On January 26, Intel announced its 2023 annual report and fourth-quarter earnings.
From the fourth quarter, Intel's transformation has come to a successful end. According to the data, Intel's revenue in the quarter was **9 year-on-year71% to 154$100 million, with a net profit of 26$6.9 billion, or earnings per share (EPS) of 0$63 with a non-GAAP EPS of 0$54. Intel CEO Pat Gelsinger said: "Exceeded expectations for the fourth quarter in a row, with revenue at the higher end of guidance. ”
Data**: Intel earnings report, graph: donews
Despite the double growth in a single quarter, Intel's performance throughout 2023 has been very dismal. Intel's revenue in 2023 is 542$300 million, up from $630 million in 2022US$500 million**14% and net income of 16$8.9 billion, up from $8.0 billion in 2022$1.4 billion**7892% with a full-year EPS of 0$40 for non-GAAP EPS of $105 USD.
Worse is yet to come, Intel expects revenue of $12.2 billion to $13.2 billion in the first quarter of 2024, which is less than the 142 expected by analysts$500 million. After the market on the day, Intel's stock price fell more than 10%.
Open.
First, AI is not "burned" into the data center
In 2023, Intel's reintegrated business will be divided into five business divisions, namely Customer Computing Group (CCG), Data Center and Artificial Intelligence Group (DCAI), Network and Edge Group (NEX), Intel Foundry Services (IFS), and Mobileye (its intelligent driving subsidiary). Among them, nearly eighty percent of Intel's revenue** is in the two major business groups of CCG and DCAI.
CCG and DCAI target the PC processor market and the data center processor market, respectively. CCG achieved a year-over-year increase of 33% in the fourth quarter, and revenue in the first three quarters declined year-on-year, respectively, while DCAI declined year-on-year from the first quarter to the fourth quarter.
Data**: Intel earnings report, graph: donews
It is not difficult to see that the PC market demand is still weak, but there is a trend of recovery. According to IDC data, global PC shipments continued to spiral down to 68.2 million units in the third quarter of 2023, down 76%。IDC said that while market demand and the global economy remain subdued, PC shipments have increased over the past two quarters and the year-on-year decline has slowed, indicating that the market has come out of the trough.
Although there is remission, it does not complete the recovery immediately. Intel's CCG revenue in 2023 fell 20% year-on-year to $15.5 billion. Chief Financial Officer David Zinsner said that customer inventory levels have normalized, benefiting from higher demand for new machines that can better handle AI software and services, and PC consumption will reach 2700 million units.
In fact, from the fourth quarter, Intel launched the Core Ultra processor based on the Intel 4 process technology, and announced the complete Core 14th generation mobile and desktop processor lineup at CES 2024, as well as the new Core mobile processor series suitable for high-performance mainstream thin and light mobile systems, it can be seen that Intel is fully "betting" on the strategic layout of the AI PC business, hoping to seize the first wave of AI PC upgrade opportunities.
However, the "fire" of AI did not bring fire to Intel's "second main force" - DCAI. The business will have revenue of $15.5 billion in 2023, down 20% year-over-year.
For a long time, when data centers were CPU-centric, Intel dominated the server market for a long time with the Xeon** processor family. But now in the face of Nvidia and AMD, the former has the H100 and A100 series, the latter has the new data center accelerator product MI300X, in addition, some of the world's largest technology companies, including Amazon AWS and Microsoft, are designing their own processors to make the data center market more competitive.
However, Gelsinger said at the earnings conference that Intel's core business is healthy, there is no loss of market share, and the company's server market share is stabilizing. And these problems faced in the first quarter are temporary, and the company's performance is expected to return to growth, and Intel is still on the right track to regain the top position in processors.
In addition, NEX will have revenue of $5.8 billion in 2023, a year-on-year decrease of 31%; Fourth-quarter revenue was $1.5 billion, down 24% year-over-year. Kissinger, however, was also positive, saying that NEX's fourth-quarter performance outperformed internal**, and the division is on track to achieve solid growth in 2024.
Second, the OEM service has been advancing rapidly
Among Intel's various businesses, the most concerned is not only how Intel will protect its dominance in the server and PC markets, but also the development of foundry services.
IFS was Intel's most significant growth business in 2023, up 103% year-over-year to 9$5.2 billion, up year-over-year in each of the four quarters.
Intel noted in its earnings report that it is still on track to achieve its goal of "five process nodes in four years" and regain its leading position in transistor performance and power efficiency performance by 2025. The Intel 3 process will be the first advanced process node to be offered to Intel's foundry customers.
Gelsinger said that Intel has entered the "Angstrom era" of the manufacturing process with Intel 20A and Intel 18A nodes. Intel 18A is expected to be manufacturing-ready in the second half of 2024. Intel's first Intel 18A process node-based processor for the server market, the Clearwater Forest processor, is already in pre-production at the fab, and Panther Lake will begin pre-production soon.
In terms of ecosystem, Intel has signed more than 40 strategic cooperation agreements, covering EDA, design services, IP, cloud and other fields. Significant agreements with ARM and Synopsys continue to advance. intel 18a 0.Version 9 of the PDK (Platform Development Kit) has been successfully delivered, and its availability was expanded in the fourth quarter.
In terms of partnerships, Intel has taped out more than 75 ecosystem and customer test chips. In 2024 and 2025, Intel Foundry Services has more than 50 test chips in the pipeline, 75% of which will use Intel 18A nodes.
In addition, to address challenges beyond Intel 18a, Intel began installing the industry's first High-NA EUV tool in Oregon.
At the same time, Gelsinger pointed out that advanced packaging has become another important advantage of IFS, allowing Intel to connect with more foundry customers faster.
Kissinger noted that the total number of new IFS customers for advanced packaging in 2023 will reach five, with the majority of revenue starting in 2025. Intel has achieved mass production of 3D advanced packaging technology at Fab9, New Mexico, USA, which has recently completed the upgrade, to support the growing demand.
According to TrendForce data, the top five global foundries in terms of market share in the third quarter of 2023 were TSMC (57.).9%), Samsung (124%), GF (62%), UMC (60%) and SMIC (54%), while Intel (1.).0%) made it into the top 10 for the first time and surpassed PSMC (1.).0%), it can be seen that Intel has the ambition of wafer foundry.
Source: TrendForce.
It is worth mentioning that on January 25, Intel and UMC officially announced a cooperation to develop a 12nm process platform, targeting high-growth markets including mobile communication infrastructure and networks. Whether the two companies can reshuffle the wafer foundry market together will become the focus of attention in the future.
3. Use the car as a new outlet
Mobileye is also a bright color in Intel's earnings data. According to the data, Mobileye's revenue in the fourth quarter of 2023 was 6$3.7 billion, up 13% year-over-year, and full-year revenue of $2.1 billion, up 11% year-over-year.
In the automotive business, Intel spent $15.3 billion to acquire Mobileye, an Israeli autonomous driving chip research and development company, to open up a new territory. Recently, at CES 2024, Intel announced the acquisition of Silicon Mobility SAS, a French startup specializing in system-on-chip technology and software designed to control electric vehicle motors and on-board charging systems, but has not yet announced the acquisition**. At the same time, Intel also introduced a new AI-enhanced software-defined automotive system-on-chip and an open automotive chip-based platform.
These new actions are also considered by the industry to be Intel's full entry into the automotive field.
Jack Weast, vice president and general manager of Intel's automotive business unit, believes that the penetration rate of new energy vehicles will exceed 60% in 2030, and the semiconductor market size of automobiles will grow to $216 billion in 2035, and now is the best time to enter the automotive field.
Although Intel has provided chips specifically for infotainment systems for more than 50 million vehicles, unlike Nvidia and Qualcomm, Mobileye is not very competitive in the field of autonomous driving and intelligent cockpits.
Today, Zeekr has announced that it will adopt Intel's new software-defined automotive SoC to enable an enhanced generative AI mobile living room experience in the next generation of vehicles. However, it is reported that ZEEKR will not apply Intel's cockpit chips in all products for the time being, and the cooperation between the two sides is limited to ZEEKR 009.
In addition, Intel did not disclose any other customers for the time being, only saying that it is actively negotiating with a number of OEMs.
After missing the opportunity for PC chips, Intel obviously can't afford to miss out on new opportunities in the face of new opportunities. However, in the face of new opportunities, how to establish their core advantages has become the key to Intel's "breaking the circle".