Intel CEO: The revitalization plan is progressing steadily and revenue growth will accelerate in the next few years

Early morning on February 18, it was reported that Intel CEO Pat Gelsinger is seeking to revive the company through a major business transformation. The company's management released performance expectations today, indicating that operating income will increase by one percent this year and the growth rate will accelerate in the next few years.

At an investor conference held in San Francisco, Intel said that the company's operating income will grow by about 5% to 9% in 2023 and 2024. For reference, Wall Street analysts predict that Intel's revenue will grow by 1% this year, 3% next year, and 8% in 2024.

Dave Zinsner, the company's chief financial officer, said Intel will increase financial discipline as it tries to regain market share and enter new industries. He expects gross margins (the proportion of sales after production costs are deducted) to be between 54% and 58% after spending on new factories peaks in the next two years. He said that figure is still lower than Intel's historical highs of more than 60%, but the company's push toward outsourcing chip production will put pressure on profit margins.

Intel expects revenue growth to reach 10% to 12% by the end of its "investment phase" in 2025 and 2026.

“I have every confidence in our plans for accelerated growth and our implementation,” Kissinger told the conference.

As we all know, the global COVID-19 pandemic has driven the work-from-home trend, and semiconductor components have penetrated into more hardware products. These two major trends have driven global semiconductor market demand. Unfortunately, Intel has not grasped this business opportunity well.

Last year, the global semiconductor market grew 26% to a record $556 billion, but Intel's operating revenue fell 4%.

In contrast, Intel's competitors are rapidly expanding their businesses. Last year, computer chip maker AMD's revenue soared 68%, while graphics chip giant Nvidia's growth rate was as high as 61%. According to Wall Street analysts, the revenue growth of these two rival companies will exceed 25% this year.

Currently, a large part of Intel's operating income still comes from the traditional computer processor market, and Intel still dominates the desktop and laptop CPU market. Last year, driven by the trend of working from home, global PC shipments hit a decade high. However, some analysts are worried that such a sales rebound cannot be sustained. In this market, Intel also faces fierce competition from its old rival AMD. In addition, some traditional major CPU purchasing customers, such as Apple, are using processors designed by themselves.

Gelsinger rejoined Intel last year after leaving the company about a decade ago, and at an investor conference on Thursday, the company's management outlined plans to restore Intel's leadership in the semiconductor industry.

According to Kissinger's plan, Intel will invest billions of dollars to build new chip factories and compete directly with Taiwan's TSMC and South Korea's Samsung Electronics in the field of outsourced manufacturing. At the same time, Kissinger reorganized the internal engineering and technology department, hoping to regain control of the semiconductor technology leadership position by 2025. In addition, Intel will also enter the graphics processor market and prepare to compete head-on with AMD and Nvidia.

On Thursday, Intel said its own graphics processor business will reach $10 billion by 2025. However, Gelsinger also emphasized that another business, external chip foundry, is only in its early stages. This week, the company announced the acquisition of Tower Semiconductor to promote its external foundry business.

Investors are skeptical of Kissinger's transformation plan. In the past year, Intel's stock price has fallen by 23%, lagging behind other peer companies in the Philadelphia Stock Exchange Semiconductor Index. In addition, whenever Intel releases its quarterly financial report, its stock price will inevitably fall sharply because investors are not satisfied with Intel's transformation progress.

Against this backdrop, Kissinger promised investors that the company's revitalization plan was making solid progress.

“The Intel turnaround train is about to leave the station, and I want you all to be on board,” he said at the conference Thursday.