In short: Decline in PC sales is one reason for Intel’s poor performance last quarter, but the company’s graphics division also suffered a massive $507 million operating loss. The chip maker confirmed rumors that it plans to raise the prices of a number of its chips in the fourth quarter and also mentioned that it will close its Optane memory business.
Intel came out its earnings report for the second quarter of 2022 on Thursday. The company’s revenue fell 22 percent year-over-year to $15.3 billion, ending the quarter with a net loss of $454 million, down 109 percent from the $5 billion profit reported in the second quarter. quarter of 2021.
Chipmaker partially blamed weakening demand for PCs and accessories due to the recent downturn in economic activity. In the past few years, the demand for computers has skyrocketed as the pandemic forced people to work and spend more time at home. As a result, many tech companies have made record profits, but that seems to have come to an end: Intel said it expects the PC market to shrink by 10 percent this year.
The company confirmed latest reports that it plans to raise prices on a wide range of products, including processors, Wi-Fi chips and controllers. The price increase will come into effect in the fourth quarter, with Intel CFO David Zinsner saying they are being hit by inflationary cost growth that should be passed on to customers at some point.
Revenue from Intel’s client computing group, which includes consumer processors, was down 25% year-on-year but still posted a profit of $1.1 billion. Intel CEO Pat Gelsinger said some of their biggest customers are cutting inventory levels at a rate not seen in a decade. The consumer and education PC markets reportedly experienced the largest drop in processor demand.
Meanwhile, Accelerated Computing Systems and Graphics Group posted a $507 million loss this quarter. Gelsinger mentioned that the company will fall short of its internal goal of selling four million Arc GPUs this year, as well as the challenges the company has experienced in developing graphics drivers. “We thought we could use the integrated graphics software stack, but it was completely inadequate for the required levels of performance, game compatibility, and so on,” he said.
The company also mentioned that it is closing its Optane memory business and halting development of its 3D Xpoint technology, resulting in a $559 million inventory impairment loss this quarter. Chipmaker sold its SSD division to SK Hynix in 2020, but initially decided to keep Optane.
Intel confirmed that it also sold its drone business, which included about 9,000 drones that provided light shows for events such as the Olympics and Super Bowl halftime shows. According to report Elon Musk’s brother Kimbal bought the unit from The Register.
However, Zinsner remained optimistic that things could improve later this year. “We believe our recovery is clearly taking shape and expect the second and third quarters to be a financial bottom for the company,” he said. Starting next year, Intel is likely to benefit from the newly adopted chips lawwhich gives the semiconductor industry a backing of $52 billion in subsidies that will go toward building new factories.
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