Yesterday evening Intel announced their best quarterly results yet, with $10.77 billion in revenue, and a net income of $2.89 billion. This really is something, considering AMD typically reports around $1.5 to $1.6 billion in revenue, and perhaps (if lucky) a few million in net income. Intel reported margins being in the 64% range, which again is really tremendous considering the tough times that the semiconductor industry has suffered over the past two years.
If anything, we are obviously seeing a significant upturn in overall consumer and, more importantly for Intel, corporate spending. Between the global economy hitting the trashbin, and the unhappiness that was Windows Vista, the corporate world had really slowed down on buying new computers, and to a lesser degree servers. Now, with a software environment that is finally starting to embrace the latest multi-core designs, plus the very solid Win7 release, purchases are going back up, and in fact hitting record levels. The other even more important area is that of cloud computing. With the huge influx of smartphones, and their reliance on external sources of processing power for most applications, we have seen a massive jump in spending in the server area. The big question for Intel, and the market, is when will we reach a saturation point for this type of workload and power? My guess is not for some time. Most people still use more traditional cellphones rather than the latest generation of smart phones, but due to the competition and low prices we are seeing, uptake of these higher end phones can be considered “brisk”.
Intel is busy ramping up 32 nm production, and they are expecting to release their Sandy Bridge line of processors for the desktop by Q1 2011 (if not slightly sooner). Currently quite a few Nehalem based desktop chips are using the 32 nm process, notably the latest i3 and i5 series and the i7 980X. This is certainly an area where Intel outstrips AMD and its partner GLOBALFOUNDRIES. AMD is not expected to see a 32 nm part hit the market until late 2010. This does give Intel a big leg up in terms of manufacturing and margins, plus the advantages of the Nehalem architecture over AMD’s older Phenom II/Athlon II series certainly turns heads when it comes to overall system performance.
There are some out there that think that Q2 is more of a blip due to pent up spending needs, and that the next few quarters will be weaker due to the overall economy still being down. Intel does not seem to think so, and they are expecting revenue to be in the $11.2 billion range for Q3, and likely slightly above that for Q4. This is certainly good news for others in the semi industry, as even competitors of Intel will have seen the same boost to their bottom lines. NVIDIA finally was able to ramp up their Fermi processors for desktop, workstation, and server use. The recent introduction of the GTX 460 will also help improve their bottom line, as it is going to be a very strong part for the company.
On Thursday we will hear from AMD, and I fully expect them to have a near record quarter as well. While desktop demand has been very good with a strong mix of parts in the Athlon II and Phenom II product lines, notebooks have been uncharacteristically strong for AMD. On the server side, a strong showing of “Istanbul” 6 core parts, as well as the derivative “Magny-Cours” 8 and 12 core parts, have allowed AMD to maintain their marketshare in that very important area. Not only does it appear to have maintained, but even perhaps has grown due to the compute density that these chips provide, as well as the overall power consumption they bring to the table when considering compute density.
Intel is certainly riding high at the moment, but there is still a lot of concern about future spending with corporate entities. Certainly the price of a well stocked desktop computer is at historic lows, but the amount of integration that we have seen on CPUs and chipsets has allowed these prices to drop. That and a user can get a full 1 TB hard drive for $70. DDR-3 prices are certainly an area of concern, as prices are about 20% to 30% higher than most OEMs would like. But with the rise of smartphones and very inexpensive non-Intel based laptops (that are quite competitive in performance to low end desktops) there are questions as to sustainability of such results. But at least with smartphones we know that the server infrastructure needed to provide service and apps to these products will see a definite increase in the quarters to come.