Intel down as virus spreads but 5G silicon could help

Intel Shenoy
Intel is innovating in base station chips as 5G expands, even as coronavirus clobbers tech stocks and chipmakers like Intel. (Intel)

As coronavirus wreaks havoc on chipmakers around the globe, Intel’s stock price dropped as much as 19% over the past 39 days, going back to a high point after reporting record revenue on Jan. 23.

On Monday, Intel’s stock opened at $55.52, down from the high of $68.47 on Jan. 24, the day after it reported record revenues of $72 billion for all of 2019.  *At market close on Monday, Intel had surged higher to $58.18, up more than 4% from its opening price, but still down 15% Jan. 24.

RELATED: Intel hits record 2019 revenue of $72 billion, with record 4Q

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The decline for Intel was part of a widespread drop in markets not seen since 2008.  On Monday, markets surged by more than 4% in a correction of a previous week of declines, but some analysts warned that the coast was still not clear.

Despite its stock decline, Intel Chief Financial Officer George Davis told financial analysts at a Morgan Stanley conference on  Monday that Intel has seen "modest dsiruptions and relatively normal operations in China." He said the company has four primary manufacturing facilities in cities through China ,but not near the epicenter of the virus. 

The virus has "spread around the world, and this is a developing situation, so we are starting to see customers impacted where their supply chains are impacted...We're actually finding ourselves able to opereate on a relatively normal basis," Davis said.

Amid Intel’s five-week decline, the company also announced on Feb. 24 a promising initiative for supplying wireless base station chips for equipment makers such as Ericsson, Nokia and ZTE in an attempt to capture 40% of the market by next year. The company said it sees a $25 billion silicon opportunity by 2023 for network infrastructure as the market moves to 5G.  

RELATED: Intel targets wireless base station silicon leadership in 2021

Three industry experts praised Intel’s base station initiative, although some were less certain the 40% market share number would be reached in such a short time.

“Intel moving forcefully into a market is always a big deal,” said Roger Entner, an analyst at Recon Analytics.  “I am not sure they can get 40% in a year. That’s a tall order.”

Patrick Moorhead, an analyst at Moor Insights & Strategy, said Intel’s silicon announcements around 5G represent “a culmination of five to ten years of investment by the company,” including both traditional compute and also accelerated compute components. 

“I believe Intel will be one of the big winners in the 5G build out given its background in datacenter and edge computing along with newer 5G capabilities,” Moorhead added.

One of the biggest notes of praise for the 5G network news came from industry observer Arne Verheyde in lengthy Seeking Alpha analysis entitled, “Intel drops a bomb on the 5G network.”

Among its announcement for 5G was the 10nm Snow Ridge (Atom P5900) chip for base stations, the first Intel x86 System-on-Chip for base stations. “Launching Snow Ridge in early 2020 and expecting 40% market share in that segment is a testament to Intel’s momentum,” Verheyde said. He calculated that if the networking infrastructure market is more than $20 billion, Intel could be earning $4 billion in revenue over the next two to three years, on top of about $5 billion it now receives. 

That increase basically means that Intel’s investments in the networking segment “could go quite a way towards reaching Intel’s 2021 goal of at least $76 billion revenue, up $4 billion from $72 billion in 2019.”

“Intel will be one of the main companies to benefit from the 5G transition,” Verheyde added.

Another area of investment for Intel is artificial intelligence, including success with Mobileye, the company's ADAS and autonomous vehicle division.  Davis told investors on MOnday that Intel already receives $4 billion in annual revenue from AI, half of which is related to Xeon processor sales.  Intel foresees a $25 billion market for AI in 2024.

Aside from its 5G investments and its interest in AI, however, the impact of the coronavirus on the supply chain and how it affects Intel or other chipmakers is still an open question.  Intel isn't alone.

* This story was updated with market closing data on Monday.

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