Intel posted a $1.6 billion loss for Q2 2024 and plans to lay off 15,000 employees
The chip giant dominates in the 5G vRAN and accelerator market
Analysts say Intel's 5G business will depend on how the overall 5G RAN market slowdown develops
Analysts tell Fierce that Intel may want to reduce its investment in its 5G telecom business as it focuses on artificial intelligence (AI) and cloud workloads, as well as its personal computer (PC) and foundry business – if the 5G radio access network (RAN) doesn’t recover – after its stormy second quarter results.
The chipmaker has recently posted a $1.6 billion loss for Q2 of 2024 and announced plans to lay off 15,000 employees. Fierce has already looked at how this will affect its PC and its data center markets and if the company is too big to fail.
So, how will the 5G slowdown impact Intel’s chip business?
“Many carriers have reduced spending over the past year or two, and the uptake of new equipment has been slow,” said Jack Gold, principal analyst at J. Gold Associates. “So all the chip suppliers, including Intel, have seen a difficult market over the past 12-18 months in telco. It’s likely the market will pick up, as telcos feel more confident we’re not going to see a worldwide recession, but it’s still challenging as profits are key to investments in new equipment.”
For Intel, "they indeed have a dominant position in the [virtualized] RAN space, with upwards of 80%-90% of that market,” Gold commented. “So they have been affected by the slowdown.”
Gold said that new 5G chip buys by vendors like Samsung should be coming in the next couple of quarters.
The challenge for Intel in the telco space
AvidThink principal analyst Roy Chua said that although Intel dominates in the 5G vRAN and accelerator market, the company may not see 5G chips as crucial to its business. It won’t have an immediate impact on whatever’s on the market, but that could change in the future.
Unlike AI, cloud, desktop workloads or Intel’s foundry business, “I don’t know if they view it as core to their business,” Chua commented. “It could be a candidate for them to reduce investment or find a different path forward.”
“Realistically, the 5G RAN market is not booming right now,” the analyst noted.
They continue to support their NEX group and are producing newer versions of Xeon for the edge and telco and radio access network (RAN) spaces, Gold said. “I don’t expect to see any major defections on the part of the equipment makers, at least not in the short term, which should keep Intel’s sales healthy,” he stated.
“Longer term, Ericsson has stated publicly they are working with Intel and its Foundry Services to produce chips, so that is a big plus, given Ericsson’s position,” Gold said. Rival Arm still has a very small share of the open RAN and vRAN market, although licensees like Qualcomm and Marvel are being aggressive, he said.
“So bottom line, I think the risk for Intel in telco has more to do with if the equipment market recovers sufficiently, rather than any risk for its financial troubles and layoffs,” the analyst concluded.