Intel Reports Smaller Profit Due to Ivy Bridge CPU Production

By Douglas Perry
published

Intel Reports First-Quarter Revenue of $12.9 Billion

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.

Douglas Perry
16 Comments Comment from the forums
  • ojas
    *Thinks of TSMC*
    Reply
  • 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?
    Reply
  • 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.
    Reply
  • zanny
    stingstang3 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?
    In terms of raw revenue, which income tax is applied to, Intel is only generating half the revenue Apple is. Also, the US govt gets a huge 2.3 trillion dollars in revenue a year from taxes, which is more than twice what any other country takes in in the world in terms of absolute tax revenue. They just spend another 2 trillion on military-industrial complex wars and propping up dying industries that buy out the politicians.
    Reply
  • gilgamex
    ZannyIn terms of raw revenue, which income tax is applied to, Intel is only generating half the revenue Apple is. Also, the US govt gets a huge 2.3 trillion dollars in revenue a year from taxes, which is more than twice what any other country takes in in the world in terms of absolute tax revenue. They just spend another 2 trillion on military-industrial complex wars and propping up dying industries that buy out the politicians.
    When we find ourselves in these moments, I like to let Carlin take the Stage:
    http://www.youtube.com/watch?v=Dpcd0woY2KY
    Reply
  • dgingeri
    Exactly what I was saying. AMD wasn't able to produce a competing CPU, so Intel delayed release of the Ivy Bridge. They'll easily make up for this lab in profit next quarter once IB is released, and then some. They're going to be charging more for IB than for nearly identical SB chips, on a product that is smaller and costs less to produce, and likely cost less to engineer because it's mostly just a die shrink of SB.

    You know the worse part? All this profit will begin to accumulate in the company bank accounts. Stale pools of money, like Google and Apple have had for years, slows the economy. It's like a blood stream. Less money circulating and more sitting around not being spent has ten times the effect on the economy. Apple has nearly $50 billion sitting around, that costs the economy about $500 billion because it is not circulating. Apple, Google, and Intel need to spend this cash, lower prices, hire more people, treat their current employees to nice fringe benefits. This would stimulate the economy as a whole and benefit all of us, including those companies. They'd probably make double that back, and the economy would expand by even more. But no... They'd rather let it sit around and let the country wallow in unemployment.
    Reply
  • dragonsqrrl
    dgingeriThey're going to be charging more for IB than for nearly identical SB chips, on a product that is smaller and costs less to produce, and likely cost less to engineer because it's mostly just a die shrink of SB.Actually the MSRP is lower than similarly clocked Sandy Bridge processors. Combined with the improvements made to performance per clock and performance per W, you're really getting a lot more for your money. I've heard that initial retail pricing will be greatly inflated, but this should balance out eventually.

    http://www.guru3d.com/news/intel-ivy-bridge-gets-prelaunch-price-cut/
    Reply
  • dgingeri
    dragonsqrrlActually the MSRP is lower than similarly clocked Sandy Bridge processors. Combined with the improvements made to performance per clock and performance per W, you're really getting a lot more for your money. I've heard that initial retail pricing will be greatly inflated, but this should balance out eventually.http://www.guru3d.com/news/intel-i price-cut/
    That's not what I read: http://www.tomshardware.com/news/intel-cpu-ivy-bridge-processor-launch,15311.html
    Reply
  • silverblue
    greghomeI'm pretty sure those were my exact words in the first quarter of comments thus farThat'd be a Chinese spammer. Usually, it's just a portion of a post, but as yours was succint, we get a copy in this case.
    Reply
  • ben850
    Has Intel released any type of pricing info for the IB CPU's?
    Reply