Intel Corporation Presents at BofA Securities 2024 Global Technology Conference, Jun-04-2024 02:40 PM - NasdaqGS:INTC

NasdaqGS:INTC

During the BofA Securities 2024 Global Technology Conference, John William Pitzer, Corporate Vice President of Corporate Planning & Investor Relations at Intel Corporation, provided updates on several key areas:

SCIP2 Partnership with Apollo

• Announced SCIP2 (Semiconductor Co-Investment Program), the second iteration of the SCIP program.
• The partnership is with Apollo, creating a joint venture (JV) where Intel has a 51% stake and Apollo has a 49% stake.
• The JV has certain rights to Fab 34 in Ireland, and Intel will buy wafers from the JV at a cost plus margin structure.
• Intel will receive $11 billion upfront, allowing them to take capital out of the already built-out facility in Ireland and use it elsewhere.
• The SCIP2 structure is similar to SCIP1, which involved a new capacity build-out in Arizona, but differs in that Ireland is mostly built out.
• There is no significant impact on the P&L over the next couple of years, and no change to capital spending plans.
• Intel will fully consolidate the JV through the net income line, reflecting the non-controlling interest after net income.

Product Announcements

• Lunar Lake: Expected to launch in Q3. At the MPU level, it will be a 48 TOPS processor, and at the SoC level, it will exceed 100 TOPS. It is 40% more power-efficient than Meteor Lake.
• Xeon 6th Generation E4 (Sierra Forest): Released in Q2.
• Granite Rapids: Peak core version, to be released in Q3.
• Gaudi: Gaudi 3 is now in the market, with expected revenue of over $500 million from Gaudi this year.

PC Market

• The AI PC is expected to drive an ASP uplift rather than a significant unit uplift.
• The PC market is estimated to be around 300 million units, with the AI PC helping to stabilize this.
• An enterprise refresh cycle is anticipated in the back half of the year, driven by the end of life for Windows 10 service level agreements.

Competition with ARM

• Intel views ARM as a serious competitor but believes its ecosystem and silicon roadmap give it a strong position.
• ARM has had limited success in the Windows PC market over the past 15 years.
• The success of Apple in the PC market is attributed more to its ecosystem than its architecture.
• Intel does not believe ARM has a structural power efficiency advantage over x86.

Data Center

• Intel expects the server market to decline low single digits YoY in the first half and increase low single digits YoY in the second half.
• Core count mix is expected to improve, benefiting ASP.
• Market share is expected to be plus or minus flat this year, based on Sapphire Rapids and Emerald Rapids performance.
• Sierra Forest and Granite Rapids will ramp in late 2024 into 2025, enabling Intel to regain share.

Huawei Restrictions

• Intel anticipates a lower end of the 12.5% to 13.5% guidance for Q2 due to incremental restrictions on selling to Huawei.
• The impact is difficult to recapture intra-quarter, but Intel expects to recapture the revenue in the back half of the year as Huawei's inability to ship does not change the size of the market in China.

Intel Foundry Services

• The break-even point for Intel Foundry Services is expected to be around 2027.

• The target model presented in April was based on conservative revenue expectations, aiming for $100 billion in revenue by 2030.

• The model assumes the core business grows at a 3% to 5% CAGR, with additional share gains in accelerated compute.

• The breakeven point depends largely on the mix shift from Intel 7 to Intel 18A and pulling back wafers from external foundry suppliers.

• Moving from Intel 7 to Intel 18A provides a significant economic benefit, nearly tripling the ASP per wafer with only a modest increase in cost.