INTC: Desktop Trends Weakening, Says Longbow

Longbow Research chip analyst JoAnne Feeney today writes that her conversations with suppliers of components for personal computers suggest to her that the second half of the year is shaping up as worse than expected, and could cause trouble for PC-related names such as Intel (INTC), Advanced Micro Devices (AMD), Nvidia (NVDA), and Intersil (ISIL).

Feeney maintains Neutral ratings on all four names.

“Contacts now see DT [desktop] units down 5-10% for the year vs. our forecast for INTC DT segment to be down 4% Y/Y in 2013,” writes Feeney.

Feeney thinks the PC trends have shifted somewhat Intel’s plans for the roll-out of new chips:

Look for a slow Haswell ramp as last year�s inventory build, following a surprisingly weak 2H, leads the industry to stick with the safer Ivy Bridge platform (socket compatible with Sandy Bridge, unlike Haswell) and for Haswell to make up less than 50% of desktop CPU shipments even in 4Q. Contrasting earlier reports, however, Haswell for DT (Denlow platform) looks set to launch with cautious volume in June using the faulty C1 stepping, and then to see a stronger ramp once the glitch is worked out. Still, this is more than we had hoped for in June. Caution in Ivy Bridge units still likely to constrain gross margin for INTC and contacts point to August as the more significant launch period.

Feeney thinks there is “downside risk” for AMD and Nvidia graphics processing unit (GPU) sales, given that integrated graphics are taking “significant steps forward” this year. She sees Nvidia’s GPU business declining 3% this year.

On a somewhat related note, research firmiSuppli today reported what might be a contrary data point, namely that�inventories of semiconductors worldwide declined faster than expected in Q4, led by Intel, in response to weaker-than-expected PC demand:

Days of Inventory (DOI) for semiconductor suppliers in the fourth quarter declined by 5 percent compared to the third quarter�higher than the 1.5 percent initially forecast. Meanwhile, inventory value in dollar terms fell almost 5 percent�larger than the originally projected 3 percent. Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand. Many chip suppliers demonstrated great agility in their reactions to the drop in demand. No. 1 semiconductor supplier Intel Corp. was the most aggressive, cutting its stockpiles by more than half a billion dollars�the largest decrease on a dollar basis of any chipmaker.