Intel’s credit rating downgraded by Fitch on demand challenges

Fitch downgrading U.S. chipmaker Intel’s credit rating by one notch Monday, according to a note by the ratings agency, which assigned a negative outlook to Intel’s rating.

Fitch downgraded Intel to BBB from BBB-plus, placing it just two notches shy of junk credit status.

The downgrade follows Fitch’s assessment that Santa Clara, California-headquartered Intel faces heightened challenges maintaining demand for its products. Fitch cited growing competition from peers such as Dutch rival NXP Semiconductors, Broadcom Inc and Advanced Micro Devices.

“Credit metrics remain weak and will require both stronger end markets and successful product ramps, along with net debt reduction over the next 12-14 months” for Intel to recover its recent ratings, Fitch analysts wrote on Monday.

Fitch added that while Intel holds a better market position than other similarly rated peers, its financial structure is relatively weaker and it faces “higher execution risk.”

Intel still enjoys a strong market position in the provision of PCs and traditional enterprise servers, Fitch noted, while warning the company faces heightened PC competition from Qualcomm and AMD.

Intel will need to ramp up its PC shipments while also reducing its balance sheet debt to recover its previous credit ratings, Fitch said.

The ratings agency called Intel’s liquidity profile “solid,” which as of June 28 consisted of a $21.2 billion mix of cash, cash equivalents and short-term investments, as well as an untapped $7 billion credit revolver. It also had an undrawn $5 billion, 364-day revolver that will come due in January 2026, Fitch said.

Fellow ratings agency S&P Global similarly downgraded Intel’s credit rating to BBB from BBB-plus in December, while Moody’s Ratings downgraded its senior unsecured debt’s rating in August last year.