Intel offers weak forecast amid trade tensions as CEO talks to TSMC

By Max A. Cherney, Arsheeya Bajwa, Stephen Nellis

(Reuters) -Intel forecast second-quarter income and revenue under Wall Avenue estimates on Thursday, casting a shadow over new CEO Lip-Bu Tan’s first spherical of earnings on the helm, in opposition to the backdrop of a raging Sino-U.S. commerce conflict.

In a convention name with buyers, Tan additionally gave the primary hints of sweeping plans to revitalize Intel’s tradition of innovation, together with a mandate for workers to return to the workplace 4 days per week, fewer conferences and stripping out pointless inner administrative work in favor of core engineering work.

His remarks appeared to assist Intel shares stem losses in prolonged buying and selling however they had been nonetheless down 5%.

The chipmaker’s dour outlook may very well be one other supply of pessimism for buyers who’re relying on Tan to show issues round after years of missteps have left it struggling to realize a foothold within the booming AI market.

Fears round tariffs pushed prospects to stockpile Intel chips, which boosted gross sales within the first quarter, CFO David Zinsner mentioned. The corporate was not capable of decide the quantity of the profit, and it expects the second quarter to undergo in consequence.

“The very fluid commerce insurance policies within the U.S. and past, in addition to regulatory dangers, have elevated the possibility of an financial slowdown with the likelihood of a recession rising,” Zinsner mentioned throughout a convention name with analysts. “This makes it harder to forecast how we are going to carry out for the quarter and for the yr.”

Regardless of the mounting tariff issues, Tan mentioned on the convention name that he met just lately with Intel rival Taiwan Semiconductor Manufacturing Co’s CEO, C.C. Wei, and former CEO Morris Chang. The aim, he mentioned, was to search out areas of attainable collaboration and to “create a win-win scenario.”

TSMC held its annual U.S. know-how day in Santa Clara, California, on Wednesday, which was attended by Tan and Wei.

Amid Tan’s makes an attempt to streamline the corporate and minimize prices, Intel additionally mentioned it’s lowering its adjusted working expense goal to roughly $17 billion in 2025, down from its beforehand said objective of $17.5 billion, and is now focusing on $16 billion in 2026.

Tan mentioned Intel is inspecting its manufacturing unit footprint. In February, the corporate mentioned it was pushing again a $28 billion manufacturing unit undertaking in Ohio till 2030.

“We’ll proceed to take a more in-depth take a look at our current manufacturing unit footprint to make sure that we’re making probably the most environment friendly use of our in-store capability earlier than committing to any extra spending,” Tan mentioned on Thursday.

CFO Zinsner mentioned on the decision that the corporate has acquired $1.1 billion in grants from the U.S. authorities underneath the CHIPS Act, however that it was holding its capital expenditure forecast for 2025 regular at $8 billion to $11 billion “because of uncertainty concerning timing of the U.S. authorities fulfilling their obligations in our CHIPS settlement.”

Zinsner mentioned the attainable impression of restructuring plans on worker head depend was nonetheless unsure, however that readability would emerge when the corporate stories second-quarter outcomes.

In a memo to workers revealed publicly forward of his first convention name with analysts as CEO, Tan wrote that layoffs would start within the second quarter and that such adjustments would give attention to lowering the corporate’s inner paperwork. Tan additionally plans to slash the quantity and dimension of inner conferences.

“”There isn’t a approach round the truth that these essential adjustments will cut back the scale of our workforce,” Tan wrote. “As I mentioned after I joined, we have to make some very onerous selections to place our firm on a strong footing for the longer term.”

Starting on September 1, Intel would require workers to return to the workplace 4 days per week, Tan’s memo mentioned.

The corporate additionally lowered its gross capital expenditures goal to $18 billion for 2025, down from the corporate’s earlier goal of $20 billion.

The Santa Clara, California-based firm expects income of $11.2 billion to $12.4 billion for the June quarter, in contrast with analysts’ common estimate of $12.82 billion, in line with knowledge compiled by LSEG.

Whereas U.S. President Donald Trump has for now spared chips from tariffs, Beijing’s excessive retaliatory levies on U.S.-made semiconductors cloud the outlook for Intel’s gross sales to China, usually its largest market.

Chips manufactured within the U.S. are set to face levies of 85% or larger, based mostly on the state-backed China Semiconductor Business Affiliation’s discover earlier in April.

China imports $10 billion value of chips from the USA yearly. About $8 billion of those are central processing items (CPUs) assembled by Intel within the U.S., in line with Bernstein analysts.

Intel’s first-quarter income was flat at $12.67 billion. The outcomes beat estimates of $12.30 billion.

The corporate expects second-quarter per-share adjusted revenue to interrupt even, in contrast with estimates of revenue of 6 cents per share.

(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney and Stephen Nellis in San Francisco; Further reporting by Shanima A in Bengaluru;Modifying by Peter Henderson and Matthew Lewis)

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