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Intel’s shifting customer preferences
In a landscape marked by economic uncertainty and fluctuating trade policies, Intel is witnessing a surprising trend: customers are gravitating towards older chip models rather than the latest releases. Intel’s chief financial officer, David Zinsner, highlighted this shift during a recent analyst call, indicating that the company’s Raptor Lake chips, launched in 2023, are outselling the more recent Lunar Lake chips. This preference suggests that customers may prioritize performance and cost-effectiveness over novelty.
Economic factors influencing choices
The backdrop of these purchasing decisions is a complex mix of tariffs and macroeconomic concerns. Zinsner pointed out that the unpredictable economic policies under the Trump administration have made it challenging for Intel to forecast future performance. As worries about a potential recession grow, customers are becoming more cautious, opting for proven products that can offer reliable performance at a better price point.
Demand for older models rises
Interestingly, the surge in demand for Intel’s older CPUs, often referred to as “N-1” and “N-2” products, highlights a strategic pivot among customers. Michelle Johnston Holthaus, who has returned to lead Intel Products, noted that customers are seeking these older models to meet specific price points that consumers desire. The preference for Raptor Lake over newer offerings like Meteor Lake and Lunar Lake can be attributed to the latter’s higher cost structures, which present challenges not only for Intel but also for its Original Equipment Manufacturers (OEMs).
Customer sentiment and product performance
This shift in customer sentiment is not entirely unexpected. The performance of Intel’s latest Core Ultra 200-series chips has been underwhelming, leading to a lukewarm reception. For instance, reviews of the Arrow Lake desktop parts revealed that they closely mirrored the performance of the previous Raptor Lake generation. This lack of differentiation could be driving customers back to the older models, which provide similar performance at a lower cost.
Future product launches on the horizon
Despite the current trends, Intel is not standing still. The company is preparing to launch its Panther Lake technology by the end of the year, though Zinsner has indicated that significant shipments may not occur until 2026. Analysts wonder if customers who have chosen to skip previous releases will embrace Panther Lake, but Holthaus remains optimistic about its appeal, citing strong commercial demand for AI-capable PCs.
Manufacturing strategies and organizational changes
Intel’s long-term strategy includes a commitment to in-house manufacturing, aiming to produce 70% of the silicon used in Panther Lake at its own facilities. This move not only underscores Intel’s dedication to its manufacturing capabilities but also positions the company for future growth in its foundry business. CEO Lip-Bu Tan emphasized the importance of building trust in Intel’s manufacturing technologies as a foundation for attracting more customers.
Financial performance amid challenges
As Intel navigates these turbulent waters, its financial results reflect the broader challenges facing the company. Recently, Intel reported a GAAP loss of $800 million, with revenue remaining flat at $12.7 billion compared to the previous year. The Client Computing Group saw an 8% decline in revenue, underscoring the impact of economic conditions on Intel’s business. As the company restructures and simplifies its operations, it remains to be seen how these changes will affect its market position.
Conclusion
In a rapidly evolving tech landscape, Intel’s ability to adapt to customer preferences and macroeconomic challenges will be crucial for its future success. By focusing on product performance and cost-effectiveness, the company hopes to regain traction with its customer base while navigating the complexities of the current economic climate.