Apparently it was all because Intel’s data centre business that has driven growth as PC sales declined proved rather disappointing.
Intel said China’s economy was consuming fewer microchips than it had expected, adding to concerns that an industry-wide slowdown could persist until the end of 2019.
Intel’s outlook follows a similar warning earlier this week from chipmaker Texas Instruments whose broad line-up of products makes it a proxy for the industry chip industry.
Intel marginally beat Wall Street targets for revenue and profit in the fiscal first quarter, but sales in the data centre group unit fell 6.3 per cent to $4.9 billion, hit by weakness in China as customers worked through stockpile of chips purchased last year. Analysts had expected revenue of $5.1 billion.
Intel’s chief executive, Bob Swan, said in an interview that customers in China had bought extra data centre chips last year due to fears of a tariff or supply constraints owing to the U.S.-China trade dispute.
“The belief at the time was that they were ordering well ahead of what their real needs were, but the expectation was that they would consume that over the course of Q4 and Q1,” Swan said. “But today we think ... it’s not being consumed quite at that level; there’s going to be another quarter.”
But generally things have been pretty grim for Intel this year. There was a U.S.-China trade war and weakening smartphone sales. Swan said a 30 per cent boost in so-called programmable chips that go into 5G networking equipment showed early gains for Intel.
Ironically Intel’s business unit that sells modem chips to connect Apple iPhones to wireless data networks was a growth spot, despite Intel’s announcement last week that it would exit the market for 5G modem chips.
“Our expectation is we will continue to deliver on the 4G modem throughout the course of this year, including the second iteration of that product coming in the fall back-to-school season,” Swan said.
The Santa Clara, California-based chipmaker estimated profit of 89 cents per share on revenue of $15.6 billion for its second quarter that ends in June, compared with analysts’ expectation of $1.01 per share on $16.85 billion.
For the first quarter, net income fell to $3.97 billion, or 87 cents per share, from $4.45 billion, or 93 cents per share, a year earlier.
Revenue in Intel’s client computing business, which caters to PC makers and still the biggest contributor to sales, rose 4.45 per cent to $8.59 billion, beating Fact Set estimates of $8.38 billion.