Intel Lowers Q2 Revenue Guidance after US Revokes Some Licenses for Exports ...

TMTPost -- Intel Corporation shares settled 2.2% lower after falling as much as 3% Wednesday, underperforming as the U.S. stock market benchmark S&P 500 finished flat, breaking its longest winning streak since March. The stock selloff came as Intel lowered its quarterly revenue outlook right after the U.S. government tightened its controls on semiconductor exports to China.

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Intel now expects revenue for the second quarter of 2024 to remain in the range of $12.5 billion to $13.5 billion, but below the midpoint, according to a filling with the U.S. Securities and Exchange Commission (SEC) on Wednesday. The chipmaking giant said its guidance cut was due to recent revocation of certain export licenses. Intel was informed by the U.S. Department of Commerce that the agency was revoking certain licenses for exports of consumer-related items to a customer in China, the company said in the filling. It reconfirmed its guidance for the year 2024. It continues to expect revenue and earnings per share (EPS) to grow year-over-year compared to 2023.

Intel didn’t specify the Chinese customer that was affected by the license revocation, nor details of products it supplied to the customer involved in the revocation. Qualcomm confirmed on Wednesday that one of its export licenses for Huawei had been revoked by the Commerce Department. It said it will continue to comply with all applicable export control regulations. Reports a day earlier said the revocation targeted Intel and Qualcomm Inc.’s exports to Huawei Technologies Co., Ltd.

The U.S. government move affected Intel and Qualcomm’s supply of chips for Huawei’s laptop computers and mobile phones, the Financial Times cited people familiar with the matter. The Commerce Department later confirmed to the Financial Times that it had “revoked certain licenses for exports to Huawei” but did not name which US companies would be affected. “We continuously assess how our controls can best protect our national security and foreign policy interests,” the department said in a statement Tuesday.

Withdrawal of the licenses blocks any chips sold to Huawei, which is key to preventing China from developing advanced artificial intelligence (AI) said Michael McCaul, the House Foreign Affairs Committee Chairman, in an interview Tuesday. The Representative called Qualcomm and Intel “two companies we’ve always worried about being a little too close to China.”

The U.S. Commerce Secretary Gina Raimondo treated Huawei as “a threat” in her interview with Reuters on Wednesday. "Maybe we have an increased focus on AI. And so when we learn more about AI capabilities, that's when we have to take action," Raimondo said. "So if a chip that we previously licensed for example, now we discover had AI capabilities, we're going to revoke the license."

The revocation was the U.S. government’s further restrictions on Chinese high-tech. The U.S. Department of Commerce introduced last October a rule to reinforce the export controls launched in October 2022 to restrict China’s both purchase and manufacture certain high-end chips critical for military advantage. The rule was supposed to come into effect following a 30-day public comment period. However, Nvidia Corporation, the AI chip leader,disclosed on October 25 that the U.S. government informed the licensing requirements of the rule applicable to products having a “total processing performance” of 4800 or more and designed or marketed for data centers, was effective immediately.

Bloomberg reported in March the U.S. government is considering blacklisting Chinese semiconductor companies related to Huawei, including chipmakers Qingdao Si'En, SwaySure, and Shenzhen Pensun Technology Co, (PST) and China’s leading memory chipmaker, ChangXin Memory Technologies Inc.,(CXMT). Most of companies that could be placed on the blacklist were identified as chipmaking facilities took over or being built by Huawei by the Washington-based trade group Semiconductor Industry Association, according to the report.

The U.S. Commerce Department also revised rules in March to reinforces the controls launched in October 2022 to restrict China’s both purchase and manufacture certain high-end chips critical for military advantage. Under the revised rules,restrictions are expanded to laptops containing AI chips, making China harder to access U.S. AI chips and chipmaking tools.