Chip giant Intel CFO and interim CEO Bob Swan released an updated supply letter on the company's official website on Friday, in response to recent capital market queries about Intel's chip supply capacity and 10 nm chip manufacturing process. The letter first reviewed the significant growth of the industry in the first half of this year. The explosive growth of data and the need to process, store, analyze, and share data have spurred industry innovation and an astonishing demand for cloud, network, and enterprise computing performance. In the first six months of this year, Intel's data center business grew 25%, cloud computing revenue grew 43%, and PC business performed even more astonishing.
According to Gartner statistics, the global PC shipments in the two quarter of this year are the first increase in six years. Intel expects this year's Potential Market Area for PC (TAM) to show modest growth for the first time since 2011, mainly due to strong demand for games and business systems.
The letter acknowledged that the strong growth in the PC market had put pressure on Intel's supply chain and that Intel had to give priority to producing Xeon and Core processors to meet the needs of both high-end markets. This leads to Intel's chip supply without doubt, especially in the entry-level PC market.
But Intel still believes that there are at least enough supply to meet its revenue targets this year. At the end of July, Intel upgraded its non-GAAP revenue guidelines for the full year of 2018 to $695 billion, up $4.5 billion from the full-year revenue guidelines for early January.
Intel has also proposed three solutions: to adjust capital expenditure to a record $15 billion in 2018, an additional $1 billion from the plan earlier this year. Incremental funds will be invested in 14 NanoChip production bases in Oregon, Arizona, Ireland and Israel to boost existing chip production to meet demand. In addition to upholding the customer-centric concept of matching customer demand with existing supply, Intel continues to make progress in the next generation of 10-nanometer chip development, production is also improving, and continues to expect mass production in 2019.
In early September, prominent investment bank JPMorgan Chase questioned Intel's ability to meet this year's performance standards, saying that not producing enough processor chips to meet demand would be a major drag on PC sales for the holiday shopping season at the end of the year. The bank also expects Intel's shortage of processors and chipsets to hurt PC shipments by 5 to 7 percentage points in the fourth quarter of this year.
After the clarification letter, Intel's stock rallied, peaking at $47.75 a day, up 3.8%, after falling 1% early Friday to hit a daily low of $45.46, and finally closed up 3.07% at $47.29, its highest since September 5.
AMD, a rival, fell nearly 8% to close below the $30 integer level and ended down 5.22% at $30.89, the lowest since September 13, narrowing its gains to 190% so far this year. But this performance is still far ahead of Intel, which has only risen 2% this year, down 3% in the past month.
Wall Street has mentioned that AMD has become the No. 1 Bull Stock in the S&P 500 this year, and has been favored by several top investment banks since August, setting new and expected target prices. Bank of America Merrill Lynch, Jefferies and Cowen all believe that AMD is ahead of Intel in chip making this year and has a relatively more attractive valuation.
Intel has delayed the launch of the 10-nanometer chip, originally scheduled for release in 2016, to the end of the holiday shopping season in 2019, while AMD plans to launch a more advanced 7-nanometer chip next year, representing the computing power and energy efficiency of AMD server microprocessors, according to the Bank of America Merrill Lynch Research.
Jefferies believes that Intel has not made any mistakes in the past 12 years, making AMD lose its market share all the year round. But in the past four years, AMD executives have made little mistake. In the second half of 2019, for the first time in many years, AMD will surpass Intel in product leadership. AMD's market share in server chips is expected to rise from 8% to 12%.
Cowen reiterated the super rating, arguing that AMD was ahead of Intel in introducing higher-tech nano-chips, reflecting a complete reversal in the industry's competitive momentum and giving AMD a chance to reverse its all-track business.
Another Wall Street article also mentions that the launch of Intel's Tick Tok in 2005, which once put AMD on a technically direct standstill, led to losses and near bankruptcy in 2011-2015, and that AMD's product line, price and brand image have been suppressed by Intel's death in the past decade:
Gordon Moore, then 76, set the timeline for Intel processor microarchitecture and chip fabrication updates (following Moore's law that transistors on a chip doubled every 24 months, that is, product performance in the semiconductor industry doubled every two years). At one point in 2003, AMD had an OPTERON server capable of overtaking Intel in manufacturing, but as soon as the pendulum was planned, AMD would technically shut down directly.
And the chance of the AMD Jedi rally is Intel's pendulum deterrence. After 2014, Moore's law, the rationale for the pendulum program, encounters the physical limit ceiling of component transistors. Insiders such as NVIDIA CEO Jen-hsun Huang even claimed that Moore's law was dead.
Although Intel's dead duck's mouth refuses to admit that Moore's law is invalid, let alone 7 nanometers, Intel's 10 nanometer chip has been jumping tickets for three years, repeatedly delaying the launch date. AMD, which has reached 7 nanometers, has completely reversed repression and even has a one-to-two-year manufacturing advantage over Intel.
According to Wall Street news articles, AMD and Nvidia have performed brilliantly in the past two and a half years. The most important reason is that they have seized the keys of the times, but the traditional giant Intel's counterattack is coming at any time.
The power of computing and image processing has allowed AMD and Nvidia to gain greater valuation flexibility in cloud computing and AI business, the strongest drivers of 10-fold gains for the two graphics cards in this round. The figures show that revenue from the computing and image sectors has been a key driver of AMD's sustained high growth and improved gross margins over the past few quarters.
In addition to catching up with Intel in the server market and making breakthroughs, the potential and competitiveness of AMD in the GPU market have also been highlighted. Despite the slow progress in GPU products in 2017, the release of 7Nm GPU means that AMD will enter the advanced field of AI computing, and the Rdeon Vega GPU chip, which focuses on artificial intelligence and in-depth learning, provides diversity for AMD products.
But the wave and demand in the GPU field have attracted Intel's attention. In 2017, Intel renewed its interest in independent graphics cards. First, Raja, the head of graphics department, was dug up from AMD. In February this year, he announced the design idea and prototype of the independent graphics card for the 14nm process. A series of initiatives show that Intel is likely to come back to the only obvious attack.
