What's going on?
Intel reported mixed earnings late last week, as the chipmaking giant struggles to hack it in the absence of some of its best customers.
What does this mean?
The irony of this chip shortage wouldn’t be lost on Alanis Morisette: PC makers need Intel’s chips badly, but the very fact that there is a shortage means that they’re making fewer PCs, which is in turn hurting the part of Intel’s business that makes the chips they need. Hence the segment’s revenue fell 2% last quarter compared to the same time last year. Instead, Intel is clinging to the aspect of its business that is working out – namely chips for data centers, whose sales were up 10%.
Why should I care?
For markets: You have to spend money to make money.
Intel hasn’t just been losing market share to its rivals for the last couple of years: once-loyal customers including Amazon, Microsoft, and Apple have started designing and producing their own chips too. So to keep from losing anyone else, the chipmaker’s invested $20 billion this year on improving its manufacturing capabilities, and said last week that it’s planning to spend another $28 billion next year. Investors, then, have good reason to be concerned about what that might do to its profit, which might be why they sent Intel’s shares down 10% after the announcement.
Zooming out: Ce n’est pas bien.
Shortages of all kinds aren’t doing carmakers any favors either: France’s Renault said on Friday that it’s expecting to make 500,000 fewer cars this year than they would’ve done otherwise – a big jump from its September prediction of 220,000 (tweet this). The company didn’t adjust its profit outlook, mind you – mostly because it’s hoping to make up for the shortfall by cutting costs and pushing its more profitable models.