Intel announced earnings today that despite the weak guide sets them up for a strong 2024 and the full road to recovery and leadership looks to continue to be clear.

Key Takeaways

• Continued execution of 5 nodes in 4 years remains on track
• Product recovery in data center and client leads to strong product revenues and suggests growth in 2024
• 4th new customer for IFS (4 total now) and three new customers for advanced packaging (5 total now)
• Announcement with UMC on collaboration on custom 12nm fab
• Strong OpEx discipline = comfortably achieved $3 billion cost savings goal

What’s Significant

Earnings: Management’s confidence in the turnaround remains clear. 5 nodes in 4 years remain on track and confidence to hit all milestones is evident. Q4 was strong but the focus for investors will be on the soft Q1 24 guidance. Management was confident this was a short team weak outlook, likely isolated only for Q1 2024 where data center and client seasonality were on the low end of the spectrum and business units being shed/sold, and adjacent ones like Mobileye impacted the soft guide.  Management seems confident the next few quarters will grow YoY and hinted at overall growth for 2024. Perhaps most telling to the year was management commentary that gross margins should hold. This confirms this soft guide is not a result of an excess of inventory but several macro factors that will resolve over the next few quarters as we see the entire semiconductor industry rebound from off-setting seasonality last year and the whole of the industry looks set up for a strong 2024.

On the IFS front, gaining another new HPC customer is significant, and management confirmed these new customers are providing positive feedback on IFS affirming the quality of the process roadmap and Intel’s ability at customer service. Intel now has a total of four customers for leading-edge processes and 5 for advanced packaging as they announced three new customers for their advanced packaging business as well.

UMC News: This is a big step forward for IFS with the main interesting element being Intel taking a page fron TSMC’s playbook and using already depreciated assets to attract customers, with UMC’s help, to a specialized trailing node. This is significant within the view that customers at the lagging edge (28nm) will look to move to more compute capable nodes and this collaboration puts IFS in a position to compete for those customers.  Management emphasized their learnings from the Tower Semi deal, which was a pure contract manufacturing deal, helped shape this deal with UMC which is more collaborative by nature. All parties involved are bringing capital, tools/equipment, and people as a part of this foundry collaboration.  This also sets IFS us well to bring a more modern trailing node to the US for domestic manufacturing which is clearly a need for many companies including government agencies and local companies.

Earnings Summary

– Fourth-quarter revenue: $15.4 billion, up 10% year-over-year (YoY).
– Full-year revenue: $54.2 billion, down 14% YoY.
– Fourth-quarter earnings per share (EPS) attributable to Intel: $0.63 (GAAP), $0.54 (non-GAAP).
– Full-year EPS attributable to Intel: $0.40 (GAAP), $1.05 (non-GAAP).
– First-quarter 2024 revenue forecast: $12.2 billion to $13.2 billion.
– Expected first-quarter 2024 EPS attributable to Intel: $(0.25) (GAAP), $0.13 (non-GAAP)

Performance of business units:

• Client Computing Group (CCG): Q4 revenue $8.8 billion, up 33% YoY; full-year revenue $29.3 billion, down 8%
• Data Center and AI (DCAI): Q4 revenue $4.0 billion, down 10% YoY; full-year revenue $15.5 billion, down 20%
• Network and Edge (NEX): Q4 revenue $1.5 billion, down 24% YoY; full-year revenue $5.8 billion, down 31%
• Mobileye: Q4 revenue $637 million, up 13% YoY; full-year revenue $2.1 billion, up 11%
• Intel Foundry Services (IFS): Q4 revenue $291 million, up 63% YoY; full-year revenue $952 million, up 103%

The Main News Bullets on UMC Foundry Partnership

• Intel Corp. and United Microelectronics Corporation (UMC) to collaborate on a 12-nanometer process platform.
• The platform targets high-growth markets such as mobile and communication infrastructure.
• This collaboration aligns with Intel’s strategy to partner with Taiwan-based companies to better serve global customers.
• The deal enhances semiconductor supply chain diversity and resilience.
• UMC gains additional capacity and accelerates its development roadmap.
• The 12 nm node will be developed and manufactured at Intel’s Arizona fabs, using FinFET capabilities.
• Production is expected to start in 2027, leveraging Intel’s manufacturing and UMC’s process leadership.
• The collaboration will support design enablement and integration with ecosystem partners.

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