Intel Claims Progress on 10nm Yields

Intel's stock value declined by more than 5 percent in after hours trading after the company reported better-than-expected overall sales for the second quarter, but came up short of analysts' targets for the closely watched data center product category.

Intel also said it continues to make progress on yields of 10nm, with its interim CEO saying the company would have 10nm chips in PCs on store shelves in time for the 2019 holiday season.

Bob Swan, Intel's chief financial officer who has been serving as the company's interim-CEO since Brian Krzanich resigned abruptly last month, told analysts on a conference call following the second quarter report Thursday that Intel thinks its 14nm product lineup for next year on both the client and server side "will deliver best-in-class performance as we continue to ramp 10nm."

Intel has been dogged by yield issues at the 10nm node, causing the company in April to delay the launch of 10nm products until next year.  

Venkata (Murthy) Renduchintala, president of Intel's Technology, Systems Architecture & Client Group, added that the 10nm yield difficulties are the result of very aggressive density scaling from the 14nm node.

"Really, the challenges that we're facing on 10nm are delivering on all the revolutionary modules that ultimately deliver on that program," Renduchintala said. "And while there's risk and a degree of delay in our timeline on that, we're very pleased with the resiliency of our 14nm roadmap, where in the last few years we've delivered in excess of 70% product performance improvement as we've moved through our 14nm generation of products."

For the second quarter, Intel reported sales of $17 billion, up 15% from the year-ago quarter. The company reported a net income of $5 billion, up 78% from the year-ago quarter.

But while the company's overall sales exceeded both its own target and consensus analysts' expectations for the quarter, data center sales of $550 million, up 27% year-over-year, but slightly below Wall Street's forecasts.

But Intel said it now expects its data center sales to grow by 20% this year, up from the forecast issued in April.

Intel said it now expects sales for 2018 to be between $68.5 billion and $70.5 million. The midpoint of this range, $69.5 billion, is up $2 billion compared to the forecast the company issued in April.

"Our biggest challenge in the second half will be meeting additional demand, and we are working intently with our customers and our factories to be prepared so we are not constraining our customers' growth," Swan said.