By Reuters | Updated: 21 June 2022
China’s Tencent announced to its staff on Monday the official formation of an ‘extended reality’ (XR) unit, three people familiar with the matter said, formally placing its bets on the metaverse concept of virtual worlds.
The unit is tasked with building up the extended reality business for Tencent including both software and hardware, the sources said, adding that it will be led by Tencent Games Global’s Chief Technology Officer Li Shen and will be part of the company’s Interactive Entertainment business group.
Two of the sources said the unit will eventually have over 300 staff, a generous figure given how Tencent has been cost cutting and slowing down hiring. However, they also cautioned that the hiring plans are still fluid, as the company will adjust the unit’s headcount based on its performance.
The unit was first formed earlier this year but remained shrouded in secrecy, the three sources said.
Extended reality is a term that refers to immersive technologies such as virtual reality and augmented reality, which are seen to be the building blocks of the metaverse.
Tencent, China’s most valuable company, declined to comment.
Investors, entrepreneurs, and established tech giants around the world have latched on to the concept of the metaverse, ever since Mark Zuckerberg, CEO of Facebook which recently changed its name to Meta Platforms, announced that he would devote the future of his company to building a metaverse.
Companies from Microsoft to Disney have announced they are also working on their own metaverses, with Chinese and US firms from TikTok owner ByteDance to Apple also building up their headset units involving XR technologies.
The XR unit will mark a rare foray into hardware for Tencent, which is mostly known for its software such as its suite of games as well as social media applications.
One of the sources said the unit was viewed internally as a passion project of Tencent founder and chief executive Pony Ma who first highlighted the importance of the metaverse, or what he called an “all-real internet”, in late 2020.
The introduction of the new team stands in contrast to downsizing happening in other parts of Tencent, which has been implementing cost control measures and scaling back non-core businesses, such as the shuttering of its Penguin Esports unit, to cope with the fall-out from a regulatory crackdown.
Tencent has remained largely coy, publicly, about its metaverse plans. Last November, it told analysts it had a lot of “tech and capability building blocks” to approach the metaverse opportunity but did not go into details.
© Thomson Reuters 2022
HP to Lay Off 6,000 Employees in Next Three Years in Cost Cutting Plan
By Agence France-Presse | Updated: 23 November 2022
PC-maker Hewlett Packard on Tuesday said it would layoff as many as 6,000 employees over the next three years as the slumping world economy continues to embroil the US tech sector.
HP, which has a payroll of about 61,000 people, said it aimed to secure $1.4 billion (roughly Rs. 11,447 crore) in annual savings through 2025 as it followed the cost-cutting path of other tech giants such as Facebook-owner Meta, Amazon and Twitter.
The plan “will enable us to better serve our customers and drive long-term value creation by reducing our costs and reinvesting in key growth initiatives to position our business for the future,” HP CEO Enrique Lores said in a statement.
Meta said earlier this month it will lay off more than 11,000 of its staff and Twitter saw half of its 7,500-strong employees culled just days after the company was taken over by billionaire Elon Musk in late October.
“These are the toughest decisions we have to make, because they impact colleagues we care deeply about. We are committed to treating people with care and respect…” an HP spokesperson said in an email to AFP.
HP, which makes computer hardware and printers, announced the layoff plan as it announced an 11.2 percent fall in revenues to $14.8 billion (roughly Rs. 1,21,050 crore) for the final fiscal quarter of 2022.
Nvidia Announces Advanced A800 Chip for Chinese Market That Meets New US Export Controls
By Reuters | Updated: 8 November 2022
US chip maker Nvidia said on Monday it is offering a new advanced chip in China that meets recent export control rules aimed at keeping cutting-edge technology out of China’s hands.
The new chip, called the A800, represents the first reported effort by a US semiconductor company to create advanced processors for China that follow new US trade rules. Nvidia has said the export limitations could cost it hundreds of millions of dollars in revenue.
Nvidia’s comments confirmed reporting by Reuters that Chinese computer sellers are advertising products with the new chip.
US regulations set in early October effectively banned export of advanced microchips and equipment to produce advanced chips by Chinese chipmakers, part of an effort to hobble China’s semiconductor industry and in turn the military.
In late August, Nvidia and Advanced Micro Devices both said that their advanced chips, including Nvidia’s data centre chip A100, were added to the export control list by the Commerce Department. The Nvidia A800 can be used in place of the A100, and both are GPUs, or graphics processing units.
Such advanced chips can cost thousands of dollars each.
“The Nvidia A800 GPU, which went into production in Q3, is another alternative product to the Nvidia A100 GPU for customers in China. The A800 meets the US Government’s clear test for reduced export control and cannot be programmed to exceed it,” a Nvidia spokesperson said in a statement to Reuters.
At least two Chinese websites by major server makers offer the A800 chip in their products. One of those products previously used the A100 chip in promotional material.
A distributor website in China detailed the specifications of the A800. A comparison of the chip capabilities with the A100 shows that the chip-to-chip data transfer rate is 400 gigabytes per second on the new chip, down from 600 gigabytes per second on the A100. The new rules restrict rates of 600 gigabytes per second and up.
“The A800 looks to be a repackaged A100 GPU designed to avoid the recent Commerce Department trade restrictions,” said Wayne Lam, an analyst at CCS Insight, basing his comments on the specs shared by Reuters, and noting that eight is a lucky number in China.
“China is a significant market for Nvidia and it makes ample business sense to reconfigure your product to avoid trade restrictions,” said Lam.
Lam said the chip-to-chip communications abilities of the A800 represented a clear performance downgrade for a data centre where thousands of chips are used together.
Major Chinese server makers Inspur and H3C which offer servers with the new chips did not respond to requests for comment. Neither did chip distributor OmniSky which posted the A800 specs online.
Nvidia has said that about $400 million (roughly Rs. 3,278 crore) worth of chip sales to China could be impacted in its fiscal third quarter ended in October due to the limits on high-end chips. Having a replacement chip could help lessen the financial blow.
Nvidia declined comment on whether it consulted the Commerce Department about the new chip. A Commerce Department spokesperson declined to comment.
© Thomson Reuters 2022
Intel Cuts Full-Year Profit Forecast, Chipmaker Plans Layoffs as Firm Ramps Up Sales Into Data Centres
By Reuters | Updated: 28 October 2022
Intel on Thursday cut its full-year profit and revenue forecast and warned it would lay off staff, but a stronger-than-expected performance at its personal computers segment helped send shares higher. The company’s shares jumped over 5 percent in after-hours trade. They have slumped roughly 47 percent so far this year, underperforming both the S&P 500 index and the Philadelphia SE Semiconductor index.
The company’s Chief Executive Pat Gelsinger said the cut to the fourth quarter outlook reflected economic uncertainty expected to last into next year, and that the company was taking time to ramp up sales into data centers, which dropped 27 percent in the third quarter.
Intel also cut its capital spending forecast for this fiscal year to $25 billion (roughly Rs. 2,05,900 crore) from a previous forecast of $27 billion (roughly Rs. 2,22,400 crore).
Asked about potential layoffs, Gelsinger told Reuters “people actions” would be part of a cost reduction plan. Intel said it would drive cost reduction of $3 billion (roughly Rs. 24,700 crore) in 2023.
“The amount that we can do with respect to people costs is a minority of our overall cost structure. So driving efficiency in the factory network is way more important to our economics than people cost,” Gelsinger told Reuters, adding that adjustments to flexible workforces can be “quite immediate”.
The adjustments would start in the fourth quarter, he said, but did not specify how many employees would be affected.
Intel had 110,600 employees in late 2020, just before Gelsinger took the helm. That has ballooned to 131,500 by early October this year.
Macroeconomic headwinds have muddied the outlook for the PC and data center market, both big markets for Intel.
Intel’s “PC Client business was the silver lining as sales grew sequentially giving investors some hope that share loss has moderated materially,” said Summit Insights Group analyst Kinngai Chan.
Revenue from the client computing group, which accounts for Intel’s PC sales, rose to $8.1 billion (roughly Rs. 66,700 crore) in the third quarter from $7.7 billion (roughly Rs. 63,420 crore) in the second quarter.
“We believe its data center share loss should also moderate going into next year,” said Chan.
On Thursday Amazon reported earnings that missed analyst expectations for revenue at its cloud business, AWS, which rose 28 percent to $20.5 billion (roughly Rs. 1,68,850 crore). AWS, and other cloud service providers, are big customers of chip makers, including Intel and key to their revenue growth.
Intel has been losing market share in the data center market and Gelsinger said it lost market share again in the third quarter.
“Our products weren’t shipping new products like Sapphire Rapids, but as those are now in full production and we’re going to be ramping those aggressively, we’re better positioned going forward than we have,” he told Reuters, adding that it would take several quarters to ramp up.
But he said Intel gained “meaningful” market share improvement in the PC segment in the third quarter.
Surging inflation has hit demand for computers and other gadgets, forcing electronics companies to cancel orders for components such as chips as they struggle to clear inventory.
PC shipments fell 15.5 percent in the third quarter, data from Counterpoint Research showed. Intel said it expects 2022 PC market to decline in the mid-to-high teens.
Still, Gelsinger said Intel expected its total addressable market – the market it is pursuing – in 2023 to stand at 270-295 million units.
The company now expects 2022 annual revenue of about $63 (roughly Rs. 5,18,870 crore) billion to $64 billion (roughly Rs. 5,27,110 crore), compared with $65 (roughly Rs. 5,35,370 crore) billion to $68 billion (roughly Rs. 5,60,110 crore) estimated earlier. Its original forecast was for about $76 billion (roughly Rs. 6,26,000 crore). Analysts on average expected annual revenue of $65.26 billion (roughly Rs. 5,37,540 crore), according to Refinitiv data.
Intel trimmed its full-year adjusted earnings per share forecast to $1.95 (roughly Rs. 162) from $2.30 (roughly Rs. 189).
© Thomson Reuters 2022
Samsung Expects Chip Demand to Recover in 2023 as Q3 Profits Fall, Names Lee Jae-Yong Executive Chairman
By Agence France-Presse | Updated: 27 October 2022
Samsung Electronics on Thursday said its third-quarter operating profits were down 31.39 percent year-on-year after a global economic downturn hit demand for consumer electronics. Earnings in the South Korean tech giant’s crucial memory chips division dropped, the company said in a statement, adding that “demand for consumer products remained weak”. Operating profit for July to September 2022 fell to KRW 10 trillion (roughly Rs. 58,100 crore), down from KRW 15.8 trillion (roughly Rs. 91,800 crore) for the same period last year, the company said.
The results are the first year-on-year decline in profit in nearly three years for Samsung Electronics, the world’s biggest smartphone maker.
But the company said it had seen an increase in sales, which were up by 3.79 percent from the same period last year to KRW 76 trillion (roughly Rs. 4,41,500 crore).
The world’s biggest memory-chip maker is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled empires known as chaebols that dominate business in South Korea, Asia’s fourth-largest economy.
The conglomerate is crucial to the country’s economic health — its overall turnover is equivalent to a fifth of the national gross domestic product.
Until the second quarter of this year, Samsung, along with other tech companies, significantly benefited from strong demand for electronic devices — as well as chips that power them — during the pandemic.
But the global economy is now facing multiple challenges, including soaring inflation, rising interest rates and the growing threat of a broad debt crisis.
The situation has been exacerbated by Russia’s invasion of Ukraine — which has spurred a surge in energy prices and pushed global food prices up — along with China’s adherence to a strict zero-Covid policy.
“In 2023, demand is expected to recover to some extent, but macroeconomic uncertainties are likely to persist,” Samsung Electronics said.
“In the Memory Business, after a dampened first half, demand is expected to rebound centering on servers as data center installations resume,” it added.
Analyst Park Sung-soon of Cape Investment & Securities told AFP he did not expect consumer demand for tech products to recover until the second half of 2023.
“So the focus for Samsung will be adjusting its supply rather than relying on demand recovering anytime soon,” he said.
Samsung also said it had benefited from the strength of the US dollar against the Korean won, “resulting in an approximately KRW 1.0 trillion (roughly Rs. 5,800 crore) company-wide gain in operating profit compared to the previous quarter”.
Parent company Samsung Group announced Thursday that heir and de facto leader Lee Jae-yong — who received a presidential pardon in August over a fraud conviction — would be promoted to executive chairman.
The vast majority of the world’s most advanced microchips are made by just two companies — Samsung and Taiwan’s TSMC — both of which are running at full capacity to alleviate a global shortage.
The supply of memory chips has become an issue of global geopolitical significance recently, with leading governments scrambling to secure supplies.
That was demonstrated in May when US President Joe Biden kicked off a South Korea tour by visiting Samsung’s sprawling Pyeongtaek chip plant.
Russia’s invasion of Ukraine has “further spotlighted the need to secure our critical supply chains”, Biden said at the plant, underscoring the importance of bolstering technology partnerships among “close partners who do share our values”.
Samsung employs about 20,000 people in the US and work is under way to build a new semiconductor plant in Texas, scheduled to open in 2024.
The US also recently introduced new measures to limit China’s access to high-end semiconductors with military uses, a move that has wiped billions from chip companies’ valuations worldwide.
Microsoft Forecasts Spook Investors as Firm Reports Lowest Revenue in Five Years
By Reuters | Updated: 26 October 2022
Microsoft on Tuesday projected second-quarter revenue below Wall Street targets across its business units, stoking fear that macroeconomic headwinds are impacting the cloud business in addition to the PC unit.
Revenue growth in the first quarter was Microsoft’s lowest in five years, and shares of the software giant fell 7 percent in extended trading.
Microsoft’s cloud business, called Azure, has supercharged revenue growth at the software giant for years. But in its first fiscal quarter of 2023, that growth dropped to 35 percent and the company projects that to drop again in the current quarter, which is its second quarter. Microsoft missed the 36.5 percent analyst target compiled by Visible Alpha due to a stronger dollar.
“If this growth deceleration continues, it could harm an investment case in the company’s stock which is considered a safe-haven amid the market turmoil,” said Haris Anwar, senior analyst at Investing.com.
The company said it expects the Intelligent Cloud business to pull in revenue of $21.25 billion (roughly Rs. 1.75 lakh crore) to $21.55 billion (roughly Rs. 1.77 lakh crore) in the second quarter, slightly below analysts’ estimates of $22.01 billion (roughly Rs. 1.81 lakh crore), according to Refinitiv IBES data.
“We expect Azure revenue growth to be sequentially lower by roughly five points on a constant currency basis,” Chief Financial Officer Amy Hood told analysts on a conference call. That would be a growth of 37 percent on a constant currency basis, and much lower taking into account foreign exchange rates.
“In a weird way, everyone expected there to be a disaster when the pandemic hit. And it was the exact opposite. But at some point, that impact was going to hit and it’s hitting now,” said Bob O’Donnell, an analyst for TECHnalysis Research, adding that even businesses like the cloud can’t escape the impact. Still, he said Microsoft has diversified its business and is in a good position to ride out the hard times.
The maker of Windows has seen demand slide for its ubiquitous computer software as the spike in inflation forces businesses and consumers to pull back on spending.
Current-quarter revenue from the personal computing unit was projected between $14.5 billion (roughly Rs. 1.19 lakh crore) and $14.9 billion (roughly Rs. 1.22 lakh crore), below estimates of $16.96 billion (roughly Rs. 1.4 lakh crore).
“The PC market was worse than we expected in Q1,” Brett Iversen, head of Microsoft’s investor relations, told Reuters. “We continued to see that deteriorate throughout the quarter, which impacted our Windows OEM business.”
Windows OEM business, which includes the operating software Microsoft sells to PC makers, dropped 15 percent year-on-year. Iversen said that part of the business did not have much of an impact from foreign-exchange headwinds and the drop was mainly PC-market driven.
Still, demand held up for its diverse portfolio of products including Outlook and Teams that have made Microsoft essential to businesses adopting flexible work models.
Revenue growth in the first quarter was $50.12 billion (roughly Rs. 4.13 lakh crore), up 11 percent year-on-year. The figure was slightly above analysts’ expectations of $49.61 billion (roughly Rs. 4.08 lakh crore).
Net income fell to $17.56 billion (roughly Rs. 1.44 lakh crore), or $2.35 (roughly Rs. 200) per share, during the quarter ended Sept. 30, from $20.51 billion (roughly Rs. 1.7 lakh crore), or $2.71 (roughly Rs. 230) per share, a year earlier.
© Thomson Reuters 2022
Logitech Q3 Sales Down 12 Percent to $1.15 Billion, Amid Strong Dollar, Economic Slowdown
By Reuters | Updated: 25 October 2022
Logitech International reported a big drop in quarterly sales and profit on Tuesday, as the computer peripherals maker was hit by tough comparisons, a strong dollar and fragile consumer confidence as economies slow down around the world.
The maker of keyboards, mice and headsets posted a 12 percent decline in sales at $1.15 billion (roughly Rs. 9,524 crore) in the three months ended September 30. In constant currencies, which removes the impact of exchange rate swings, sales was down 7 percent.
Logitech also said its chief financial officer, Nate Olmstead, will be leaving the company. Olmstead will stay on in his role as Logitech launches a search for his successor.
Non-GAAP operating income plunged 26 percent to $156 million (roughly Rs. 1,292 crore) in the period, the second quarter of Logitech’s financial year.
The Swiss-American company is facing a slowdown from last year, when COVID-19 restrictions drove it to its highest ever second-quarter sales on the back of strong demand for home office products and computer gaming devices.
Since then, many lockdowns have been lifted, while components and transportation costs have risen, eating into profit margins.
Meanwhile, the dollar has continued to rise in value, reducing the reported level of overseas sales, and consumer confidence has been fragile in the United States and falling in Europe.
Logitech, which cut its full year outlook in July, reaffirmed the guidance on Tuesday, expecting sales to fall by 4 percent to 8 percent in constant currencies and non-GAAP operating income of $650 million (roughly Rs. 5,403 crore) to $750 million (roughly Rs. 6,235 crore).
© Thomson Reuters 2022
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