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Intel’s 5G Modem Exit, CPU Supply Shortage, and 10 nm Progress

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Intel’s first-quarter earnings are important for investors

Investors and analysts eagerly awaited Intel’s (INTC) first-quarter earnings results as they sought clarification on the company’s sudden exit from the 5G smartphone modem space on April 17. Investors and analysts also wanted an update on Intel’s supply issues and progress in the 10 nm (nanometer) space after rival TSMC (TSM) started volume production on its 7 nm Plus node.

However, Intel’s earnings disappointed investors. The company reported weaker-than-expected second-quarter and full-year guidance.

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Intel’s 5G smartphone modem exit

On April 17, Intel exited the 5G smartphone modem market after its largest modem customer, Apple (AAPL), settled its licensing dispute with Qualcomm (QCOM) and agreed to use the latter’s modem. On Intel’s first-quarter earnings call, CEO Bob Swan stated that with Apple’s 5G business gone, 5G smartphone modems provided no path forward for profit. He added that Intel would tap the 5G market with its network and edge infrastructure products and would continue to supply 4G modems for Apple’s iPhones.

Intel’s 5G modem exit comes as Swan drops Intel’s low-margin businesses to focus on fewer businesses that generate stronger returns. Along these lines, he is focusing on Intel’s PC business, which has been hampered by supply shortages as the company has transitioned to the 10 nm node.

CPU supply shortages

According to Swan, Intel will ensure that manufacturing capacity is never an issue again by adding more 14 nm capacity. Intel has also invested in 10 nm capacity, and 10 nm chips will be available in higher volumes this holiday season. However, he said, “Product mix will continue to be a challenge in the third quarter,” which means that the company will continue to prioritize high-margin data center and PC chips over cheaper PC and embedded chips.

10 nm processors

The long-pending question surrounding the company’s 10 nm launch has also received an answer. According to Swan, Intel has plans to start customer qualification for its first 10 nm Ice Lake processors in the second quarter and to bring them to the market in higher volumes by this holiday season.

With rival Advanced Micro Devices (AMD) already grabbing PC market share with its new 7 nm chips, Intel’s 10 nm update assured investors that there wouldn’t be further delays in its 10 nm release. This news sent AMD stock down 1.4% in the after-hours trading session on April 25.

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