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PC Demand Is Sagging. Intel and AMD Head Into a ‘Much Weaker’ Second Half
By: Barron's | July 11, 2022

With demand for personal computers rapidly decelerating, there is trouble ahead for both Intel and Advanced Micro Devices, which provide most of the microprocessors used in laptops and desktops.

Barclays semiconductor analyst Blayne Curtis warned in a research note Monday that June-quarter notebook production from Taiwan-based contract manufacturers missed expectations, but adds that the bigger issue for the PC-component companies is a “much weaker” than expected outlook for the second half of 2022. He points to cautious comments from the contract manufacturers, noting that they see a flat-to-down year, but that a double-digit decline seems likely.

Curtis now expects full-year 2022 notebook production to drop17%, down from a previously forecast 12% decline. Intel made cautious comments about the demand outlook at an investment conference last month.

Curtis views the situation as “yet another negative data point” for Intel (ticker: INTC) and Advanced Micro (AMD). The analyst reduced estimates on both companies and warned that there could be additional cuts to come. “We just see no reason to own these names until the size of the correction is better understood,” he writes.

For Intel, he repeats his Underweight rating, trimmed his target to $40, from $45. For AMD, he maintains his Equal Weight rating, with a new target of $85, down from $115. For both Intel and AMD, the analyst now has below-consensus estimates for the June and September quarters, and for both 2022 and 2023.

The market research firm IDC on Monday reported that worldwide PC shipments were down 15.3% in the second quarter, to 71.3 million units. That includes estimated year-over-year unit declines of 27.6% for HP Inc. (HPQ), 22.5% for Apple (AAPL), 12.1% for market leader Lenovo, and 5.3% for Dell Technologies (DELL), which has lower exposure than others to the weakening consumer laptop market.

“Fears over a recession continue to mount and weaken demand across segments,” Jitesh Ubrani, research manager for IDC’s Mobile Device trackers, said in a statement. “Consumer demand for PCs has weakened in the near term and is at risk of perishing in the long term as consumers become more cautious about their spending and once again grow accustomed to computing across device types such as phones and tablets. Meanwhile, commercial demand has been more robust although it has also declined as businesses delay purchases.”

Intel shares were down 1.13%, to $37.56, while AMD was off 1.83%, to $77.90.

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