BlueFin Stays 'Cautious' On Intel Despite Production Improvements In March

Production levels likely declined at Intel Corporation INTC in 1Q, while there could be a sequential improvement in 2Q. BlueFin’s Steve Mullane said the “cautious” stance on Intel continues for the near term, although the initial reads on PC demand in Q2 “is somewhat stable.”

Q1 Production

Production levels are estimated to have declined 4-5 percent sequentially in 1Q, although production levels improved in the final two weeks of March. Overall production levels had slowed noticeably in February and declined further through mid-March.

“The production declines were not totally surprising, given the lackluster PC shipments in January and February and the high inventory levels entering the quarter,” analyst Steve Mullane wrote.

Projection For 2Q

Production levels picked up by the end of March, and the increased momentum seems to have continued into Q2. Material suppliers are forecasting a 5 percent sequential increase, Mullane noted.

“After two quarters of production declines, we are finally seeing a production increase for the June quarter which suggests that inventory are getting closer to target levels,” the analyst said. He added, “While our latest reads on the PC Shipments are projected to be up only slightly at 65M units in Q2, Skylake builds are expected to increase to 50% of the mix.”

With the PC environment continuing to be challenging into Q2, Intel could report its revenue at the low-end of its guidance range, the BlueFin report added.