Intel said an October explosion at its Kiryat Gat factory in Israel is expected to reduce fourth-quarter revenue by about $300 million and gross margin by roughly 200 basis points, adding to pressure on the chipmaker’s outlook. Chief Financial Officer David Zinsner gave the estimate in an interview with Reuters on Thursday, October 29.
The plant was shut for about two weeks after the blast. Zinsner said Intel expected a similar revenue impact in the first quarter, amounting to roughly $600 million across the two quarters. Intel was assessing which wafers affected by the explosion could still be used or sold, Reuters reported. The company planned to begin ramping up production at the facility by the end of the week.
Factory disruption weighs on Intel’s forecast
Intel’s Kiryat Gat facility primarily produces data-center chips, according to CTech. The production interruption comes as Intel faces strong demand for server processors and weakness in its PC business.
Intel forecast fourth-quarter revenue of $15 billion to $16 billion, below analysts’ average estimate of $17.07 billion, Reuters reported. The company also forecast adjusted earnings of 25 cents per share, compared with analysts’ estimate of 43 cents. The fab disruption is one factor in that outlook; Intel also cited continued weakness in the PC market.
Reuters reported that the October explosion killed two people and seriously injured one, citing local media reports. Intel had not yet determined whether the assessment of damaged wafers would reveal effects extending beyond the expected fourth-quarter and first-quarter revenue impacts.
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