Intel's faltering GPU launch has only made matters worse as it reports rare loss

Intel's Accelerated Computing Systems and Graphics Group (AXG), which is responsible for its line-up of Alchemist graphics cards, has lost the company $507 million in the past three months. That is markedly more than it lost in Q1, 2021 which came in at $168 million.

A big chunk of that cash is caught up in "inventory reserves and roadmap investments", Intel explains. Alchemist is yet to hit the shelves anywhere outside of China, and may be further delayed according to recent leaks from YouTuber Moore's Law Is Dead, yet inventory is building up ready for a release at some point.

Now that sort of build-up of inventory is to be expected for a major product launch, but it has coincided with one of Intel's worst financial reports in years. The company posted revenue of $15.3B, which is down 17% year on year and $2.7B below the expected outlook.

Alchemist wouldn't have done much to plug that hole, but a timely release may have gone a long way to making Intel's big push into graphics appear a lot more worthwhile for shareholders.

"The sudden and rapid decline in economic activity was the largest driver of the shortfall, but Q2 also reflected our own execution issues in areas like product design, DCAI, and the ramp of AXG offerings," CEO Pat Gelsinger says (via Seeking Alpha).

Intel is having to lower its expectations for AXG, stating that it will "not hit our GPU unit target."

He also elaborates slightly on why Intel hasn't been able to deliver Alchemist in a timely fashion, noting "COVID-related supply chain issues and our own software-readiness challenges caused availability delays that we continue to work to overcome."

There is some positive news, however, and it's not just that by comparison Meta's Reality Labs division's losses make AXG's appear small fry. 

"We remain on track to deliver over $1 billion in revenue this year. In Q2, we started to ramp Intel Arc graphics for laptops and OEMs, including Samsung, Lenovo, Acer, HP and Asus…. Intel Arc A5 and A7 desktop cards will start to ship in Q3," Gelsinger says.

Yet what state these cards will be in when they do release is another thing entirely.

Those software-readiness challenges are a common theme in reviews of the Intel Alchemist A380 GPU available in China today. Wolfgang Andermahr of Computer Base reviewed the card and said of the drivers: "This is currently so bad that it is hard to believe that Intel will be able to raise the quality to a usable level in the next few months."

It's a shame that Intel's graphics effort hasn't come at a great time for the chipmaking giant. Ultimately it would be a shame to see Alchemist, and its successors Battlemage, Celestial, and Druid, affected by greater headwinds at the company. I say that mostly because it would be a mighty good thing for everyone to have another competitive player in the graphics card market, and if not Intel, then who else?