Will Intel’s Venture into the Memory Market Generate Earnings?
A Look at Intel's Fiscal 1Q16 under Its New Reporting Structure
Intel eyes four new growth areas
Until now, we’ve looked at Intel’s (INTC) top three business segments, which account for more than 90% of the company’s revenue.
As the company has diversified its product portfolio, it has created four new segments dedicated to NVM (non-volatile memory), security, programmable semiconductors, and new technologies.
Non-Volatile Memory Solutions Group (NSG)
Intel sources all of its memory chips from its joint venture partner Micron Technology (MU). Intel has now entered the NVM space and is spending $5.5 billion to convert its Dalian plant in China (FXI) for the manufacture of 3D NAND (negative AND) and 3D XPoint technology. Intel will use Altera’s FPGA (field-programmable gate array) technology to build 3D NAND.
3D XPoint
3D XPoint is a breakthrough memory technology developed jointly by Intel and Micron. The two companies are currently sampling the technology with select partners, and they expect to launch it in 2018. This technology will boost the performances of servers, computers, and smartphones.
However, SanDisk (SNDK) and Toshiba (TOSBF) claim to have developed a storage class technology that can compete with 3D XPoint. If they succeed in providing this technology first, Intel and Micron may lose the first-mover advantage.
Solid state drives
Intel has moved up the supply chain and is now building SSDs (solid state drives) equipped with its 3D NAND technology. The company has launched three sets of SSDs, each catering to a different user base:
Intel’s SSD DC (Data Center) D3600 and D3700 dual-port NVM drives for enterprise networked storage, expected to be shipped in 2H16
Intel’s SSD DC P3320 and P3520 NVM products for cloud storage, expected to be shipped in June or July 2016
Intel’s entry-level S3100 Series for server-side disk storage and the E5400S Embedded Series for IoT (Internet of Things) data storage
NSG performance in fiscal 1Q16
At the fiscal 4Q15 earnings conference, Intel’s CEO Brian Krzanich stated that the company’s memory revenue rose more than 20% to $2.6 billion in fiscal 2015. The company has allocated $1.5 billion worth of capital expenditure for the memory business.
2016 is a transitional year for the memory market, which has been hit by oversupply and falling prices. However, the demand for 3D NAND is expected to pick up in 2H16. Micron reported weak earnings for its March 2016 quarter and weak guidance for its June 2016 quarter. Looking at these factors, Intel’s memory business is likely to report slow or negative growth in fiscal 1H16.
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