Intel Reports Smaller Profit Due to Ivy Bridge CPU Production

An aggressive ramp of Ivy Bridge and Romley has hit Intel with a decline in profit, even if the company's revenue slightly increased from $12.8 to $12.9 billion. Net earnings were down from $3.2 to $2.7 billion or the quarter.

According to the company, 22 nm Ivy Bridge processors are now in mass production. While the additional investments are weighing on the company's profit, Intel said that the extra cost is no surprise. "We have three new 22 nanometer factories. And at the beginning of that ramp, the first units that go through those factories in essence absorbs all of the cost of those factories," said chief financial officer Stacy Smith during the earnings conference call.

"So that is, by far, the most expensive part of the ramp. Those are the products that are today sitting in inventory. And as we ramp up sales in Q2, those will be the products that we sell-through," Smith stated, adding that Intel's peak cost of the 22 nm ramp will be seen in the second quarter.

Chief executive officer Paul Otellini noted that Ivy Bridge will be Intel's fastest ramping product ever. Almost 25 percent of CPU shipments in Q2 will be Ivy Bridge CPUs. By fall, Ivy Bridge will represent the majority of Intel's processor manufacturing. Advancing its manufacturing power will also focus on mobile processors, in which Intel aims to move the "Atom roadmap at twice the rate of Moore's Law through 2014," Otellini said.

For the second quarter, Intel expects its revenue to jump to $13.6 billion. the R&D as well as MG&A spending driven especially by Ivy Bridge will hit $6.4 billion for the quarter. Intel also told investors that the company will pump another $200 million into Ultrabook marketing campaigns.

Check out Intel's first big Ultrabook TV ad here.

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  • ojas
    *Thinks of TSMC*
  • stingstang
    3 new factories just to switch to 22nm? This is insane! More insane is that the first BATCH of these processors are going to pay for them. Their profit numbers are just incredible to be able to spend this kind of dough every 2 years on new tech, research, manufacturing, ect.. How is America still in the sh!tter with the federal tax income taking a piece of this galaxy-sized pie of revenue from an American-based company?
  • stingstang
    I'm suddenly getting this picture of a cartoon character of a fat guy in a stained white t-shirt laughing while swinging a greasy turkey leg around in one hand.