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Intel Slumps After New Chip Production Process Delayed Again

(Bloomberg) -- Intel Corp. shares slumped after the world’s largest chipmaker said a new 7-nanometer production process was delayed again.“The company’s 7nm-based CPU product timing is shifting approximately six months relative to prior expectations,” the company said as it reported quarterly results on Thursday. “The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”Intel shares fell almost 9% in extended trading. Advanced Micro Devices Inc., a rival, jumped 6%.Competitive pressure has been building on Intel in recent years. The company designs and manufacturers its own processors, while many rivals focus on design and tap Taiwan Semiconductor Manufacturing Co. to make their chips. That’s helped TSMC improve production faster than Intel, and given companies such as AMD a new chance to compete.Read more: AMD Says New Server Chip Faster Than Pricier Intel OfferingMajor Intel customers, including Amazon.com Inc., are also increasingly supplying themselves with server chips manufactured by TSMC.Intel suffered delays in 2018, too. The company’s comments on Thursday reveal that the new 7-nanometer production process isn’t good enough because it is creating too many chips that must be thrown away. Semiconductor companies need to have a high yield, or percentage of usable chips from each production run, to support new manufacturing plants that cost more than $5 billion to build and must be run 24 hours a day.(Updates with background on production and rivals in fourth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Read More...

(Bloomberg) — Intel Corp. shares slumped after warning about another production delay, sparking concern the world’s largest chipmaker will fall further behind rivals in a crucial area it once dominated.

The timing of a new 7-nanometer process “is shifting approximately six months relative to prior expectations,” the company said as it reported quarterly results on Thursday. “The primary driver is the yield of Intel’s 7nm process, which based on recent data, is now trending approximately twelve months behind the company’s internal target.”

Intel shares fell 9% in extended trading. Advanced Micro Devices Inc., a rival, jumped 8%.

Competitive pressure has been building on Intel in recent years. The company designs and manufacturers its own processors, while many rivals focus on design and tap Taiwan Semiconductor Manufacturing Co. to make their chips. That’s helped TSMC improve production faster than Intel, and given companies such as AMD a new chance to compete.

Read more: AMD Says New Server Chip Faster Than Pricier Intel Offering

Major Intel customers, including Amazon.com Inc., are also increasingly supplying themselves with server chips manufactured by TSMC.

New production techniques in the chip industry are measured by nanometers. The advancements help companies make semiconductors that have smaller circuits on them. This allows the components to count faster, store more information or use less electricity. It also makes them cheaper to produce.

Intel suffered delays in 2018 on its 10-nanometer initiative, too. The company’s comments on Thursday reveal that the new 7-nanometer production process isn’t good enough because it is creating too many chips that must be thrown away. Semiconductor companies need to have a high yield, or percentage of usable chips from each production run, to support new manufacturing plants that cost more than $5 billion to build and must be run 24 hours a day.

A high-end server chip can sell for $10,000. It doesn’t cost that much to make but if companies throw away a lot of these components at the production stage, that cuts into profitability.

For now, the production woes have damaged Intel’s reputation rather than it’s finances. Second-quarter revenue and earnings per share beat Wall Street expectations.

Intel Chief Financial Officer George Davis said the company will gain market share in personal computer chips and server chips this year.

(Updates with quarterly results in final paragraphs.)

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