On Monday local time, Fitch lowered the credit rating of U.S. chip manufacturer Intel by one notch, from BBB+ to BBB, with a negative outlook, only two notches away from "junk level." This shows that Intel is facing significant challenges in maintaining market demand and financial soundness. For Intel, which is in the midst of internal and external troubles, this rating drop can be described as "a leak in the house only to be met with rain all night long."
The house leaked and it rained all night
Nearly two weeks ago, Intel just announced its second quarter financial report for fiscal year 2025. Due to huge profits losses and wafer foundry business challenges, Intel's stock price has fallen by 11.36% in the month as of Monday's close, and its market value has shrunk to US$85.3 billion, which is only a fraction of the market value of its main competitor AMD (US$286.6 billion).
The financial report shows that although the company's revenue has recovered in the second quarter and stopped its continuous decline, huge losses and large-scale restructuring will inevitably become the focus of market attention.
In order to reverse the profit dilemma, Intel announced a series of "branch-breaking" reform measures, including laying off 15% of its employees, canceling multiple European factory construction projects, and slowing down the advancement plan of the Ohio wafer fab in the United States.
However, the outside market still seems not optimistic about Intel's prospects.
On Monday, Fitch Ratings downgraded Intel's credit rating in its report, noting that Intel faces increasing challenges in maintaining demand for its products - increasingly fierce competition from rivals such as NXP Semiconductors, Broadcom and ADM. At the same time, slow growth in global consumer electronics and enterprise market demand has intensified the company's operating pressure.
Fitch analysts wrote in a report: "Credit metrics remain weak, and Intel's restoration of its near-term rating will require end-market strength, successful product upgrades, and net debt reduction over the next 12-14 months."
Competition is becoming increasingly fierce
Fitch added that while Intel's market position is better than that of similarly rated peers, its financial structure is relatively weak and it faces "elevated execution risk."
Fitch noted that Intel still enjoys a strong market position in providing PCs and traditional enterprise servers, but warned that in the PC field, the company faces increasing competition from Qualcomm and AMD.
Fitch said its outlook on Intel is negative also because the company's competitors have stronger financial structures and more stable market positions.
Fitch said Intel needs to increase shipments of PC chips while reducing balance sheet debt to restore its previous credit rating.
Fitch said Intel's liquidity position was "solid," including $21.2 billion in cash, cash equivalents and short-term investments as of June 28, and $7 billion in undrawn credit.
Rating agency S&P Global also downgraded Intel's credit rating from BBB+ to BBB in December last year, while Moody's also downgraded Intel's senior unsecured debt rating in August last year.