Intels says PC demand has fallen to the point PC makers are drastically slashing their product inventory levels, leading to a drop in orders for the company’s processors.
The weakening demand caused Intel’s revenue to decline 22% year-over-year during the second quarter. In addition, the chip maker failed to make a profit during the period and instead posted a $500 million loss.
“Importantly, our Q2 PC unit volumes suggest we are shipping below consumption as some of our largest customers are reducing inventory levels at a rate not seen in the last decade,” said company CEO Pat Gelsinger in an earnings call.
According to Intel’s estimates, the total addressable market for PCs is expected to shrink by 10% for this year. Gelsinger noted “ broadening consumer weakness” for the products, although the company is still seeing some PC demand in the enterprise space.
It marks a huge reversal from 2020 and 2021 when the PC market saw skyrocketing demand on the COVID-19 pandemic sparking a push to work and study from home. This caused PC shipment levels to reach a level not seen in a decade.
Intel is now blaming the disappointing financial performance largely on the ongoing economic downturn at a time when consumers are also facing sky high inflation. The fears of a recession, and weakening demand, are triggering PC vendors to reduce their inventory levels to save on costs.
Intel’s CFO David Zinsner said another factor was a “worse-than-expected COVID-driven demand reduction and supply dislocations in China.” However, he expects Intel’s revenues to pick up in the coming months as PC vendors resume chip orders to refill their inventories.
“We do feel we are at the bottom of revenue here,” Zinsner said. “We have a good set of products coming in the second half of the year.” One of those products will be Intel’s upcoming 13th generation Core “Raptor Lake” processors, which will likely arrive around October. In addition, Intel is planning to raise prices for the company's chips.