SAN FRANCISCO (REUTERS) – Intel raised its annual revenue forecast above Wall Street expectations on Thursday (July 22), but chief executive Pat Gelsinger said the outlook for the chipmaker was still “supply constrained” and that it could take the industry two more years to catch up with rising chip demand.

Paired with a third-quarter sales forecast that just cleared analyst estimates, the results sent shares down 2.8 per cent in after-hours trading after the results.

Intel, one of the few remaining companies in the processor chip industry that both designs and manufactures its own chips, has been able to weather the supply chain woes better than some rivals and is also working to build a business of making chips for others, called a “foundry” business.

Mr Gelsinger declined to comment on a recent report that Intel is looking to buy GlobalFoundries for US$30 billion (S$41 billion) to bolster its foundry efforts, but told Reuters that he expects industry consolidation to continue and that “(mergers and acquisitions) will remain a part of our strategy” for building the company’s foundry business.

Intel said it now expects annual adjusted revenue of US$73.5 billion, compared with its previous forecast of US$72.5 billion and analyst expectations of US$72.80 billion, according to Refinitiv IBES data. Intel expects adjusted third-quarter revenue of about US$18.2 billion, only modestly above estimates of US$18.09 billion, according to Refinitiv data.

“I think investors simply expect more from semiconductor companies in this environment,” said Mr Logan Purk, an analyst at Edward Jones. “Even though they did increase revenue guidance, it was only about a 1 per cent increase. A bulk of the change in earnings guidance was due to a lower tax rate.”

Mr Gelsinger said Intel could sell more chips if it could make more. Even though the company runs its own factories, it still faces supply constraints from its own suppliers of materials and equipment.

“We are helping them build factories as fast as they can,” Mr Gelsinger told Reuters. “But it will be one of those things that just takes a couple years to fully catch up to this explosive demand we’re seeing, and we have better tools to address it than others.”

But some analysts do not agree with Intel’s rosy view of end demand. Citing a tame forecast this week from Texas Instruments, Mr Kinngai Chan, analyst at Summit Insights Group, disputed Mr Gelsinger’s view of the market and said Intel was likely to keep “playing defence” against rivals like AMD with better chips.

“We think the entire semiconductor supply chain will be caught up by 4Q21 as we believe there’s rampant double ordering in the supply chain coupled with a moderating end-market demand,” Mr Chan said.

Mr Angelo Zino, analyst at CFRA Research, said that Intel’s stronger-than-expected second-quarter results and third-quarter forecast actually imply a shortfall in fourth-quarter sales versus previous forecasts – despite the fourth-quarter usually being one of the company’s best quarters as consumers snap up laptops and personal computers (PCs) as holiday gifts.

Mr Gelsinger, however, told investors on a conference call that he expects the PC market to keep growing into next year, contradicting the predictions of some analysts.

Revenue from the company’s higher-margin data centre business fell 9 per cent to US$6.5 billion in the second quarter, while its personal computing business revenue rose 6 per cent, both beating Refinitiv estimates.

On an adjusted basis, the company earned US$1.28 per share in the second quarter, compared with estimates of US$1.06, according to Refinitiv data.