The plans that Intel announced earlier this year to reinvigorate its manufacturing business and regain the throne as chipmaking king may cost more and take longer than we may have thought.
It will take roughly four years before Intel starts to see a significant boost to its revenue and profit from its contract manufacturing business, Intel CEO Pat Gelsinger said Thursday during a conference call for investors.
"It will really have minimal impact in the next couple of years, and then it'll really deliver in years four and five, and in the second half of the decade more significantly," Gelsinger said in the conference call.
Regaining leadership will be costly too, as Gelsinger said the company plans to run its gross margins below its current levels for the next two to three years before recovering, though will remain "comfortably above 50%," Gelsinger said. Part of the cost includes capital spending, which Intel projects between $25 billion and $28 billion next year, and he left open the potential for even more investment.
Higher costs did not sit well with investors, as shares slid 9% in extended trading Thursday. The company reported third-quarter net profit jumped 60% to $6.8 billion. Revenue grew 5% to $18.1 billion, which fell short of investor expectations.
After Gelsinger was installed as CEO in February, he made significant changes to the company's executive and engineering teams. Thursday, CFO George Davis said he planned to retire in May.