Intel ( (INTC) – Get Intel Corporation Reports) brings more bad news.
The chip giant will deliver an additional blow to consumers and businesses concerned about the health of the economy. In fact, consumers have seen their bills for groceries and other products increase for several weeks. When they went to fill up, the price of gasoline at the gas station went up.
And it’s not getting better as inflation remains at a 40-year high, which should push the Fed to be more aggressive in raising rates. Economists, however, have warned that such monetary policy will tip the economy into recession.
US inflation accelerated to a 40-year high last month, the Bureau of Labor Statistics announced on July 13.
The headline consumer price index for June is expected to rise 9.1% from a year earlier, up from 8.6% in May and significantly above Wall Street’s consensus forecast of 8.8%. The June reading was the fastest since December 1981.
Intel will raise its chip prices
For consumers already concerned about grocery prices, they must also scrutinize labels on tech products such as computers, laptops and game consoles. In fact, Intel plans to raise the price of its chips by the end of the year, a spokesman confirmed to Wall Street.
“During the first-quarter earnings call, Intel indicated that it will increase pricing in certain areas of its business due to inflationary pressures,” company spokeswoman Penny Bruce said in an emailed statement. “Companies have started notifying customers of these changes.”
The Japanese newspaper Nikkei was the first to report on the price hike.
Intel will particularly raise prices on its flagship products, such as central processing units (CPUs) for servers and computers, and several other products, including chips for Wi-Fi and other connections. The price increase for some chips may be around 20%. The Nikkei said the group had not yet finalized the magnitude of the increase. These increases will undoubtedly lead to higher prices for PCs and laptops during the holiday season.
scroll to continue
“We’re looking at target price increases in certain segments given the inflationary environment. So that’s really not showing up much yet, but it’s going to be part of the story for the full year,” CFO Dave Zinsner told analysts in the first During the quarterly earnings call.
demand is slowing
The executive said the move comes at a time when material and commodity costs have soared, adding to pressure on a semiconductor industry already facing rising labor costs and disruptions related to Covid-19. The industry is also facing weak demand as consumers begin to trade off expectations of a sharp economic slowdown.
“More specifically, in our PC business, we continued to see strong commercial demand, offset by weakness in low-end consumers and education and the impact of no longer shipping to customers in Russia and Belarus,” Zin said. Sner explained at the time.
“Furthermore, with the recent COVID-19 lockdown in Shanghai, component supply constraints remain a challenge, further increasing supply chain risks and exacerbating inflationary pressures that are negatively impacting PCs.”
“As a result, we see OEMs continue to reduce inventory levels to better meet demand and align with other system components,” Zinsner concluded of OEMs.
Research and data firm IDC announced last month that worldwide PCD shipments reached 118.1 million units in the first quarter of 2022 (Q1’22), down 5.4% year over year due to slowing demand. PCs, which include desktops, laptops and workstations, fell 5.6% year over year, while the tablet market declined 5.1% year over year.
Intel customers have warned that this drop in demand is real and we are no longer in a real chip shortage.
Acer Chairman Jason Chen told reporters on July 13 that his company was no longer facing chip shortages.
“The CEOs of some chip suppliers even called me recently to buy more chips from them,” Chen said. “The situation has changed.”