In an hour-long webinar Intel Corp. hosted for Wall Street analysts to provide updates on its contract manufacturing business, the company confirmed that it would be a long slog for investors.
Shares of the world’s second-largest semiconductor company fell nearly 5% on Wednesday, following Tuesday’s lesser tumble of 3.8%, when Intel
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was the worst performer in the Dow Jones Industrial Average
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Wednesday’s trading indicated it was on track to repeat that unenviable feat.
Also read:Why Intel is the Dow’s worst performer for the second day in a row.
In the webinar, Intel executives said that they are hoping to announce their first big manufacturing customer “in the back half of this year” but that they won’t see any revenue in the new business until at least early 2025.
“I think there was hope they might announce a foundry customer,” said Stacy Rasgon, a Bernstein Research analyst, about why the shares fell on Wednesday. “I wasn’t really expecting it, but I think there was a hope. But they have to nail everything down first.”
The company did have some news earlier Wednesday, but it wasn’t exactly what some were hoping for. Intel said it was selling a 20% stake in its IMS Nanofabrication business to a Bain unit, in a deal that values the entire business that develops advanced lithography tools used in chip manufacturing at about $4.3 billion.
Intel Chief Financial Officer Dave Zinsner said that before Intel can secure its first customers for its contract manufacturing business, it must finish developing its process development kit (PDK), which is a typically a proprietary set of files and specifications, or the building blocks for the manufacturing process and design tools Intel uses to make chips.
“They don’t even have the PDK yet. No one is going to sign without that,” Rasgon said.
Creating a large contract manufacturing business at Intel is one of Chief Executive Pat Gelsinger’s biggest moves since taking over the company — and the company’s biggest gamble. While known for its leadership in the sector for decades for the manufacturing of its own chips, Intel has fallen behind Taiwan Semiconductor Manufacturing Co.
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Gelsinger and his fellow executives are now working on getting Intel’s own manufacturing up to speed and creating a new business unit to offer its services to its rivals.
Now read: How did Intel lose its Silicon Valley crown?
Chris Rolland, a Susquehanna Financial analyst, agreed with Rasgon, adding in a note to clients that the meeting “ultimately lacked the meaningful customer announcements that give visibility into the timing and magnitude of revenue here.”
So even as investors have been waiting for more information about Intel’s much-touted push into manufacturing for others, the update on Wednesday confirmed one thing: Intel’s foundry business is going to stay small until at least early 2025.