Patrick Gelsinger, CEO of Intel, speaks during an interview with Bloomberg Studio 1.0 at the company’s headquarters in Santa Clara, California, on February 3, 2022.
David Paul Morris Bloomberg | Getty Images
Intel shares fell about 6% on Friday after the company told investors at a meeting on Thursday that it would have to spend a lot over the next two years to encourage its turnaround and transformation into a producer for other semiconductor companies.
Shares also received a hit on Thursday when CEO Pat Gelsinger confirmed that a future server chip codenamed Granite Rapids had been postponed from 2023 to 2024.
The chip is especially important because it will be Intel’s first server processor to use extreme ultraviolet lithography, a key technology that Intel must deploy to catch up with TSMC and other leading chipmakers.
Gelsinger took over as CEO of Intel a year ago, promising to turn the company into a rival company such as AMD and former customers such as Apple began to challenge Intel’s status as the best processor manufacturer in terms of power and performance.
But the market’s reaction to Intel’s investor day highlights doubts the iconic chip maker faces from investors who worry that Gelsinger’s five-year turnaround plan will hurt profit margins and that his new chipmaking business is capital-intensive and risky.
“Some of you said,‘ How do I know you’re doing this? Help strengthen my confidence, ”Helsinger said.
Intel said on Thursday that the company plans to achieve 10% annual sales growth by 2025, but revenue growth this year will be “moderate”. Intel CFO Dave Zinsner said the company is entering an “investment phase” and expects negative free cash flow in 2022 of at least $ 1 billion as it increases capital expenditures.
For example, Intel is building $ 20 billion worth of chip plants in Arizona and Ohio and plans to announce a new European venture this year.
Intel Corp CEO Pat Gelsinger is speaking in an undated photo taken on July 26, 2021, when the company announced a four-year plan to overtake its competitors in chip manufacturing technology.
Intel Corp. | Reuters
Meanwhile, Intel also hopes to catch up with TSMC and Samsung’s chip production technology. In recent years, Asian chipmakers have bypassed Intel in terms of the “process node” they can use to produce microchips – TSMC runs on a 5-nanometer node and Intel remains on a 10-nanometer. (Smaller process numbers are more advanced and produce more efficient chips.)
The delay in the release of Granite Rapids suggests that despite Intel’s belief that it can catch up by 2026, creating new CPU production methods remains a technical and complex process vulnerable to delays. The company says it plans to introduce 5 new nodes in the next four years, a more aggressive plan than its competitors.
Helsinger said the release of the Granite Rapids chip was postponed so that it could be produced on a more advanced node, and so that Intel could introduce a new two-year release schedule for new core server chips.
“Granite Rapids is now a product running Intel 3, the new microarchitectural core that comes with it, so it’s a product with higher performance in the 24th. So we changed the roadmap and made it stronger,” Helsinger said. .
He added that he had talked to Intel server customers about the change. “We’ve been through all of our major customers, and they’re happy with the changes we’ve made.”
During Thursday’s meeting, Helsinger repeatedly acknowledged Wall Street’s skepticism about Intel’s turnaround plan. He said he wanted to double earnings per share, as well as double Intel’s “multiplier” or the value of shares and profits, but said it would require investor confidence.
Intel will begin reporting more information about its business units to help strengthen that confidence. “You will see how they all do and how we do what we have said we will do,” Helsinger said.