Intel's stock fell 45% in October, its worst month on record, according to FactSet. The drop follows a weak PC outlook and raises pressure on the chipmaker to land customers for its foundry business.
Intel shares dropped 29% on Friday, their worst day since the 1970s, and are down another 8% in Monday trading. The selloff followed a warning that PC demand is weakening, and it puts the company's foundry effort under closer scrutiny.
A revenue warning hits the PC business
On Thursday, Intel said revenue this quarter will fall between $1 billion and $2 billion short of analysts' estimates. The PC market continues to suffer from soaring costs for memory and other components. Intel still counts on its PC segment for roughly half of its revenue.
The data center business offers a counterweight. It grew 78% in the third quarter from a year earlier to $7.3 billion, and CEO Lip-Bu Tan said he sees the global server processor market growing as much as five times to about $200 billion over the next five years.
Capacity shift complicates the foundry pitch
However, Intel said it cannot make enough chips to meet demand, pointing to industry-wide supply constraints for wafers, substrates and memory. In response, it is shifting some Oregon factory capacity away from advanced 18A wafers to produce more wafers on the older Intel 3 node for data center products.
Intel is counting on 18A to attract outside foundry customers, so the shift could complicate that effort. David Yoffie, a Harvard Business School professor who spent almost three decades on Intel's board, said that customers worry Intel may lack excess capacity beyond its own demand, which would make it a less credible supplier.
Still no marquee customer
Intel has spent half a decade and a good chunk of its $108 billion in capital expenditures trying to challenge Taiwan Semiconductor Manufacturing Company. Yet it still has no marquee customer for its most advanced chips. Tan has taken a more cautious approach than predecessor Pat Gelsinger, and he said on Thursday that a couple of customers would be announced in the coming two quarters.
Yoffie said that if Intel does not find a large-scale foundry customer within a year, the stress on its economics will show even more dramatically. According to Yoffie: "The right solution is for Intel to spin off the foundry business." He called it maybe the only solution.
Source: CNBC
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