Intel lowers hopes for its graphics card launch

For decades, there have been two manufacturers of graphics chips that power gaming PCs and workstations: NVIDIA and AMD. NVIDIA was all about graphics from the start, while AMD entered the business in 2006 by acquiring ATI.

Intel (NASDAQ:INTC) has a long history with graphics. Many of its CPUs include integrated graphics chips, and they keep getting more powerful over the years. They can’t hold a candle to graphics cards that cost hundreds of dollars, but they are capable of playing some games at low settings with acceptable performance.

miss target

Graphics cards have become a big business during the pandemic with the use of graphics chips to accelerate demand for gaming, cryptocurrency mining, and enterprise workloads. This is a market that Intel would be foolish to ignore. The company announced in 2017 that it would enter the discrete graphics market, and now that plan is finally coming to fruition, though not without its fair share of delays.

Originally, Intel planned to have graphics cards ready by 2020. The company missed that target, but was able to launch a few in 2021. That product, the DG1, was intended for OEMs and system integrators only. Intel laid out some ambitious plans earlier this year at an investor event: Ship at least 4 million GPUs in 2022, with products tackling the notebook, desktop, workstation, and server markets. By 2026, Intel expects its accelerated computing and graphics segment to reach close to $10 billion in annual revenue.

With Intel’s second-quarter report, the company confirmed that it certainly won’t meet that goal of shipping 4 million GPUs this year. Software issues have slowed the company. “Our software release on our discrete graphics was, well, clearly underperforming. We thought we’d be able to take advantage of the integrated graphics software stack, and that was purely for performance level, gaming compatibility, and more. was insufficient from what we needed,” Intel CEO Pat Gelsinger said during the earnings call.

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There are already a few laptops on the market that have Intel’s Arc graphics chips, and a data center GPU shipping to customers, but the launch of the desktop variant is still a work in progress. The company now expects its Arc A5 and Arc A7 desktop graphics cards to be launched in the third quarter, although an exact date has not been set.

break the monopoly

While it will take longer than expected for Intel to become a major player in the graphics card market, graphics still represent a multi-billion dollar opportunity. John Peddie Research reported that $8.6 billion worth of graphics cards were shipped in the first quarter of this year, a number significantly lower than in the fourth quarter as the drop in cryptocurrency prices drove demand and prices down.

Intel probably won’t be able to compete at the high end of the market with this early launch, but depending on the company’s prices for its products, it could be a disruptive force in the mid-range. If Intel can be competitive in the $200-$400 price range, it will be able to sell a lot of graphics cards. According to Steam’s latest hardware survey, the most popular graphics card in use is NVIDIA’s GTX 1060. That card was announced in 2016 with an MSRP of $249.

Intel’s biggest opportunity is to offer people who have mid-range graphics cards that are unable to upgrade due to price hikes, an affordable option. Intel will fall short of its graphics card target this year, but 2023 could be a big year for its nascent graphics business.

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Timothy Green holds positions at Intel. The Motley Fool positions and recommends Advanced Micro Devices, Intel and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

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