Despite the world’s economic downturn Intel continues to blow quarters out of the water, with its first quarter of 2020 seeing revenue rise by 23 percent year-on-year to $19.8 billion (£16 billion), while the anticipated release of 10nm Tiger Lake chips in the second half of 2020 is expected to spur further growth.
The strong growth came with an increased demand for notebooks and a solid showing in its data-centric business that saw growth of 34 percent, while PC revenue grew by 14 percent. Perhaps strikingly, Intel expects many of these tailwinds to continue, saying demand for mobile PCs, cloud and network infrastructure for 5G “remain above seasonal trends.”
“Coming into the year, we’re very bullish about the medium and long-term outlook. And we’re putting our capital to work to support that medium and long-term outlook, and that’s not going to change” CEO Bob Swan said.
While the Q1 posting is strong COVID-19’s impact is being watched closely and as CEO Bob Swan noted in a call with investors “took some actions to dramatically strengthen our liquidity position that we felt were prudent.
He noted: “We raised $10.3 billion in debt to further underpin an already strong balance sheet, and we suspended our share buybacks. We think this level of conservatism is appropriate at this phase, and we intend to reinstate our buyback program as circumstances warrant.”
Market headwinds include the impact of a global recession on IoT end markets, particularly industrial and retail, lower automotive production and slowing enterprise and government data center demand, he added.
Intel bought autonomous vehicle specialist Mobileye in 2017, in order to compete with the likes of Qualcomm and Nvidia and tap into the fast-growing driverless market. That appears to have paid off as Mobileye revenue is up 22 percent.
Mobileye brought in $254 million (£205 million) in Q1, its product range includes computer vision, ML-based sensing, mapping and driving policy technology.
However as the automotive trade is impacted by COVID-19 the firm expects to see weaker growth as demand wanes.
Intel plans to release its 10Nm and Tiger Lake chips halfway through the year and indicated that it is seeing strong demand signals as it ramps up production. Intel has struggled in the past to produce enough chips to meet demand and has had manufacturing woes with the development of its 10Nm range. It said it added capacity in the quarter.
CEO Bob Swan commented that: “We have 50 designs that we expect to ramp in the holiday season this year”.
Listing some improvements, he noted: “Clock speed, battery life, AI incorporation into the core design…”
Even though Intel boasts 50 Tiger Lake-based notebook designs lined up for release this year, competitors such as AMD have already announced that they expected to have significantly more designs created off of its 7nm Renoir chips in 2020: competition is hot.
Intel bought Israeli AI chip specialist Habana in December 2019 for a reported $2 billion, saying it expects the fast-growing AI silicon market to be worth $25 billion by 2024.
CEO Swan noted: “This quarter, we have largely completed the integration. We consolidated product road maps, aligned software resources and are executing to our deal thesis. We are also now sampling Habana’s first deep learning training processor to large CSPs.”
The company also had upbeat news on 5G infrastructure, saying with major design wins at Ericsson, Nokia and ZTE, “we expect to be the base station market segment leader by 2021, a year earlier than previously committed.”
The firm came into the year off a strong showing in the second half of 2019 and was ready for cloud service providers to operate as normal, however it is now nervous about how badly enterprise and governments are going to be disrupted by the pandemic.
As CEO Swan notes that: “We’re most anxious about is just enterprise and government and what kind of demand signals we’ll see in the second half…Enterprise and government, a big, a bit of an unknown for us at this stage.”
The work and learning at home dynamic caused by the global health crisis has had a strong impact of the sales of Notebooks which were up 22 percent YoY. While the firm expects PC sales to be ‘solid’ in the first half of 2020 they expected the demand to be attuned towards notebooks.
CFO Davis commented that: “We had customers who have been short of demand for a number of quarters who were seeing a chance to finally build some – a little bit of inventory, which gave us a seasonally strong first quarter relative to anything we might see historically.
“But we saw notebook volumes up over 20 percent in the quarter. And I would say that that’s more than just the pent-up demand.”