Chip giant Intel (NASDAQ:INTC) is expected to report its first-quarter financial results on April 26, and the earnings release will be accompanied by an investor conference call.
As management sheds light on the latest developments from the past quarter, there are three questions in particular I'd like leadership at the company to answer.
1. The Mac question
Earlier this month, Bloomberg reported that Apple intends to eventually phase out Intel processors from its popular Mac line of personal computers in favor of Apple-designed replacements.
Such a switch would have a meaningful impact on Intel's personal computer processor business -- a $3 billion reduction in revenue and about $1.8 billion in operating profit, by my estimates.
At this point, I'm sure that Intel executives have had long talks with Apple to get a read on the situation. Ideally, I'd like to see Intel address during its prepared remarks what's going on with respect to its long-term relationship with Apple, but meaningful responses to the inevitable slate of questions that the analyst community will hurl at Intel's top brass would be acceptable, too.
2. The 10-nano question
Intel said on its last earnings call in January that it had begun shipping its first "low-volume" products built using its upcoming 10-nanometer technology. As of this writing, the company has yet to announce a single product based on this tech.
Management also indicated that it would begin ramping up production of its 10-nanometer-based products more seriously during the second half of 2018.
So what I'd like to know is this:
- When do they expect the first products based on 10-nanometer technology to arrive in the marketplace?
- When will Intel transition a significant portion of its product portfolio (e.g., PC processors, data center chips) to 10-nanometer technology?
- And at what point does Intel anticipate that yield rates on its 10-nanometer products will be good enough that shipments of such parts won't be a drag on gross margins?
If the company can satisfactorily answer these questions, it'd help investors better understand exactly what's going on with its manufacturing efforts.
3. The competition question
Last but not least, another question that I'd like to see answered is related to the previous one: How does Intel view its competitive positioning in chip manufacturing given the numerous delays with its 10-nanometer technology and the major announcements from key chip competitors?
For context, Taiwan Semiconductor Manufacturing Company expects to go into mass production on its 7-nanometer technology (roughly equivalent to Intel's 10-nanometer technology) in June, while Samsung has said that it should begin mass producing 7-nanometer chips sometime later this year.
Right now, it's looking like Intel has managed to squander a multi-year leadership position in chip manufacturing and is now actually behind the competition in many key areas.
It's imperative analysts push Intel on this front. If the company has fallen behind and has no credible path to achieving at least parity with the competition, let alone taking back a leadership position, then management and the board of directors will need to seriously consider shuttering its internal chip manufacturing operations in favor of using third parties.
With every quarterly earnings release, there are headline numbers that capture the attention of most investors. But for deeper insights into a company's performance and long-term prospects, we often have to ask tough questions. For Intel, that means pressing management on a major customer relationship and potential challenges behind its next-gen technology.