Intel lost half a billion dollars last quarter, confirms price increases, Optane shut down

Tudor Cibean

Posts: 144   +9
Staff
In brief: Lower PC sales are part of the reason for Intel's weak performance this past quarter, but the company's graphics division also saw a massive $507 million operating loss. The chipmaker confirmed rumors that it plans to hike prices for a variety of its chips in Q4 while also mentioning that it will shut down its Optane memory business.

Intel released its second-quarter earnings report for 2022 on Thursday. The company's revenue dropped by 22 percent year-over-year to $15.3 billion, ending the quarter with a $454 million net loss, a 109 percent drop compared to the $5 billion in profit reported in Q2 2021.

The chipmaker partly blamed the weakening demand for PCs and components caused by the recent decline in economic activity. In the past few years, computers saw a massive spike in demand as the pandemic forced people to work and spend more of their time at home. As a result, many tech companies saw record profits, but this seems to have come to an end, with Intel saying it expects the PC market to shrink by 10 percent this year.

The company confirmed recent reports that it's planning to increase pricing on a wide variety of products including CPUs, Wi-Fi chips, and controllers. The price hikes will take effect in the fourth quarter, with Intel CFO David Zinsner saying they've been suffering from inflationary cost increases that must be passed on to customers at some point.

Intel's Client Computing Group, which includes consumer CPUs, dropped in revenue by 25 percent YoY but still generated a profit of $1.1 billion. Intel CEO Pat Gelsinger claimed that some of their largest customers are reducing inventory levels at a rate not seen in the last decade. The consumer and education PC markets reportedly saw the biggest drop in processor demand.

Meanwhile, the Accelerated Computing Systems and Graphics Group saw a $507 million loss this quarter. Gelsinger mentioned the company would not meet its internal target of selling four million Arc GPUs this year and also talked about issues the company's had developing the graphics drivers. "We thought that we would be able to leverage the integrated graphics software stack, and it was wholly inadequate for the performance levels, gaming compatibility, et cetera, that we needed," he said.

The company also mentioned that it's shutting down its Optane memory business and ceasing the development of its 3D Xpoint technology, incurring a $559 million inventory impairment charge this quarter. The chipmaker sold its SSD division to SK Hynix in 2020 but originally decided to keep Optane.

Intel confirmed that it sold off its drone business as well, which included about 9,000 drones that provided light shows for various events such as the Olympic Games and Super Bowl halftime shows. According to a report from The Register, Elon Musk's brother Kimbal bought the division.

However, Zinsner did remain optimistic that the situation could improve later this year. "We believe our turnaround is clearly taking shape and expect Q2 and Q3 to be the financial bottom for the company," he said. Starting next year, Intel will likely benefit from the recently passed CHIPS Act, which gives the semiconductor industry a $52 billion boost in the form of subsidies that will go toward the construction of new fabs.

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HardReset

Posts: 1,717   +1,377
Optane was great but it's pretty pointless now with PCIe 5.0 NVME drives at 13GB/s
Optane's seek times and 4kB performance are awesome for OS drive. Much faster than any NAND flash based SSD will probably ever have. For OS drive I would gladly take Optane based drive. But since pricing is simply horrible, I'll wait for something else.

Optane also was supposed to be 1000x faster than NAND flash and have 1000x endurance. Well, it wasn't so good riddance.
 

Theinsanegamer

Posts: 3,530   +5,967
Optane's seek times and 4kB performance are awesome for OS drive. Much faster than any NAND flash based SSD will probably ever have. For OS drive I would gladly take Optane based drive. But since pricing is simply horrible, I'll wait for something else.

Optane also was supposed to be 1000x faster than NAND flash and have 1000x endurance. Well, it wasn't so good riddance.
But ti doesnt matter. SATA III, NVMe 4.0, or optane, the OS runs no faster. Modern software just isnt coded with flash memory in mind, or there are other programming bottlenecks.
 

HardReset

Posts: 1,717   +1,377
But ti doesnt matter. SATA III, NVMe 4.0, or optane, the OS runs no faster. Modern software just isnt coded with flash memory in mind, or there are other programming bottlenecks.
What? Optane runs OS much faster than NAND based solutions. Difference between SATA and NVMe drives is quite small because seek times and random performance are somewhat same, only raw transfer speeds are bigger. But OS rarely needs high transfer speeds...
 

Lew Zealand

Posts: 2,218   +2,757
TechSpot Elite
"We thought that we would be able to leverage the integrated graphics software stack, and it was wholly inadequate for the performance levels, gaming compatibility, et cetera, that we needed,"

Oops. So they pretty much had to start from scratch again with their Arc drivers. Does explain a few things including the reduced cadence for updates to iGPUs older than 18 months if their driver staff is coding primarily for dGPUs. And that's encouraging for Intel staying in the dGPU market to give that market a third player.
 

Lionvibez

Posts: 2,713   +2,526
But ti doesnt matter. SATA III, NVMe 4.0, or optane, the OS runs no faster. Modern software just isnt coded with flash memory in mind, or there are other programming bottlenecks.

I take it you have never used an system with the Optane drive for an OS drive. Its faster and noticeable since it has less latency than Flash based nvme drives.
 
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neeyik

Posts: 2,019   +2,342
Staff member
"We thought that we would be able to leverage the integrated graphics software stack, and it was wholly inadequate for the performance levels, gaming compatibility, et cetera, that we needed,"

Oops. So they pretty much had to start from scratch again with their Arc drivers. Does explain a few things including the reduced cadence for updates to iGPUs older than 18 months if their driver staff is coding primarily for dGPUs. And that's encouraging for Intel staying in the dGPU market to give that market a third player.
Surprising and welcome honesty from Intel, for once. But it also speaks volumes of how little integration, between the various departments, there is. While Gen 12.x is more than just a scaled-up Gen 11, the fundamentals are still the same. You'd think Intel would have thoroughly prepared the Gen 11 stack in the early years, while Gen 12.x was still on the drawing board.

Sounds like either the software dept or the GPU department, or both, weren't being entirely honest about how good their work was - and the other was holding back what each were trying to achieve.
 

wiyosaya

Posts: 7,961   +7,006
Your business is losing money because people are not buying your products, so the solution is to raise the prices of those products. Makes sense!
Intel Hubris, of course. They were used to being on top, but then got caught with their pants down. Now, even when AMD has drastically closed the performance gap, it sounds like they are banking on their "reputation" to pull them out of the hole they dug themselves into. However, IMO, that means they are betting on "loyal customers" and those who don't know any better to get them out of the hole they are in.

In any event, as I said above, to me, its typical Intel Hubris, and they will have to learn the hard way.
 

Nanochip

Posts: 92   +127
Intel needs to begin to embody the word: co-optimization. Intel owns both the ARC hardware and software, and arc has been in development for years, so why did it take until now 2022 for them to realize the iGPU driver is inadequate? Intel UHD is hardware that is on package, while a dGPU sits off of the pcie bus.

ARC Drivers and hardware should’ve been cooptimized in lockstep.
 

Nanochip

Posts: 92   +127
What a bunch of losers. I've never lost half a billion dollars in my life.
Since they had profits in several prior quarters they’re simply using those prior profits to buttress the current quarterly loss. Sapphire rapids failure to ramp in time probably hit them hard. They had to create a new stepping for sapphire and tape it out before volume ramp.
 

RudyBob

Posts: 704   +669
Your business is losing money because people are not buying your products, so the solution is to raise the prices of those products. Makes sense!
They may not be buying. Inflation, gas prices, loss of 401k values and on and on. It isn't because Intel is a bad company
 

TheRealSCDC

Posts: 310   +432
Inflation in the US is completely out of control! It's not what's reported by the Gov't. Go shopping, look at product prices you normally buy from last year. At least 20% or more increase. It's so bad. No way my family is splurging on things anymore. Hell, we even cut out our vacation.

I work in commercial/industrial tires, and tire prices have increased well over 30% in 2 years.

Now upgrading a PC is becoming something you have to really think about/plan/budget.
 

Alfatawi Mendel

Posts: 220   +321
Have AMD announced their Q2 financial performance results yet? Could be, that it is an industry trend due to (mostly) external factors. (I don't usually pay attention to the corporate finance announcements...But this is a surprise from Intel)
 

umbala

Posts: 689   +1,248
They may not be buying. Inflation, gas prices, loss of 401k values and on and on. It isn't because Intel is a bad company
No one said Intel is a bad company. It doesn't matter why people are not buying, the point is that sales are down. If you raise prices when sales are down it just adds to the problem. The people who didn't buy before (for whatever reason) are going to buy now that prices will go up?
 

umbala

Posts: 689   +1,248
Have AMD announced their Q2 financial performance results yet? Could be, that it is an industry trend due to (mostly) external factors. (I don't usually pay attention to the corporate finance announcements...But this is a surprise from Intel)
It probably is a trend, but that's not the point. If sales are down and you raise prices, will that increase sales? In my experience no.
 

Rocky4040

Posts: 104   +136
Yep that's how you do it. Weakening PC sales so you up the prices sounds like a plan to me. /s

Here is some food for thought if the PC sales are in a decline because well the prices have already been increased to a point that most consider to high already because of supply issues and company and retailer greed all in the name of covid and soon to be the monkey virus which is going to be the next big thing they will use to blame everything being over priced even more.

These companies come up with all of these excuses to raise the prices and then when sales start to decline because people are getting tapped out for money or smart ones just refuse to over pay for stuff. What is the first thing they do becuase of slowing sales. They go hey everyone we are gonna raise all of those prices even farther because we can't sell enough products to cover our power bills and keep our share holders happy.

Great idea would be to lower the prices let the demand go up make more sales and in the end make more money by selling a lot more product.

I would say where is the government to step in and put an end to this crap but when you got Sleepy Joe at the wheel you know you are pretty much screwed. Same goes for our own country in Canada our PM is not sleeping but he may as well be because he just turns a blind eye to what is happening and pretends everything is all good.
 

azicat

Posts: 132   +150
I wonder how much Apple's move to ARM contributed to the financial hit. Mainstream MacBook sales seem to remain strong. And I've been looking for an x86-based laptop in the last 6 months and it wasn't much cheaper for similar specs; some were even more pricey. Brands like Lenovo and Dell don't even offer more than 16GB RAM as upgrades for most mainstream 12th Gen. OK probably more an OEM than Intel problem, but it doesn't help their position.