hynix,is exacerbating challenges.
Competition and Ongoing Demand
Intel’s core product division, encompassing PC and customary data center chips, reported $12.9 billion in revenue, surpassing the forecasted $12.7 billion. Though, the company continues to face intense competition in the PC chip market from rivals like AMD and Qualcomm. Despite these headwinds, demand remains strong, and Intel is aggressively working to increase supply and navigate the complex landscape of the global semiconductor industry.
