Intel profit sinks 27% on dreadful PC sales

[djgandy]

exacly

there is no more volume for 1k Cpu's

sure, never had much, but now is zero

Well as pointed out you have Socket 2011, which is actually a far better proposition. It's like workstation, but on the cheap

 

[NTMBK]

Just curious, did Intel mention how much inventory declined in Q4 yesterday?

[B]Intel’s inventory 	Percentage of sales[/B]
Q3 2011: $4 billion 	28%
Q4 2011: $4.1 billion 	30%
Q1 2012: $4.5 billion 	35%
Q2 2012: $4.9 billion 	36%
Q3 2012: $5.3 billion 	39% 
[COLOR="Red"]Q4 2012: $?.?  billion 	??% [/COLOR]

source:[URL="http://www.marketwatch.com/story/intel-bulls-should-hope-it-made-fewer-chips-2013-01-16?siteid=yhoof2"] Intel bulls should hope it made fewer chips[/URL]

Intel's inventory situation is only going to get worse, if their flagship tablet chip is heavily binned Haswell.

Selling lots of heavily binned chips means producing far higher numbers of chips which don't meet those TDP targets, i.e. standard voltage parts. Demand for laptop TDP parts is flat/falling, demand for tablet TDP parts is rising- by making a binned ULV part their tablet chip, they are linking the two in their production. If they want to make enough ULV parts to meet demand they will have to make warehouses full of unwanted stand voltage parts.

They need an architecture built from the ground up for lower power- 22nm Atom can't come soon enough for them.

 

[Vdubchaos]

The valid point is that for home use, PC's are just fast enough so the upgrade cycle has slowed. By PC's I also mean laptops. The average consumer doesn't buy a PC in a case.

But there is still the corporate side of things. Faster PC's are important for a lot of industries. And even in stupid places like call centers you'll have equipment upgrades, new pc's for new employees. After 3 years of constant use the hard drives are usually wrecked and slow so a business just buys a new box.

Then you have Asia, which has been saving Intel's bacon over the past 5 years.

Even for Business, here at work we haven't upgraded for at least 3-4 years and no hardware upgrade needed or in site. Our PCs do everything we need them to do very well and we simply wouldn't benefit from ANY upgrade (or benefits would be MINIMAL at best).

Again, this doesn't apply to sectors that do heavy computing (Graphics/Dev etc) but this is a small % of sales.

Personally I have 6 PCs at home and my latest upgrade was I-2500 about a year ago or so...... there is no hardware upgrade needed in the near future (but I do play mostly older games).

 

[guskline]

In tough economic times, discretionary spending is the first to go. For someone who's livelihood depends on the fastest cpu or gpu, upgrading, even in tough financial times makes sense. For most it doesn't.

My wife shakes her head in disgust when she comes down into my computer room and sees my rigs.

I'm wise enough and hopefully smart enough after 39yrs of being married to her not to comment on the number of shoes she has!

 

[dma0991]

Intel will also slowly but surely enter the phone/tablet market. Funny reading these doom and gloom posts.

They certainly are and I'm waiting for them to release a decent product into the mobile market real soon. The success however is dependent on its price, the ecosystem they choose to go with and lastly, performance.

I'm still not convinced by the success of the Surface Pro. I'm more inclined to purchase an Ultrabook than a Surface.

 

[mrmt]

Intel's inventory situation is only going to get worse, if their flagship tablet chip is heavily binned Haswell.

In fact, it improved. Intel inventory finished at 4.7 billion levels, still above the beginning of 2012 but still better than the 5.3 billion they got in Q3.

Cash flow statements shows something interesting. Intel seems to be building *an awful* lot of 14nm capacity. It seems thay they are planning to take the smartphone and tablet market by assault in the next couple of years. I wonder what they are planning to do with their "old" 22nm factories.

 

[Torn Mind]

Surely the problem with performance is easy to figure out?

Intel killed multi core computing by pricing their +4 core at the kind of prices that hardly anyone can afford. It suits their business to have smaller dies at the expense of ultimate performance. Don't blame the TDP cap - Ivy Bridge is 77W and could easily have been a ~3GHz octocore at 125W.

Don't blame the software either - AMD has been trying to go much more multithreaded for years and has been thwarted, simply because intel dominates the market in their position and it doesn't suit them for the software to be more multithreaded than it already is. If the desktop market is dying, it's because intel has strangled it for all it's worth as it attempts to maintain it's position. That's all their is to it.

If the software was available to make use of it, we could easily be looking at 16 or 24 core Kabini's next year. Whats the point when no software uses it and it'll get shot down for having poor single threaded performance in 2013?

It's a pain in the ass to debug software that is more and more multithreaded at the moment, hence why developers are not writing heavily multithreaded apps. Unless you want to impose martial law on software developers, they will do as they see best fit for their labors.

 

[krumme]

I wonder what they are planning to do with their "old" 22nm factories.

Fighting Kaveri , earning a lot profit on server segment?

Then they can waste part of profit on bleeding edge 14nm tech fighting little, little-big and temash probably, all running mostly on depreciated dirt cheap 28nm. Looks bad imho.

Not exactly creative, but most of Intel more true innovative attemps have unfortunately been failures og minor succes.

 

[ShintaiDK]

32nm gonna be used for the 8 series chipsets for example. 22nm for Pentium/Celerons.

 

[Abwx]

In fact, it improved. Intel inventory finished at 4.7 billion levels, still above the beginning of 2012 but still better than the 5.3 billion they got in Q3.

They could have "reduced" the inventory with a 10% depreciation
wich is quite plausible given their recent low cost cpus dumping
that couldnt compensate for the yearly 1bn revenue shrink...

 

[Idontcare]

We have plenty of sub-100W GPUs- my own HD 7770 is 80W. The option exists for people to use lower power consumption GPUs if they want to, the same way that they can still get a 130W i7-3930k if they want to.

All of which were comprehended in advance of the crafting of my post. Clearly I am addressing the top-end of the spectrum, not where spectrum bottoms out.

At the top-end of the GPU spectrum you have products like the GTX 680, GTX 580, and HD7970GE that can easily draw 300W at load and stock clocks (stock for the AIB), before end-user OC'ing is applied.

At the top-end of the of the CPU spectrum you are looking at 150W TDP chips that weigh in at 1/2 the power consumption.

Now compare the air-cooling options for that 300W GPU versus your options for air-cooling that 150W CPU.

 

[SiliconWars]

Are you serious? Hardly anyone can afford a quad core? I have seen a lot of outlandish statements in these forums but this is right up at the top. Besides you contradict yourself. You say that hardly anyone can afford a quad but that they would buy them if the software was written better.

MORE than a quad core. And dear oh dear can't you figure out that if Intel's quad cores were selling for $100 like they should be, their 6 and 8 cores would be selling for $200?

 

[Idontcare]

I wonder what they are planning to do with their "old" 22nm factories.

It is too bad they don't have serious designs on the foundry space. Even if they simply licensed out the 22nm IP to existing foundries for a tidy premium on the IP then at least the investment would go on being used instead of being shelved and forgotten.

Reminds me of the Grinch in How the Grinch Stole Christmas! when he reads his schedule and notes an upcoming item "5pm, solve world hunger...tell no one..."

Intel solves some of the world's most complex challenges in shrinking CMOS and then they tell no one, even long after they have ceased having a need for the then outdated solutions :\

Why not public-domain those process flows and turn it over to academia or something so at least the next generation of engineers can study and learn from them?

 

[ShintaiDK]

Why not public-domain those process flows and turn it over to academia or something so at least the next generation of engineers can study and learn from them?

Because its capitalism and private run

 

[mrmt]

They could have "reduced" the inventory with a 10% depreciation
wich is quite plausible given their recent low cost cpus dumping
that couldnt compensate for the yearly 1bn revenue shrink...

You can't "reduce" inventory value at will, simply throwing a number, adding it to your COGS, and that's it. You must have a valid trigger for that, such as a market value *below COGS* for a given unit, and once the trigger is fired, you ought to mark to market the asset (valid for the previously mentioned trigger), not put an arbitraty value, and if doing that on a relevant number of units in your inventory, you have to at least put a note in your SEC fillings informing how much you recognized as an expense.

With 58% gross margins, I doubt Intel is selling any relevant number of units below COGS, and they didn't report anything on the SEC fillings, so no, they didn't take any relevant inventory write down charge this quarter.

As for your theory that Intel would take an inventory mark down to safeguard profits, this is even more nonsense. Inventory markdowns must be taken against COGS. If Intel had to do that in a revenue-depressed environment, not only they would have to report smaller revenues, they would also have to report worse gross margins and overall profits because the write down would have been added to COGS, and caused an snafu in the market because part of their inventory would have to be sold at essentially 0 gross margins.

 

[Edgemeal]

In fact, it improved. Intel inventory finished at 4.7 billion levels, still above the beginning of 2012 but still better than the 5.3 billion they got in Q3.

In Q3 Intel estimated Q4 inventory would drop by $500M.

Got a source for that 4.7B?
Thanks!

EDIT Never mind, seems inventories were down by $600M.
http://allthingsd.com/20130117/liveblogging-intels-q4-earnings-conference-call/
http://seekingalpha.com/article/1119351-intel-declines-on-q4-disappointment

 

[mrmt]

Got a source for that 4.7B?
Thanks!

http://files.shareholder.com/mwg-internal/de5fs23hu73ds/progress?id=qxfPluVu+L

Here you can get the entire filling. On page 5 there is a table with the assets balance sheet.

 

[mrmt]

Why not public-domain those process flows and turn it over to academia or something so at least the next generation of engineers can study and learn from them?

With 22nm it is easy to see why. Nobody has a working finfet process, and opening this avenue to the academy would give competitors access to Intel solutions to problems they are yet to find.

On why they don't license 180nm or 130nm.... that's IDK.

 

[Idontcare]

With 22nm it is easy to see why. Nobody has a working finfet process, and opening this avenue to the academy would give competitors access to Intel solutions to problems they are yet to find.

On why they don't license 180nm or 130nm.... that's IDK.

Yeah I'm talking about the older stuff, I'm not so silly or daft as to be thinking about more recent nodes in my post above on the topic.

But the nodes that Intel has basically retired, cycled out of production because they aren't a foundry and they don't have reason to keep 130nm in production for example, it is a shame that all that process technology know-how becomes a lost accomplishment from the perspective of mankind's heritage and written record.

Its just a shame is all, and it really need not be that way. At least with NASA for example they sold off the obsolete space shuttles (yes I know this is public vs private entities) to museums for posterity sake rather than crating them up and burying them in Warehouse 13 next to the Ark of the Covenant

 

[Phynaz]

They could have "reduced" the inventory with a 10% depreciation
wich is quite plausible given their recent low cost cpus dumping
that couldnt compensate for the yearly 1bn revenue shrink...

In that case they would have to take a charge, like AMD has done.

 

[NTMBK]

In fact, it improved. Intel inventory finished at 4.7 billion levels, still above the beginning of 2012 but still better than the 5.3 billion they got in Q3.

They only achieved that by lowering output at their factories. My point was this-

1. Intel is pinning their hopes for reviving the PC market on Ultrabooks with ULV parts, and x86 tablets with ULV parts

2. ULV parts are a deep bin sort of the same dies which go into standard voltage parts

3. In order to ramp up production of ULV parts to meet the new market segments, they need to also ramp up production of their standard voltage parts

If demand for their ULV parts rises at the same time as demand for their standard voltage parts falls - which seems to be the case in today's market- they're in a real pickle.

Let's say 30% (random number off the top of my head) of their 2-core GT2 dies can run at low enough voltages to go into ultrabooks or tablets. So for every 3 extra ultrabook chips they manage to sell, they get 7 extra standard laptop chips to sell- which isn't the way they want to go.

Could someone with a better knowledge of the semicon industry give me a better picture of how this can work for them? Are my yield/binning estimates way, way off? IDC, I'm looking at you here

 

[Olikan]

Yeah I'm talking about the older stuff, I'm not so silly or daft as to be thinking about more recent nodes in my post above on the topic.

what about reverse engineering those old stuff with a electron microscope?

 

[Idontcare]

They only achieved that by lowering output at their factories. My point was this-

1. Intel is pinning their hopes for reviving the PC market on Ultrabooks with ULV parts, and x86 tablets with ULV parts

2. ULV parts are a deep bin sort of the same dies which go into standard voltage parts

3. In order to ramp up production of ULV parts to meet the new market segments, they need to also ramp up production of their standard voltage parts

If demand for their ULV parts rises at the same time as demand for their standard voltage parts falls - which seems to be the case in today's market- they're in a real pickle.

Let's say 30% (random number off the top of my head) of their 2-core GT2 dies can run at low enough voltages to go into ultrabooks or tablets. So for every 3 extra ultrabook chips they manage to sell, they get 7 extra standard laptop chips to sell- which isn't the way they want to go.

Could someone with a better knowledge of the semicon industry give me a better picture of how this can work for them? Are my yield/binning estimates way, way off? IDC, I'm looking at you here

I don't see anything intrinsically flawed in your reasoning, what you outlay is within the spectrum of the possible. Without knowing Intel's specifics, though, we can't really speak to whether or not this scenario is probable.

What I do suspect is that the part I bolded is a self-limiting situation because if that were to be the case (what you wrote in bold) then Intel would surely resolve that imbalance by adjusting prices for the "in-demand" ULV chips accordingly.

People can't buy what isn't available, and Intel kinda has that market to themselves for the near future owing to the very ability they have in binning such ULV products. So Intel has the ability to avoid cannibalizing sales through price control.

But what do they do to spark demand for their standard voltage SKUs? Presumably there is a reason desktop clockspeeds and performance for IB were held to comparable levels as SB while TDP was lowered.

They left themselves room to raise the perceived performance proposition with Haswell as an upgrade candidate by bumping up stock clockspeeds (and TDP) as needed to fuel a wave of consumer and corporate upgrades if need be.

Intel is in the enviable position of not being in dire straits, this affords them the luxury of not needing to micro-manage the supply picture at a high frequency with the associated risks of over-managing the chain and throwing things into wildly off-balanced oscillations (AMD serves as the best counter-example of this, ironically enough, in every way).

If actions need be taken then I have every confidence Intel will take them, but I also have every confidence that Intel isn't going to panic and run around like a chicken with its head cut off just because the global outlook takes a dip for one fiscal year. They have a far more responsible and steady hand on the rudder of S.S. Intel IMO.

Of course this leaves them vulnerable to the inevitable "black swan" business environment, which will be the iceberg that sinks the unsinkable S.S. Intel, but I don't see the waning desktop PC being that black swan. Mostly because the waning desktop PC segment is so readily visible and obvious. Usually what gets in under the radar of a big business like Intel, such that it is their own undoing, is something completely out from left field. Course you can't help the unhelpable either, Eastman Kodak

 

[Idontcare]

what about reverse engineering those old stuff with a electron microscope?

That can be done, and is done to an extent as a for-profit industry, but that isn't what I'm talking about.

Reverse engineering only tells you what the final product is supposed to look like and how it is supposed to function.

It doesn't really tell you how they got there, you have to fill in all those blanks with logic and deduction. (which is why reverse engineering is not illegal)

What I am talking about is the process flow, the precise sequence of recipes and steps that Intel spent billions developing, and made billions more using in production, but now sits unused on a shelf (figuratively).

The same could be said of any IDM or foundry, I only pick on Intel because they have what is considered to be the pinnacle of process expertise at any given node. Where would you rather have the Mona Lisa? Buried alongside DaVinci for no one to see, or in the Musée du Louvre for countless eyes to behold?

Just as artists enjoy viewing the priceless treasures of their field, so too do engineers and scientists.

 

[Abwx]

In that case they would have to take a charge, like AMD has done.

They dont need to given the low $ amount , all they had
to do is to sell a part of their Q4 production at 10% lower
price for the few OEMs that make 50% of the global market,
hence there is no depreciation to be seen since the product
line is the same through those two quarters.

See the recent 7W/13W IB "launch" as a move to dump
a product in a market in wich it wasnt meant to compete
from the start as they expected growth in its intended area
of sales.