Intel warns on chip demand

Updated at 2:50 p.m. with correction of comments in FORM 10-Q

Intel reiterated in an SEC filing Friday that business conditions may worsen and that demand for its chips may take a hit because of global economic conditions.

As a result of the recent financial crisis, "there could be a number of follow-on effects from the credit crisis on Intel's business, including insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies," Intel restated in a FORM 10-Q filing.

Intel also cited "increased expense or inability to obtain short-term financing of Intel's operations from the issuance of commercial paper."

"The current uncertainty in global economic conditions makes it particularly difficult to predict product demand," Intel said, reiterating what was stated in its third-quarter earnings announcement.

(Intel also plans to publish a mid-quarter business update on December 4, 2008.)

For the fourth quarter of 2008, Intel reiterated that it expects revenue of between $10.1 billion and $10.9 billion and a gross margin of 59 percent, plus or minus a couple points. Gross margin is a crucial indicator of profitability. The company repeated that economic uncertainty may result in lower than expected demand and may "negatively impact our gross margin if we fail to reduce manufacturing output accordingly."

Restructuring and asset impairment charges--as stated in its third-quarter earnings announcement--will be approximately $250 million, which includes charges related to Intel's joint decision with Micron to discontinue the supply of NAND flash memory from a facility within the Intel-Micron manufacturing network.

iSuppli warns on flash memory revenue
And speaking of NAND flash memory, iSuppli said Friday that its revised forecast for the flash memory market predicts that worldwide NAND flash memory revenue will fall by 14 percent to the $12 billion level in 2008, down from $13.9 billion in 2007.

This year will mark the first time that worldwide NAND flash revenue has declined on an annual basis.

In 2009, global NAND flash memory revenue will decline by another 15 percent, iSuppli said.