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Intel‚??s Otellini calls bottom to semiconductor slump; pulls in 32nm ramp

15 April 2009 | By Mark Osborne | News > Fab Management

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Paul Otellini, President and Chief Executive Officer of Intel and Stacy Smith, Chief Financial Officer noted that a new base line for demand had been reached in the first quarter and that seasonal trends would resume in the second half of the year, indicating that a recovery was in sight. That said, we are coming from a low base as Intel expected sales in the second quarter to be basically flat with the first quarter. However, that would mean a slight improvement in business as Intel execs were keen to point out that Q2 demand is typically lower than Q1.

Looking ahead to better times, Otellini said that the company would pull in the ramp of its first microprocessors using its 32nm process technology and had already shipped samples to customers.

“Our 32nm process is very healthy and shows great promise for us. This is the reason we recently announced a $7.0 billion investment in plants and equipment to accelerate high volume deployment of this technology,” noted Otellini. “We have pulled in Westmere, our fist 32nm product family, and will now be shipping those products later this year. We have shipped thousands of Westmere samples to over 30 EOM customers already.”

Although fab utilization rates fell in Q1, executives noted in the conference call that utilization rates would trend upwards as demand returned and the 32nm ramp gathered pace. Expenses for the ramp are expected to peak in 2Q, Intel said.

“We are forecasting a gross margin that’s in the mid-40%. You can think of that as being approximately flat to where we were in Q1,” commented Stacy Smith, Chief Financial Officer. “What you see [are] a couple of things that offset this. We will get about 5 points better in excess capacity. We started to reload the factories in Q1 a little earlier than expected, so we will see some significant increases to utilization that drives some gross margin good news.”

Smith said that he expects utilization levels to return to ‘historical levels’ near the end of the year. 

There was also good news on the capital spending front as Intel reported Q1 spending of US$1.5 billion and reiterated its total spend for 2009 would be only down slightly from 2008 levels of US$5.2 billion.

Although not prepared to give detailed guidance, one thing was made clear: a bottom to the semiconductor slump had been reached. Otellini noted:

“In terms of visibility, three months ago we were sitting in a fragile global economic environment and we had just come off of a horrendous Q4 and we weren’t sure where sales out were of PCs. Three months later we’re still sitting in a fragile global economic environment but we’ve got three or four months of fairly good trending in terms of where the business is, what the inventory levels are, what geographies are still buying product, what segments are still buying product.

"The global environment hasn’t changed but our ability to look and plot some points, historical points, has given us the confidence to essentially say that the industry has seen the bottom. And I feel pretty comfortable in that, having done this for more than a few years.”

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Reader comments

Dennis, I know you are Medical Man now but do you think this article is on track or pipe dreaming? Thanks for sharing while Roy is golfing! Chris
By Dennis Hansen on 15 April 2009

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