Intel says customers stockpiling chips on US-China tension

July 26, 2019 07:46
Intel forecast that third-quarter revenue and profit will reach US$18 billion and US$1.24 per share respectively, above analysts’ estimate of US$17.72 billion and US$1.16 per share. Photo: AFP

Intel Corp. forecast current-quarter profit and revenue above estimates and raised its full-year revenue forecast, allaying concerns about a global semiconductor sales slowdown and curbs on US sales to China’s Huawei Technologies Co. Ltd., Reuters reports.

Intel shares rose 4.9 percent to US$54.70 in extended trading on Thursday.

The chip industry is in a slowdown, with research firm Gartner forecasting a 9.6 percent drop in global semiconductor revenue in 2019, to US$429 billion. US-China trade tensions, including tariffs on some products and the restrictions on sales to Huawei, are pressuring chipmakers.

But those factors did not trouble Intel, which was the second chipmaker this week to beat analysts’ earnings estimates. On Tuesday, Texas Instruments Inc. said US-China trade tensions were not hampering its ability to conduct business in China.

Intel chief financial officer George Davis told Reuters the company had resumed some product sales to Huawei that comply with US regulations. Tariff threats between the United States and China actually helped second-quarter sales by about US$400 million, Intel executives said.

“Customers concerned about supply risk in the second half of the year related to those items pulled in some demand into the second quarter,” Davis said in an interview. “It isn’t a net add to the full year [forecast], but it certainly de-risks some of the full year.”

Intel reported second-quarter revenue of US$16.5 billion and adjusted earnings of US$1.06 per share. Analysts on average had expected revenue of US$15.7 billion and adjusted earnings of 89 US cents per share, according to IBES data from Refinitiv.

But it was the company’s forecast that drove up shares, with third-quarter revenue and profit forecast to be US$18 billion and US$1.24 per share, above analysts’ estimate of US$17.72 billion and US$1.16 per share.

The company estimated 2019 revenue of US$69.5 billion, instead of the US$69 billion it told investors to expect in April.

Chief executive Bob Swan told investors on a conference call that Intel has two factories now producing 10-nanometer chips – the next generation of manufacturing technology which Intel has struggled to bring online – and said plans to produce 7-nanometer chips by 2021 remain on track.

“We’re most impressed by progress on 10-nanometer ramp,” said Abhinav Davuluri, an equity analyst with Morningstar.

Revenue in Intel’s client computing business, which caters to PC makers and remains the biggest contributor to sales, rose to US$8.84 billion, beating FactSet estimates of US$8.13 billion.

Revenue from Intel’s higher-margin data center business rose to US$4.98 billion, above estimates of US$4.89 billion according to FactSet.

Intel, the biggest provider of processor chips for PCs for decades, has come to count on data center chips for most of its revenue growth.

Net income fell to US$4.2 billion, or 92 US cents per share, in the second quarter, from US$5 billion, or US$1.05 per share, a year earlier. Net revenue fell 3 percent to US$16.5 billion.

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