Intel would mull consortium deal to buy ARM

Intel expects its profit margin to drop this year and then be steady for several years as it invests in new technologies and factories to meet rising chip demand, but added it forecasts climbs from 2025.

Intel CEO Pat Gelsinger also said Intel would be interested in participating if a consortium emerges to own the British semiconductor and software design company ARM.

Gross margins are set to drop to 52% this year from nearly 58% last year on a non-Gaap basis, Intel said at its Investor Day conference on Thursday. It saw levels of 51-53% in 2023-2024 before a climb back to 54-58% the following years.

Intel predicted a revenue increase of 1.7% to US$76-billion in 2022, then mid-to-high single digit percentage point growth in 2023-2024, followed by gains of 10-12% for 2025-2026.

Shares fell about 1% in after-hours trading.

“I think the vision and strategy are strong, but there are still questions about their ability to execute,” said Bob O’Donnell, an analyst for TECHnalysis Research. “The progress and time lines they laid out do seem reasonable.”

David Zinsner, Intel’s new chief financial officer, promised rising revenue and profit. “We’re going to instil financial discipline through this company.” That includes using more outside capital for expansion as well as relying on local government grants, he said.

Intel’s investment announcements over the past year include $20-billion for a new greenfield chip factory in Ohio. This week it said it would buy Israeli chip-maker Tower Semiconductor for $5.4-billion. Those investments will help Intel ramp up a business to build chips for other companies.

Tower deal

Gelsinger said in an interview on Thursday that the Tower deal doesn’t change its plans for investing in Europe and reiterated that an announcement would come soon.

On ARM, he said there had been talk in the industry about forming a consortium even before Nvidia proposed to buy ARM from SoftBank Group. That deal, valued at up to $80-billion, officially collapsed last week. SoftBank cited regulatory hurdles and said it will seek to list the company.

Gelsinger said Intel would be happy to see ARM do an IPO or be owned by a consortium.

“We’re not big users of ARM, but we do use ARM. We’re going to get to be bigger users of ARM as we make it part of our IFS (foundry business) agenda as well,” he said. “So if a consortium would emerge, we would probably be very favourable to participate in it in some manner.”  — Jane Lanhee Lee and Eva Mathews, (c) 2022 Reuters