Intel Corp. entered late Tuesday as the chipmaker announced aggressive plans to expand its manufacturing capacity to restore its leadership role in the industry.
Intel INTC,
Shares rose more than 6% after hours, following a 3.3% decline in the regular session to close at $ 63.48.
On a conference call, new CEO Pat Gelsinger, who had spent decades at Intel focused on the engineering side of the industry before moving on to Chief Operating Officer at EMC Corp. and CEO of VMware Inc. VMW,
they put forward an ambitious roadmap to kick back from recent manufacturing problems that surfaced last year.
Gelsinger said Intel was investing $ 20 billion in “major factory building” at its Ocotillo, Ariz. Facility, and plans to announce other expansion plans this year. Last year, Intel spent $ 14.3 billion on capital expenditures. While Intel is likely to benefit from the government’s effort to re-establish U.S.-based chip manufacturing, Gelsinger said Intel does not include that in its plans.
“This is Intel’s strategy time, stop-point,” Gelsinger said on the call.
Gelsinger said Intel would not only make most of its products in-house but would also expand the use of third-party manufacturers and rent other products.
“It’s an exciting and bold new manufacturing move,” Maribel Lopez, chief analyst at Lopez Research, told MarketWatch. “Short-term implementation is the challenge, but Gelsinger and his team seem to be in control.”
“The most exciting thing is to see Intel’s leadership demonstrate that the company is willing to do what they are doing to compete,” Lopez said.
Also, Intel was forecasting revenue of $ 76.5 billion and changing earnings of $ 4.55 a quarter for 2021, after not providing a full-year outlook in its previous earnings report. Analysts surveyed by FactSet expect an average of $ 76.64 billion and adjusted earnings of $ 4.78 per share.
Back in January, Intel’s stock fell under pressure as Gelsinger walked back expecting the company to rely more on third-party manufacturers to make its chips. A week earlier, Intel had announced that Gelsinger would take over for Bob Swan, the former head of finance who had supported Intel for more than two years.
Intel’s manufacturing problems surfaced back in July, when it announced that they would delay their next-gen 7-nanometer chips until at least the end of 2022 due to a “defect” in the manufacturing process.
In a chip eye, a nanometer, or nm, refers to the size of the transistors that go on a computer chip, with the general rule that smaller transistors are faster and more efficient at using power. Rival Advanced Micro Devices Inc. AMD,
they began releasing its 7-nm chip in the summer of 2019.
Ahead of Tuesday’s show, analysts had said Intel needed to address how it intends to recapture its manufacturing leadership in the chip world, and address the workload of migrating computing from the x86 chip architects he started.
Citi Research analyst Christopher Danley, who has a neutral rating on Intel, has said he expects Gelsinger to dispel fears of a “doomsday” scenario where Intel’s 80% market share falls to 50% in the hands of competitors like AMD.
“While it is not a promise that Intel will be able to capture its competitors, less regain this leadership, we believe that Intel has hired the leader who will give that company the best opportunity to Cowen analyst Matthew Ramsay, who has an improved performance on Intel. in a note.
Over the past 12 months, Intel shares are up 28%, while the PHLX Semiconductor Index SOX,
increased 123% over that period. Meanwhile, the S&P 500 SPX index,
received 75%, and the Nasdaq Composite Index COMP,
they found 93% recovering from the massive downturn of COVID-19 pandemics that plagued markets a year ago.