Intel Expected to Post Loss as Demand for Chips Wanes

Intel, which remains America’s largest chip maker by revenue, is expected to report a $278 million loss for the final period of the year on sales of $14.49 billion, according to analysts surveyed by FactSet. Those sales would represent a decline of almost 26%—a sharper year-over-year drop than in the prior quarter—and be in line with guidance Intel gave in October for the year’s final three months. 

The sales slump reflects, in part, the sharp downturn the personal-computer market has been experiencing over recent months. PC shipments fell 28.5% in the final quarter of last year, research firm

Gartner

said, the worst retreat since it began tracking the market in the 1990s. Consumer spending has been hit by central banks raising interest rates to combat soaring inflation and growing fears of a possible recession. 

Intel’s central processing units, or CPUs, feature in most of the world’s PCs. Revenue in the division responsible for those sales is expected to fall by about 25% in the fourth quarter, according to the analyst survey.

Chief Executive

Pat Gelsinger

last year put the company on a push to slash expenses, with $3 billion in cost cuts this year, increasing to as much as $10 billion of annual cost reductions and efficiency gains by the end of 2025, including layoffs. 

Chip companies, including Intel, have pared back production plans and reduced capital spending—including computer-memory giants

Samsung Electronics Co.

and

Micron Technology Inc.,

key players in a segment of the chip market viewed as a leading indicator for technology demand. 

Sales in Intel’s other big division, which handles chips that go into the data centers that power apps and form the backbone of the internet, are expected to fall roughly 42% to $4.2 billion.

The company has fallen behind chip-making competitors in Asia in the race to make the fastest chips with the tiniest transistors, although Mr. Gelsinger has laid out plans for a return to leadership within a few years.

Intel’s swoon also reflects a broader downturn for the chip industry after two years of high demand, scrambled supply chains and a widespread chip shortage, with companies exposed most directly to shifting consumer appetites facing stiff headwinds. Still, pockets of high demand remain.

Texas Instruments Inc.

this week reported a 3% fall in sales for the fourth quarter, citing a downturn in all end markets except for the auto industry.

Even as Intel cuts spending, it is continuing on an unprecedented plan to expand its chip-making factory footprint. Fueled by potential government grants worth billions of dollars and tax breaks under U.S. legislation passed last year, Intel is building new plants in Arizona, Ohio and Germany and is expanding its operations elsewhere.

Intel executives said they remain committed to major projects, though the company has pushed back the start of construction on its facilities in Germany against the worsening market outlook and made other moves to save money.

Write to Asa Fitch at [email protected]