Intel’s next-generation chip delay sparks shares sell-off
Intel’s share price sank more than 16 per cent as markets opened this afternoon, after it said it would be postponing the launch of its next-generation chip.
Intel said it would be pushing back the launch of the 7 nanometre (7nm) chips by six months until 2022, after it identified a “defect” in its manufacturing process.
It also said that it is considering outsourcing some of its manufacturing to third-party suppliers to make up for the delay, and improve its performance against rivals after 2023.
Intel’s current-generation chips are 10mn, and experienced similar delays in the run-up to their launch. Those chips, first promised in 2015, were eventually launched in last year.
The announcement is another blow for Intel, after Apple said last month it would transition away from using the company’s processors for its Mac computers and design its own chips.
It leaves a gap in the market for rivals such as TSMC, AMD and Nvidia, who will now hold sway in their argument for either focusing on building or designing chips, but not doing both like Intel.
In its second-quarter earnings report last night, Intel beat expectations with strong revenue and profit figures despite the coronavirus pandemic.
Revenue for the three months to the end of June was $19.73bn, compared with analysts’ estimates of $18.55bn. Net income rose 22 per cent to $5.1bn.
Ben Barringer, an equity research analyst at Quilter Cheviot, called Intel’s delay and outsourcing announcement “a significant admission of failure” by the chipmaker.
“For many investors, this is like watching Ferrari announce that they have chosen to use Mercedes’ engines — unimaginable.”