During the first decade of January 2022, Intel (INTC) introduced a wide range of solutions for PCs and laptops called Alder Lake based on the 7-nm+ process technology (according to the classification used by TSMC), which allows Intel to compensate for the lag behind its main competitor AMD (AMD) in all segments except mobile, in which AMD retains leadership due to the recently introduced 6-nm Ryzen 6000 (Rembrandt) mobile processors.
On January 18, Intel CEO Patrick Gelsinger even stated in a video message that the company had regained its leading position in the consumer segment forever thanks to the new Alder Lake processors. AMD, in his opinion, will now be left behind forever. This statement is supported by ratings tomshardware.com, which confirm the higher results of the Alder Lake architecture compared to Zen3. It should also be noted that the transition of users to Windows 11 has a positive effect on Intel's business, since the performance of Alder Lake is higher on the new Microsoft OS. Of course, statements about leadership by the heads of companies are often only an interpretation of certain facts or events in their favor. However, it should be noted that after a period of total technological lag from AMD in all key niches, the situation begins to gradually change in favor of Intel. The only exceptions are the server segment, since the Sapphire Rapids microarchitecture, according to management plans, will be presented only in the middle of this year.
Now Intel continues to lag behind AMD in terms of the technical process used, despite the breakthrough in the microarchitecture niche after the release of Alder Lake, which demonstrates a significant increase in performance. In particular, the budget Core i5-12400 based on Alder Lake is ahead of the Core i9-11900K in gaming performance.
Solutions from the new Intel line are 5-10% more expensive than Rocket Lake products, which indicates Intel's confidence in the success of innovations.
According to Mercury Research, by the end of the third quarter of 2021, Intel's market share in the laptop CPU sub-segment decreased by 3.6 percentage points (pp), but the company was able to increase the same indicator for the PC CPU sub-segment by 3 pp. However, this was due not to the weaker performance of Ryzen 5000-based machines, but to a smaller impact of the market deficit on Intel compared to AMD.
The negative aspects of the report include the lack of detailed information on the release date of Intel Arc. This is one of the most anticipated releases, since, according to Intel, the GPU supports ray tracing, grid shading and pixel sampling.
However, AMD also has a very strong release schedule. In particular, in the first half of 2022, a CPU for Zen 4 Ryzen 7000 (based on a 5-nm process technology) and the fastest (according to its own test) Ryzen 7 5800X3D gaming CPU will be presented. In addition, at CES 2022, the company demonstrated a new generation of Ryzen 6000 based on a 6-nm process technology (architecture - Zen3+). At the same time, we believe that AMD is unlikely to be able to achieve a noticeable expansion of market share in the notebook segment, where Intel has the strongest positions, as well as the closest to the competitor process technology (7-nm).
In general, we maintain a neutral-positive view of Intel's prospects, noting changes in pricing policy and good dynamics of new microarchitectures: according to the results of the third quarter, both sales in kind and average prices increased, and growth was noted both quarterly and annualized. Previously, the dynamics were mostly negative, which was explained by attempts to stabilize the market share.
Since the beginning of the year, Intel's shares have looked significantly better than the sector: Intel's quotes have increased by 8.2% against the industry's decline by an average of 3%. We believe that the positive dynamics will continue until the end of the year, since Intel refers to "value" stocks, and in the conditions of tightening of the PREP and rising interest rates, investors prefer to shift to more mature companies. We believe that with the stabilization of Intel's market positions in key niches, as well as in the case of higher estimates of mobile versions of Alder Lake compared to Ryzen 6000 (Rembrandt), the demand for Intel securities may increase significantly.
We raise the target price for INTC paper to $62.