[Asia Economy Reporter Jeong Hyunjin] Concerns have grown that Intel's profitability will deteriorate in the first quarter as the company continues to make large-scale investments. Since CEO Pat Gelsinger declared that Intel has entered 'investment mode' amid a semiconductor boom, profitability concerns are expected to persist for the coming years.
According to Bloomberg and other sources on the 26th (local time), Intel announced its 2021 performance and guidance for the first quarter of this year. The first-quarter revenue forecast is $18.3 billion, exceeding the market's initial estimate of $17.6 billion, but net income is expected to fall short of expectations at 80 cents per share compared to the anticipated 86 cents.
The reason Intel's profitability is lower than market expectations is due to increased costs from large-scale investments. Intel recently announced it will invest $20 billion to build two semiconductor factories in Ohio. Having declared its re-entry into the foundry (semiconductor contract manufacturing) business last year, Intel plans to expand this site to the largest scale over the next decade with an investment of $100 billion.
Gelsinger, who returned to Intel in February last year, stated that at this point, the company must enter investment mode rather than focus on short-term performance improvement, forecasting a gross margin of 51-53% over the next two years. Considering Intel's previous gross margin was around 60-65%, this indicates profitability is deteriorating due to increased costs.
Additionally, there is a possibility that revenue related to data centers, Intel's core income source, may decline somewhat. While total first-quarter revenue is expected to exceed estimates due to increased sales of server semiconductors, the volume sold to major customers such as Amazon, AWS, and Microsoft (MS) is reported to be decreasing.
Bloomberg reported, "Until a few years ago, Intel held over 99% market share in the server semiconductor market," adding, "Now companies like Amazon and MS are moving to manufacture semiconductors themselves to reduce their dependence on semiconductor companies."
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