Intel Plans to Raise Prices on CPUs, Wi-Fi Chips in Q4
In case you haven’t heard, Intel had a pretty rough second quarter. Its revenue was down 22 percent year-over-year, and overall, it was the worst quarter financially for Intel since 1999. “We do think we’re on the bottom in terms of revenue,” CFO David Zinsner said on the earnings call. One way Intel is looking to rebound from this predicament is to raise its prices in the fourth quarter, confirming the previously reported rumor.
Despite the lousy results, Zinsner says everything is about to turn around, thanks to a solid lineup of products and the price increases. “[I] think we’re kind of operating with wind at our sails in terms of product offerings in all of our businesses,” Zinsner said on the call. He added that inflation factored into the decision to raise prices. He said the company thought it might be transitory at first, but now that it’s become more entrenched, it’s time to pass that on to its customers. Intel didn’t discuss numbers, but the hikes are rumored to be as high as 20 percent for certain products, according to Wccftech.
The timing of the price increase is interesting as Raptor Lake is already undergoing validation. Many leaks have already appeared online too, suggesting the launch is quite close. This makes me wonder if the price increase will affect Raptor Lake or just Intel’s current products. The jittery economic conditions around the globe have combined with inflation to make consumers more budget-conscious. Launching an expensive CPU lineup while doing battle with AMD’s Zen 4 architecture might prove challenging.
It also remains to be seen if Intel raising prices will alleviate some of its financial headwinds. It’s reportedly already told its partners about the impending price increase. That might spur them to order more product now, before the price hike kicks in. However, Intel CEO Pat Gelsinger said in the earnings call that lowered demand for PCs was a prime factor in its reduced earnings. “The sudden and rapid decline in economic activity was the largest driver of the shortfall,” said Gelsinger. So if Intel’s customers have a ton of inventory sitting around, why would they order even more?
Regardless, Intel says Q3 and Q4 should allow it to reverse its fortunes. That will be due to Raptor Lake’s launch, as well as the typical surge in sales that accompanies the holiday season. Gelsinger reconfirmed Raptor Lake will deliver “double-digit performance gains” over Alder Lake and said he expects it to do quite well. He added that Intel has sold over 35 million Alder Lake CPUs.