Fitch has downgraded Intel’s credit rating to BBB, just two steps away from junk status. Meanwhile, the company is having problems with Panther Lake’s performance and commercial viability.
Fitch added its negative outlook to the one-point downgrade of the long-term rating, according to a statement on that refers Reuters. The statement also says that Intel is facing increasing difficulties in maintaining demand for its products. Fitch points to increased competition from manufacturers such as AMD, Broadcom and the Netherlands’ NXP. In December, Intel’s rating was already downgraded to BBB by S&P Global, and Moody’s downgraded its unsecured debt last August.
“Credit metrics remain weak and will require both stronger end markets and successful product line expansion, as well as net debt reduction over the next 12-14 months [to recover],” Fitch notes.
According to Fitch, while Intel has a better market position than other similarly rated companies, its financial structure is relatively weak and it faces “higher execution risk.” Intel still has a strong position in the PC and traditional enterprise server markets, while facing increased competition from Qualcomm.
The rating agency called Intel’s liquidity profile “stable”. As of June 28, it consisted of a combination of cash, cash equivalents and short-term investments of $21.2 billion, as well as an undrawn $7 billion automatically revolving credit facility. The company also had an undrawn $5 billion 364-day revolving credit facility that matures in January 2026.
As for the production and product line expansion mentioned by Fitch, Intel is facing a very serious problem, as described in another message of Reuters. The 18A manufacturing process has a low quality yield, and judging by previous reports, this has not changed much in recent months. According to two anonymous sources of the news agency, only a small percentage of Panther Lake processors were of sufficient quality to reach customer levels. The high reject rate means that the commercial value of the new chips is low for the company.
As Intel CFO David Zinsner said in late July, profitability typically “starts off low and improves over time.” For Panther Lake, “it’s just the beginning of the journey.” In the past, Intel has sought yields of more than 50% before ramping up production, as any early start risked hurting its profit margins, according to company sources. Typically, Intel doesn’t make much profit until yields reach 70-80%.
Earlier, ITC.ua wrote about the possible cancellation of Intel 18A production for third-party customers and the company’s focus on future technical processes. The 14A process may also be phased out, if no large customers are found.
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