Intel’s third-quarter net profit of $1 billion fell 85% year-on-year

21st Century Business Herald reporter Ni Yuqing reported in Shenzhen

On October 28, Intel released its financial report for the third quarter of fiscal year 2022. According to the GAAP guidelines, Intel’s revenue was US$15.3 billion, a year-on-year decrease of 20%, and its net profit was US$1 billion, a year-on-year decrease of 85%. Under non-GAAP criteria, Intel’s revenue was US$15.3 billion, down 15% year-on-year; net profit was US$2.4 billion, down 59% year-on-year.

This year, the global semiconductor market is chilling, and upstream semiconductor chip manufacturers are under pressure on their profits. As of press time, Intel’s stock price was $26.27, down 3.45%, with a total market value of $107.865 billion.

Regarding the results of the third quarter, Intel CEO Pat Kissinger said: “Despite the economic downturn, this quarter achieved solid results and made important progress in product and process execution. In response to commercial Cycle impact, we are aggressively cutting costs and driving performance improvements across the business to accelerate turning our IDM 2.0 ‘flywheel’ towards a digital future.”

Looking at the business level specifically, Intel’s two core revenue pillars continued to decline by double digits year-on-year. Among them, the PC chip business (CCG) revenue was US$8.1 billion, down 17% year-on-year; the data center and artificial intelligence business (DCAI) related to server chips fell 27% year-on-year to US$4.2 billion.

Since the beginning of this year, the PC market has declined rapidly after the high growth in the previous two years. According to the “Global PC Market Quarterly Tracking Report” released by IDC, the global PC shipments in the third quarter of 2022 will be 74.3 million units, a year-on-year decrease of 15%, but still higher than pre-pandemic levels. With the sluggish demand in the end market, the profits of the upstream industry chain have declined, and the stock prices of major manufacturers have fallen.

In terms of data center business, on the one hand, global competition has become more intense, and Intel’s firm server chip market is also facing market share competition from competitors. On the other hand, under the influence of multiple factors such as the epidemic, the growth rate of data center demand in the Internet and other industries has slowed down, which also affects the chip price and growth space of data centers.

In the foundry business (IFS), revenue in the third quarter was $171 million, down 2% year-on-year. It is reported that Intel’s two advanced chip manufacturing plants in Ohio have been started, and Intel has also launched its first semiconductor cooperation investment plan, including an agreement with Brookfield to jointly invest $30 billion in a chip factory in Arizona.

At the same time, Intel’s three business divisions achieved revenue growth. The network and edge division (NEX) rose 14% year-on-year to $2.3 billion; the accelerated computing systems and graphics division (AXG) including GPUs recorded revenue of $185 million, an increase of 8% year-on-year; Mobileye, the autonomous driving unit, had revenue of $450 million, up 38% year-over-year.

On October 26, Mobileye landed on Nasdaq, and its stock price rose 38% on the first day of listing. Its latest market value is currently $21.818 billion, which is more than half of the initial market estimate of $50 billion. In 2017, Intel acquired Mobileye, an Israeli autonomous driving vision company, for $15.3 billion. In 2020, Intel acquired Moovit, an intelligent transportation company, and entered the field of autonomous taxi (Robotaxi) services, forming synergy with Mobileye.

Mobileye mainly focuses on the EyeQ series chips and chip-based ADAS (advanced driver assistance systems) to expand the market. According to the prospectus, 117 million vehicles have adopted its system-on-chip. From 2019 to 2021, Mobileye’s revenue has increased from US$870 million to US$1.38 billion, but it is still in a loss-making stage in the past three years. Mobileye is still a leading ADAS company, but it faces challenges from established chip manufacturers and emerging automotive chip companies. .

In addition, Intel further lowered its full-year revenue and capital expenditures. Intel expects a 2022 revenue target of $63 billion to $64 billion and a full-year net capital expenditure of $21 billion.

Notably, Intel announced that it will drive $3 billion in cost reductions in 2023, with annualized cost reductions and performance gains of $8 billion to $10 billion by the end of 2025. Specific measures include reducing the investment portfolio, rationalizing the size of the department, implementing stricter cost control on expenditure, and improving sales and marketing efficiency.

Pat Kissinger said he still believes that there are optimistic long-term opportunities ahead, and this decline is also an opportunity to more quickly advance the necessary transformation.