2024-08-02 18:49:00
[Article publié le vendredi 2 août 2024 à 8h23 et mis à jour à 20h49] Intel is going to cut its expenses. The designer and manufacturer of semiconductors announced on Thursday a major social plan to reduce its costs by 10 billion dollars: the American semiconductor giant plans to lay off more than 15% of its staff by the end of the year. The company had nearly 125,000 employees at the end of 2023, so around 18,000 people are expected to lose their jobs.
Following this announcement, the shares of the American manufacturer collapsed by nearly 27% on Wall Street this Friday morning in New York. Intel thus lost on paper more than 30 billion dollars of stock market valuation while its share price was worth 21.22 dollars, down 26.87% at 8:47 p.m. (Paris time)
This massive social plan is motivated by very poor results. Lagging behind its competitors in chips adapted to generative artificial intelligence (AI), the American group published net losses of 1.6 billion dollars in the second quarter, instead of 1.5 billion in net profit a year ago. Also between April and June, the group achieved 12.8 billion dollars in turnover, less than expected by analysts and down 1% over a year.
The company has suffered “headwinds” in the second quarter that slowed production of components for the new generation of AI-enabled computers, according to its chief financial officer, David Zinsner.
“Our financial performance was disappointing in the second quarter, even though we achieved key technology milestones”also acknowledged Pat Gelsinger, the boss of Intel.
19% drop in one trading session
He also announced that he would not pay a dividend at the end of the year. These announcements greatly displeased investors.
Especially since, “The outlook for the second half is more challenging than we anticipated, and we are leveraging our new operating model to take decisive actions that will improve our processes in terms of efficiency”also announced Pat Gelsinger,
“By orchestrating cost reduction, we are taking proactive steps to improve our profits”added David Zinsner. While the rest of the industry is investing heavily in cutting-edge electronic components, paid for at a premium by the tech giants (Microsoft, Google, etc.), Intel plans to reduce its capital expenditures by more than 20% for the full year, to between $25 billion and $27 billion.
A strategy that has not entirely convinced. The cost reduction plan “may support its finances in the short term, but this measure is not enough to redefine its position in the evolving chip market”responded Jacob Bourne, analyst at Emarketer.
Chip industry profits explode
While Intel suffers, the designer Nvidia is forecasting revenue of $28 billion for its second fiscal quarter, a level much higher than the $26.6 billion projected by analysts. Already in the first quarter, the Santa Clara (California) group had generated a net profit of $14.9 billion, more than seven times compared to the same period last year (+628%). At the beginning of June, the American semiconductor giant even became the third company to briefly cross the symbolic threshold of $3,000 billion, after Apple and Microsoft before becoming the world’s largest capitalization.
On the cutting-edge chipmakers side, it’s also time to celebrate thanks to AI. On Wednesday, Samsung Electronics said it generated an operating profit of 10.44 trillion won (7 billion euros) in the April-June period, up from 670 billion won a year earlier. The results beat analysts’ average forecast of 8.8 trillion won, according to data from LSEG SmartEstimate, and represented a jump of 1,462.29 percent year-on-year. Meanwhile, Samsung Electronics’ sales increased 23.4 percent year-on-year to 74 trillion won (49.5 billion euros).
Meanwhile, Taiwanese semiconductor giant TSMC reported a 36% year-on-year increase in second-quarter net profit on July 18. The group posted a net profit of 247.8 billion Taiwan dollars ($7.6 billion) for the April-June 2024 period, compared with 181.8 billion Taiwan dollars ($5.6 billion) in the same period last year. Second-quarter revenue reached $20.82 billion. In early July, the group, listed in both Taiwan and New York, briefly crossed the $1 trillion market capitalization mark, dethroning Tesla as the world’s seventh-largest technology giant in terms of valuation.
Intel to receive €20 billion in subsidies to expand US plant
Overwhelmed, Intel has not yet said its last word. The American giant received some good news last March.
“The Commerce Department has reached a preliminary agreement with Intel to provide up to $8.5 billion in direct financing and $11 billion in loans under the Chips and Science Act,” the White House announced in a statement released on March 20.
The law, which dates from the summer of 2022, provides $52.7 billion to revive semiconductor production in the United States and combat China’s power in this crucial industry. The envelope granted to Intel turns out to be the largest amount announced to date by the American government under this law.
The envelope announced this Wednesday will participate “to build and expand Intel’s facilities in Arizona, Ohio, New Mexico and Oregon,” added the White House. For its part, the American giant also plans to invest. It should thus release the equivalent of more than 100 billion dollars, as the Secretary of Commerce, Gina Raimondo, had explained to journalists before the official announcement. According to her, this represents one of the highest investments ever made in the semiconductor industry in the United States.
With these investments, the US government anticipates the creation of nearly 30,000 direct jobs – 10,000 jobs in production and 20,000 in the construction sector – and “support for tens of thousands of indirect jobs.”
European chipmakers take on water with Intel
The European semiconductor sector is down sharply this Friday after disappointing results from Intel.
ASML, the Dutch manufacturer of equipment used in the manufacture of electronic chips, fell by 7.6% on the Amsterdam Stock Exchange around 2 p.m., as did the French manufacturer, STMicroelectronics, which lost 4.3% on the Paris Stock Exchange, and its German competitor, Infineon, which lost 4% in Frankfurt.
And for good reason, in addition to Intel,The semiconductor sector of the New York Stock Exchange was weighed down on Thursday by the quarterly results of Arm Holdings. and Qualcomm’s statements which has warned of the impact of trade tensions on its turnover. So many clouds that raise fears that the overproduction crisis, which European manufacturers of mid-range chips are experiencing, will last longer than expected.
(With AFP)
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