Intel Corp. data center sales. continue to decline as Advanced Micro Devices Corp.’s sales continue to fall. continue to grow, and it looks like Intel is finally doing something about it.
While Intel’s second-quarter profit easily exceeded expectations Thursday, server chip sales fell 9%, which was actually an improvement from a 20% drop in the first quarter. Data center chips are a hot growth area that has greatly helped AMD rivals AMD,
and Nvidia Corp. NVDA,
(which is now worth more than Intel).
appears to be addressing the problem by showing a willingness to cut prices while fighting AMD for customers and reorganizing its data center operations. Investors will have to take heart, as a lackluster third-quarter forecast despite an unprecedented and ongoing semiconductor shortage sent shares down 2.6% in after-hours trading on Thursday.
Declines in Intel’s overall average selling price, or ASP, have raised eyebrows in particular. Intel executives said “strength in consumer access and education products” led to lower ASPs, but Chief Executive Pat Gelsinger later admitted that competitive factors played an important role in answering an analyst’s question.
“Some of it is competitive, some of it is mix-oriented, but a little bit more competitive,” Gelsinger said. “Our outlook there is we see pretty stable prices and market share in the data center business for the second half of the year and that’s being driven by — I’m just saying we’re putting everything on the table to win back the market.” The company’s chief financial officer, George Davis, predicted that the data center would grow again in the third and fourth quarters.
But falling prices can also affect margins. Angelo Zino, an analyst with CFRA Research, said in a short note after the call that he is “concerned about the competitive landscape” due to price drops in both the company’s computing and data center segments. He also expects some pressure on gross margin going forward.
Gelsinger also said that a recent reorganization Intel did last month is putting more focus on the high-performance computing business, where AMD has also been making big strides. AMD is gaining ground in supercomputing, with its Epyc chips now power 49 of the 500 best supercomputers, up from 11 of the top 500 supercomputers a year ago.
While consecutive declines in the data center sector are a bad sign for Intel, it appears the new CEO is willing to fight back against a resurgent rival in AMD. But he will have to live up to the company’s prediction that growth for that all-important company will return in the second half.