Intel delays Granite Rapids, says it needs to boost spending
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Patrick Gelsinger (chief executive officer, Intel Corp.), speaks in a Bloomberg Studio 1.0 interview, which took place at Intel Corp.’s Santa Clara headquarters, California on February 3, 2022.
Bloomberg | Bloomberg | Getty Images
IntelThe stock dropped 6% after the company informed investors on Thursday at a meeting that it would need to spend heavily over the next 2 years in order to fuel its turnaround and become a semiconductor manufacturer.
On Thursday, the stock took another hit when Pat Gelsinger, CEO, confirmed that the forthcoming server chip codenamed Granite Rapids had been delayed by 2023 to 2024.
This chip will mark the beginning of extreme ultraviolet lithography (a crucial technology Intel must deploy in order to keep pace with TSMC, and other leading chip makers) as a core feature.
Gelsinger assumed the role of Intel CEO last year, promising to transform the company like other rivals. AMDFormer customers also like AppleAttempted to overthrow Intel’s position as the top processor manufacturer in terms power and performance.
The market’s reaction to Intel’s investor-day announcements reinforces the doubt that Intel faces. Investors worry Gelsinger’s five-year turnaround plan could impact profit margins, and the new chip foundry is capital-intensive.
Some of you said that they don’t know if you are executing. Help build my confidence,'” Gelsinger said.
Intel officials stated on Thursday that they plan to grow sales by 10% annually by 2025. However, this year’s revenue growth will be modest. Intel CEO Dave Zinsner claimed that Intel is in an “investment phase” and will generate at least $1B in negative free cash flow as it invests in capital.
For example, Intel plans to build $20 billion worth of chip factories in Arizona, Ohio and Europe.
Granite Rapids delay
Pat Gelsinger is the chief executive officer of Intel Corp. This photo was taken in undated handout on July 26, 2021. The company had announced a four year plan to outperform its competitors in chipmaking technology.
Intel Corp | Reuters
Intel hopes to also catch up with TSMC’s and Samsung’s chips manufacturing technology. In recent years, Asian chipmakers have leapfrogged Intel in terms of the “process node” they can use to manufacture microchips — TSMC is on a 5-nanometer node, while Intel remains on 10-nanometer. The smaller process numbers make more efficient chips.
Granite Rapids delays suggest that, despite Intel’s optimism that it can catch up in 2026, new manufacturing techniques are still a complex process and vulnerable to delays. According to the company, 5 additional nodes will be introduced over the next four year period. This is a bolder plan than its rivals.
Gelsinger stated that Granite Rapids’ chip release was delayed to allow for more advanced manufacturing nodes and Intel to introduce new biannual releases of major server chips.
“Granite Rapids now has a product on Intel 3. It’s got a microarchitectural center going into it. So it’s a better product in ’24. Gelsinger explained that they have changed the roadmap and strengthened it.
He also said that he’d spoken with Intel’s servers customers about the new change. We’ve gone through the process with all of our customers, and they are happy with what we did.
Gelsinger admitted Wall Street doubts about Intel’s turnaround plan multiple times in the Thursday meeting. While he stated he wants to double Intel’s earnings per share, as well double Intel’s “multiple,” or the ratio of its stock price and earnings, Gelsinger said that it will require investors’ confidence.
Intel will begin to provide more details about its business units in order to build this confidence. Gelsinger stated that you will see the performance of all business units and whether they are executing as we promised.
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