The chip group Intel is hit hard by the downturn in the PC market and resorts to extensive austerity measures. In the last quarter, group sales fell by a fifth year-on-year. In the coming year, Intel now wants to significantly reduce costs.
The chip manufacturer Intel earned significantly less in the third quarter because of the rapidly shrinking PC market. Quarterly revenue fell 20 percent to $15.3 billion and net income reached $1 billion. Wall Street had expected revenue of about $15 billion and net income of $494 million for the quarter ended September, according to FactSet. Intel and other chipmakers had benefited from a boom in computer and electronics sales early in the pandemic. However, the market has turned as high inflation, rising interest rates and recession fears weigh on demand.
For the current quarter, Intel has forecast revenue of $14 billion to $15 billion, down from the $16.3 billion estimated by analysts. The company also lowered its full-year sales guidance and now expects sales to reach $64 billion, down from $68 billion in July. Investment plans for this year have been reduced from $27 billion to $25 billion.
Chief Executive Pat Gelsinger said the company is cutting spending to adjust to the weaker market. "To position ourselves for this economic cycle, we are aggressively addressing costs and driving efficiencies across the business," he said. Intel is working to achieve $3 billion in cost reductions by 2023, growing to $8 billion to $10 billion in annual cost reductions and efficiencies by the end of 2025.
Intel is among the hardest hit companies in the chip industry due to the company's heavy reliance on the PC market. The company is also struggling in the data center market. Intel chips dominate in server farms that process data for businesses and governments, but the company is facing growing competition from rival AMD there. Intel's data center division reported a 27 percent drop in revenue to $4.2 billion for the third quarter.
The weakness in Intel's core business comes at a time when the company is ramping up production and trying to catch up with rivals in Taiwan and South Korea in the race for the fastest, most advanced chips. But ambition doesn't come cheap. Gelsinger, who took the helm last year, has announced plans to build plants in Arizona, Ohio and Germany, among other expansions. These projects together could cost hundreds of billions of dollars.
