Is the future of Intel's OEM business uncertain? Wall Street analysts advise Intel to abandon the business
网事大话每
发表于 2024-9-6 16:29:41
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On September 6th, Caixin News Agency reported that well-known Wall Street investment bank Citigroup called on American chip manufacturing giant Intel to withdraw from its foundry business on Thursday (September 5th); Meanwhile, some analysts suggest that investors should sell the stock.
The OEM business mainly produces semiconductors based on internal company design, or like TSMC, produces chips based on the design of other companies. Currently, TSMC is the world's largest chip foundry, with clients including Nvidia, AMD, and others.
Since Pat Gelsinger took over Intel, the company has been betting on its future in the foundry business, attempting to enhance its ability to manufacture the most advanced chips for itself and other companies at its foundries in the United States. The plan also received funding support from the US government, with a $8.5 billion grant to Intel and a $11 billion federal loan mentioned in a document released by the US Department of Commerce several months ago.
But the problem is that due to Intel's severe decline in performance, according to sources cited by the media earlier, the company may not be able to smoothly obtain subsidies from the US government.
There are differences between the Ministry of Commerce and Intel on information disclosure requirements. Insiders revealed that Intel is disappointed with the delay of the US government and urges officials to accelerate the disbursement of funds; US officials are seeking to review the feasibility of Intel's chip production roadmap, but the company has refused to provide certain information requested by the government.
Call for withdrawal from OEM business
Intel executives attended the Citigroup TMT conference on Wednesday, September 4th. Subsequently, on Thursday, Citigroup analyst Christopher Danely once again called on Intel to withdraw from its OEM business.
Danely had already been bearish on Intel before, and this time he once again claims that Intel's stock price is too expensive, and its plans for outsourcing business have a "very low probability of success".
It is worth mentioning that recently, Intel's proud 18A process seems to have encountered setbacks. The 18A process, which produces chips at the 1.8 nanometer level, has always been regarded as the "winning weapon" of Intel's chip foundry business, and is expected to be put into production in the second half of 2024. However, the 18A process technology is currently likely to be unsatisfactory.
According to insiders, chip manufacturer Broadcom has conducted trial production of the 18A process and recycled the tested silicon wafers last month. But after research by engineers and executives, Broadcom believes that Intel's 18A is not yet sufficient for mass production.
There are also reports that Broadcom engineers seem to be concerned about the yield of Intel 18A, which means that the number of scrap products on each wafer exceeds expectations. This is likely to become a major obstacle for Intel's OEM business.
Since the beginning of this year, Intel's stock price has fallen by 61.4%, with a drop of nearly 12% in the first three days of September alone. Prior to this, there was a staggering 28.3% decline in August, as it reported a loss of $1.61 billion in the second quarter and announced plans to lay off 15000 employees. The current stock price is slightly higher than the 52 week low of $18.84 set on August 8th.
Intel's stock price closed down 0.15% to $19.40 in Nasdaq trading on Thursday. After hours, the stock price rose to $19.47.
Citigroup is not the only company this week that is not optimistic about Intel. Hans Engel, an analyst at Erste Group Research based in Austria, downgraded Intel's stock rating from "hold" to "sell" on Thursday, without providing a target price.
Engel attributed it to a very uncertain outlook, weak sales (declining server CPU market share), and high debt. At the same time, he also acknowledged that Intel is in a transitional stage.
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