Intel Thursday estimated second-quarter earnings below Wall Street views as it cited the cost of readying a brand new PC chip and said it couldn’t make a forecast for the full year due to economic uncertainty brought on by the coronavirus pandemic.
Intel’s shares plunged 6% in extended trading, as executives tried to brace investors for the possibility that a short-term bump in demand for its processor chips from cloud computing centers and locked-at-home consumers buying PCs may become a slump if the economy enters recession.
The COVID-19 pandemic has ripped via the semiconductor sector, disrupting operations as lockdown orders hit nations in the chip supply network akin to Malaysia, where chip operations had been ultimately allowed to resume but suffered disruptions.
Intel Chief Executive Bob Swan stated the corporate needed to briefly halt some projects on account of local authorities restrictions at some sites; however, he mentioned Intel’s factories largely have been able to meet demand.
In an interview, Davis stated stay-at-home directives around the globe drove higher demand for Intel’s chips during the first quarter. Demand for PCs surged, Davis stated.
However, Davis stated Intel estimates lower gross margins in Q2 due to the costs of building its Tiger Lake 10-nanometer processors for the PC market. Intel plans to promote those chips starting in the third quarter. The prices drove Intel’s profit estimation for the quarter below Wall Street expectations, he stated.
The prices wouldn’t affect the margin for the full year, Davis said, because Intel would have the ability to sell the chips at high margins in Q3 as the prices of developing them would already have been accounted for in Q2.