Intel could really use a few bucks from the recently passed (by Congress, at least) $280 billion CHIPS and Science ACT. The U.S. chipmaker shocked investors on Thursday, revealing it lost nearly $500 million in Q2, its first quarterly loss in years. The company cited weakened demand for PC components and downturns in the broader economy as the main culprits for the declines.
Overall, Intel’s revenues were down 22% year over year. Those results have forced Intel to lower its expected yearly revenues down from $68 billion to $65 billion. Yikes.
Intel CEO Pat Gelsinger said the results were “disappointing.”
“This quarter’s results were below the standards we have set for the company and our shareholders,” Gelsinger said. “We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.”
He continued. “We are being responsive to changing business conditions, working closely with our customers while remaining laser-focused on our strategy and long-term opportunities. We are embracing this challenging environment to accelerate our transformation.”
In his prepared statements, Chief Financial Officer David Zinsner elaborated on the declines, saying a worse than expected covid-19 related downturn was partly responsible for declining consumer demand. On the economic side, Zinsner said a combination of rising inflation, higher interest rates, and downstream effects from the war in Ukraine hit the company particularly hard.
“Due to the difficult macroeconomic environment together with our own execution challenges, our results for the quarter were well below expectations and necessitate a significant revision to our full-year financial guidance,” Zinsner said.
Now, Intel says it’s planning to pass on some of that inflationary pricing to consumers. In statements first spotted by PC World, Zinsner reportedly confirmed the company’s getting ready to hike prices for components, so you might want to buy any new Intel chips before the fourth quarter. While Zinsner didn’t say how much prices will rise by, previous reports claim the company’s considering increases of up to 20% for certain processors.
“You know we can absorb a lot of inflationary impacts that others can’t,” Zinsner said, according to PC World. “But at this point now that some of the price increases, inflationary increases, have turned out to be more permanent, where there’s a certain amount that we do need to pass on to the customers.”
News of Intel’s massive Q2 losses came just hours after the House of Representatives voted to pass a historic $280 billion spending bill that will invest $52 billion into the U.S. semiconductor industry. In a statement supporting the bill, President Joe Biden said the spending will strengthen domestic semiconductor production and eventually aid in lowering prices for everyday goods.
“The CHIPS and Science Act is exactly what we need to be doing to grow our economy right now,” Biden said. “By making more semiconductors in the United States, this bill will increase domestic manufacturing and lower costs for families. And, it will strengthen our national security by making us less dependent on foreign sources of semiconductors.”
Intel stands to gain the most from this bill when compared to other US chip companies like AMD or Nvidia, as the company also manufactures its own chips rather than relying on outside help from companies like TSMC. Despite losing half a billion dollars in a matter of months, Gelsinger remained optimistic about the increased demand for chips around the corner.
“As we look beyond the near term, the semiconductor industry continues to be at the beginning of a new structural growth phase driven by four superpowers: ubiquitous compute, pervasive connectivity, cloud-to-edge infrastructure and AI,” Gelsinger said. “What remains very clear, even during this period of uncertainty, is the growing importance of silicon to the global economy and to each of our daily lives.”