Trade tensions are giving Intel's older chips a second life - Reuters

Trade tensions are giving Intel's older chips a second life - Reuters

Intel Corporation (INTC) is experiencing a resurgence in demand for its older chips, driven by escalating trade tensions between the United States and China. The company's forecast for the second quarter of 2025 revealed a challenging outlook, with revenue and profit expected to fall below Wall Street estimates. This comes as Intel's new CEO, Lip-Bu Tan, announced sweeping plans to revitalize the company's culture and innovation, including a mandate for employees to return to the office four days a week [1].

During a conference call with investors, Tan provided insights into Intel's strategy to navigate the current economic climate. The company's CFO, David Zinsner, highlighted that the uncertainty surrounding trade policies and the potential for a recession has made it difficult to predict future performance. This uncertainty has led to a boost in sales during the first quarter, as customers stockpiled Intel chips in anticipation of tariffs [1].

Intel's dour outlook is a source of concern for investors who are looking for Tan to turn around the company's fortunes. The company's struggles in the AI market have been a significant challenge, and the recent shortages in production capacity for its newer chips have exacerbated the situation [2]. Despite these challenges, Intel is exploring potential collaborations with Taiwan Semiconductor Manufacturing Co. (TSMC) to create a "win-win situation" [1].

In an effort to streamline operations and cut costs, Intel has reduced its adjusted operating expense target for 2025 to $17 billion, down from the previously stated goal of $17.5 billion. The company is also examining its factory footprint and expects revenue of $11.2 billion to $12.4 billion for the June quarter, compared to analysts' estimates of $12.82 billion [1].

The company's decision to reduce its gross capital expenditures target to $18 billion for 2025, down from the previous target of $20 billion, reflects its cautious approach to spending in the face of economic uncertainty. Intel has also received $1.1 billion in grants from the U.S. government under the CHIPS Act, but it is holding its capital expenditure forecast for 2025 steady at $8 billion to $11 billion due to uncertainty regarding the timing of the U.S. government fulfilling its obligations [1].

Tan's memo to employees, published ahead of his first conference call with analysts as CEO, outlined plans for layoffs in the second quarter, focusing on reducing the company's internal bureaucracy. Beginning on September 1, Intel will require employees to return to the office four days a week [1].

The resurgence in demand for Intel's older chips highlights the impact of trade tensions on the semiconductor industry. As tariffs continue to pose a threat to Intel's sales to China, the company is navigating a challenging landscape. Despite these challenges, Intel remains committed to its long-term strategy of innovation and collaboration to secure its position in the market.

References:
[1] Reuters. (2025, April 25). Intel offers weak forecast amid trade tensions as CEO talks to TSMC. Retrieved from https://www.marketscreener.com/quote/stock/INTEL-CORPORATION-4829/news/Intel-offers-weak-forecast-amid-trade-tensions-as-CEO-talks-to-TSMC-49711183/
[2] Tom's Hardware. (2025, April 25). Intel's AI PC chips aren't selling, instead last-gen Raptor Lake booms and creates a shortage. Retrieved from https://www.tomshardware.com/pc-components/cpus/intels-ai-pc-chips-arent-selling-instead-last-gen-raptor-lake-booms-and-creates-a-shortage