TUK020 wrote:simoan wrote:SteadyAim wrote:Anybody have any thoughts on Intel, on a p/e of about 9 ?
Yes, a good long term bet especially once they get their new fabs built and start up their new TSMC-like new business model. With the pandemic induced chip shortages and the South China Sea situation the US are going to want to bring home as much chip production as possible, which is good for Intel. Low/no growth for the next few years though on a PER of 12-14 but you get a 3.1% dividend while you wait...
All the best, Si
Really not sure about them (disclosure, I worked for Intel on graduating about 40 years ago).
Intel comprise 3 elements of the chip making business (to oversimplify):
- fab manufacturing
- core processor design (x86 architecture)
- design and sale of end processors using said architecture and manufacturing process.
In Fab manufacturing they have clearly dropped behind the market leaders (TSMC). This is not just a capex bandwidth, but also a capability development model. Not sure they will ever be able to catch up.
Core processor design - at the top end this is becoming more of a free for all. Apple designing their own processors, AMD achieving higher performance (using TSMC fab processes). At the low power end, the ARM approach is conquering all.
Design & Sale of end processors - this depends on leveraging success in the above two arenas, in both of which Intel no longer represents "best of breed"
Hi TUK020,
I should also disclose I spent 35 years of my life designing integrated circuits and intellectual property, working with various semiconductor companies in the process. Everything you say about Intel is completely true. I have no great love of the company and they were a PITA to deal with from an external point of view. I hope they were better to work for than they are to work with!
From an investment perspective they've also made several terrible investments (why on earth did they buy McAfee!?) and the management of the company, including the technical side has been awful since the direct line of original founders ended 8 or 9 years ago. Not sure, was Otellini the last? Either way, Krzanich was a disaster and they bought the wrong FPGA company in Altera (Xilinx has much better technology IMHO) and then proceeded to completely screw up the launch of the companies premium Stratix-10 line. Utterly abysmal execution of a takeover! However, I believe the new CEO is doing all the right things, at least he's saying the right things at this stage
Clearly in the near term things are not looking too rosy with purchasing of laptop CPUs pulled forward during the pandemic and they are playing catch up on the fab technology front with TSMC and Samsung. Revenue for FY22 is forecast to be flat with a large drop in EPS to $3.52 so at least the dividend (which was recently increased by 5%) is covered 2.4x. So, I would say it is safe despite all the capex required for the build out of new fabs and would expect it to keep up with inflation. There are worse places to park some money whilst you wait for the new fabs to come on-line in a few years time and I think in the longer term the new fab model could work well, especially if there are any China related issues in the Far East. I did state I saw it as a long term bet i.e. 5 years plus. If you want to make a quick buck, Intel is not the place.
I've been hearing about the dangers of AMD and ARM replacing Intel CPUs for so long now that I'm not sure it's ever going to happen tbh. Of course, there will be some erosion at the edges and it may really happen one day, but in the meantime Intel is very lowly rated, so I would say much of this is already baked into the share price, especially when you compare it against the rating of TSMC. It seems to me, that even if they never catch TSMC up technology wise they can still eat a lot of their lunch in the same way you suspect AMD and ARM will eat Intel's on the CPU side.
TUK020 wrote:I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure
Yes, me too, although I'm being more selective. As mentioned earlier, I really like Qualcomm currently in particular because of the 5G patent portfolio and applications outside 5G they are targeting. Again, there is the shadow of losing the Apple modem business hanging over the share price. I just feel they can grow without that. Some of the other stocks like Nvidia just look hideously overvalued by comparison. What other semi stocks do you find interesting? I sold my Microchip before last years acquisition of Microsemi (both companies I used to work with!) and that is starting to look interesting again.
All the best, Si