Intel Corporation’s financials released last week were bad and predictable to the same degree. Intel went into the economic slowdown of 2022 still battered by a leadership and technology crisis that eroded its innovative edge, production capacity, and profitability in comparison with its competitors in the semiconductor market such as Nvidia, AMD, Arm, and TSMC.
Analysts estimate that although the worst is not yet behind Intel, the bad times will not continue for long. If the stock market is to be believed, there is general optimism about the company.
So far this year, Nvidia’s share price has risen by 42%, AMD is up 18%, and even Intel was rising, by a decent 12%, until it published its financials on Thursday. Following that, its share price dipped by more than 6%, but the assessment on the market is that the trend will reverse.
Shahar Carmi, a senior analyst at Psagot Investment House, says, “2023 can be expected to be a mirror image of 2022: the first half will be weak, and the second half will be marked by recovery.”
The collapse in Intel’s revenue and international status could have effects in Israel. The last quarter will undoubtedly impact Israel’s macro-economic figures. The placing of workers at the company’s Kiryat Gat fab on unpaid leave and the shutdown of some production lines, even if only temporary, presumably reduced exports of semiconductors from Israel in that period. That will affect Israel’s foreign currency reserves and export figures, as the Kiryat Gat fab supplies chips to the tune of billions of dollars to Intel Ireland.
Intel has announced that the closing of its deal to acquire Israel’s Tower Semiconductor may be postponed. If the deal is cancelled, the company’s business in Israel could also be damaged.
Intel is still a profitable company, and as such could not avoid paying dividends or bonuses to employees, although it is believed that the bonus will decline.
Despite all this, and despite the departure of Intel Israel CEO Yaniv Garty, and the announcement that the expansion of the development center in Haifa will not go ahead, there are several points of light for Intel’s Israeli employees.
First of all, Israeli subsidiary Mobileye again beat the estimates and remains Intel’s fastest growing unit, while the Sapphire Rapids server and workstation processor, which was developed in several countries including Israel, has finally been launched and has won positive reviews.
Intel’s Israeli development centers are also putting their hopes in what Intel sees as its answer to Apple’s M2 processor, Lunar Lake, due to be launched nest year for low-power mobile devices.
Finally, Intel has high hopes for its new fab in Kiryat Gat, which will probably be inaugurated in 2027. Sources inform “Globes” that within the past few months Intel Corporation has bought the most advanced machines in the world for producing microchips using ultraviolet lithography technology from Netherlands company ASML for installation in Israel.
US-China standoff delaying completion of Tower deal
In another two weeks, it will be a year since Intel signed the deal to buy Israeli-US chip manufacturer Tower Semiconductor. The much publicized acquisition became a central plank of Intel Corporation CEO Pat Gelsinger’s strategy of turning Intel into a service provider, making chips to order according to other companies’ designs.
Intel promised to obtain the required regulatory consents to the deal by February 15 this year, but it now looks as though completion of the deal might be postponed to as late as June, because of delay by the Chinese regulator.
Closure of the deal comes at a sensitive time in US-Chinese relations. The US has declared a ban on the export of manufacturing plant for advanced microchips to China, and has co-opted the Netherlands and Japan, which are critical to China’s manufacturing value chain, to the ban.
The Chinese state and Intel are bound up with each other, and it is not certain that the Chinese regulator will want to express a protest against the US government by nixing Intel’s deal. The market, however, is already reflecting lack of confidence that the deal will be closed. Tower Semiconductor’s shares are at $42, lower than the $53 price in the deal with Intel.
“The price indicates that the market believes that there is a high chance that the deal will not take place, or at least that completion will be significantly postponed,” says Carmi. “In the extreme case in which the deal is cancelled, the share price could fall substantially, like those of its competitors, which are down about 30% on average.”
Published by Globes, Israel business news – en.globes.co.il – on January 30, 2023.
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