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Intel’s chief executive says there needs to be more consolidation in the chip industry

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Intel’s chief executive said more consolidation was needed in the chip manufacturing industry, days after a report that the American chipmaker was in talks to buy GlobalFoundries for $ 30 billion.

“We just see that younger players won’t be able to keep up,” said Pat Gelsinger. Speaking on a call with analysts to discuss Intel’s latest gains, he added that “foundries without cutting-edge capabilities” – a term generally used to mean those who don’t manufacture computer chips with smaller dimensions than characteristics – they would fight to compete.

GlobalFoundries, which is owned by Mubadala, a Abu Dhabi sovereign wealth fund, abandoned cutting-edge manufacturing three years ago. At the moment he has ruled out plans to make 7-nanometer chips – the same processing technology that Intel has struggled with.

Gelsinger’s comments amount to the clearest indication that the American chipmaker could use deals to bolster its manufacturing base. Intel said it was in discussions with 100 potential customers about the new foundry business it announced in March, citing rapid expansion at its production facilities.

“We won’t say that M&A is critical, but we wouldn’t dismiss it,” Intel’s CEO told Wall Street. Mubadala did not comment on the discussions with Intel, which they did reported from The Wall Street Journal, while GlobalFoundries said it was not under discussion.

Meanwhile, Intel said it expected the supply chain crisis looming in the electronics world to come to a head this summer, and predicted it could take another two years for the pressure to subside. calm throughout the industry and so that supplies to customers return to normal.

Supply pressure – particularly a lack of silicon chips from which Intel sculpts its chips – is hampering production of personal computer semiconductors in the current quarter, weighing on sales, the company said. The caution, with higher costs that Intel is said to face later this year as it tries to finally increase production of 7nm chips, has wiped out 2% of its shares in post-market trading.

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Some industry leaders have predicted a faster recovery in chip supplies, arguing that shortages have been artificially exacerbated by customers who have ordered too many to try to make up for shortages. But Gelsinger has warned for months that the problems will hinder electronics producers much longer than many expect, reiterating Thursday that it would take “a year or two for the industry to catch up on demand.”

The warning came when Intel reported surprisingly strong gains in the second quarter, thanks to the continued boom in PC sales that began with the Covid-19 blocks. $ 19.6 billion in revenue exceeded Wall Street’s expectations of nearly $ 2 billion – even though sales were still slightly weaker than a year ago, when a jump in digital demand caused by the pandemic has brought an influx of chip sales to cloud companies.

Intel raised its previous year-over-year revenue guidance to $ 1bn, to $ 73.5bn – even after last quarter’s $ 2bn superperformance, which still implied a $ 1bn shortfall in the rest of the year. ‘year.

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