Intel: Stock of the Week

What will the company do if mobile phones replace computers?

Andrew Willis 13 March, 2023 | 4:39AM
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Andrew Willis: How much do you use your phone nowadays, versus your computer – even while you’ve been at home more often?

The trend of weak PC demand is occurring as smartphones get more powerful. Streaming movies or music doesn’t require a computer, and most administrative tasks don’t need cutting-edge hardware. Sector strategist Abhinav Davuluri says the proliferation of mobile devices has come at the expense of the mature PC market, which had been Intel (INTC)’s historical stronghold.

Intel has also been facing headwinds at the manufacturing level. Our biggest concern in recent years has been the company’s delays with its 10-nanometer process, while AMD (AMD) and TSMC (TSM) take a technological lead on x86 [microprocessor] products.

Amidst the external and internal challenges, and after a rough year for Intel stock, the company cut its dividend a couple of weeks ago. We agree with the move as a turnaround story on the manufacturing front will require the funds. But we expect Intel will get manufacturing back on track and return to a technological capacity much closer to its rivals.

And just as Intel catches up with competitors, it will be facing another challenge from artificial intelligence and the type of hardware it prefers. The company’s responding to that as well, with non-CPU solutions, as computing decouples from traditional computers.

For Morningstar, I’m Andrew Willis.

 

bulls Bulls Say

  • Intel is one of the largest semiconductor companies in the world and holds the lion's share of the PC and server processor markets. The firm has maintained its position at the forefront of technology by investing heavily in R&D, and this trend should continue.
  • Intel has made a string of savvy acquisitions to build its AI and automotive offerings, including Altera, Mobileye, Habana Labs, and Movidius.
  • The data center group has indirectly benefited from the proliferation of mobile devices. Server processor sales will be the main driver of growth in the near future.

bears Bears Say

  • Intel is facing significant manufacturing delays and must maintain its process technology competitiveness to prevent market share loss to AMD.
  • The inability for Intel to break into the smartphone market at a reasonable level is cause for concern, as mobile devices continue to proliferate at the expense of PCs.
  • The rise of alternative solutions in the data center is cause for concern, with Nvidia's GPUs being leveraged to accelerate server workloads.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Intel Corp42.99 USD0.00Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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