Intel Corporation (NASDAQ:INTC) has received a big downgrade by analysts from Baird. In a report issued to investors this week, they provide details from their trip to Asia, which indicates a below-seasonal outlook for the second half of this year in the semiconductor industry.

Intel Corporation

Weaker seasonal demand expected

Analysts Tristan Gerra and Nicholas A. Clare said so far outlook for the second half is below seasonal and even weaker than industry expectations just one or two months ago. They expect PC units to post declines in the teens this year, which is worse than their previous expectations.

The analysts set a new price target of $23 per share for Intel Corporation (NASDAQ:INTC) and lowered their rating on the stock to Neutral. They based their new price target on a 12 to 13 times P/E multiple to their new reduced earnings per share estimate of $1.85. The multiple they used represents a discount to Intel’s five-year median P / E of 16 times, which is based on continued slowdown in PC growth rates and more competition from architectures made by ARM Holdings plc (NASDAQ:ARMH) (LON:ARM).

Risks to Intel

The analysts note several risks for Intel Corporation (NASDAQ:INTC). They said pricing could decline more rapidly than the company’s costs. They specifically cite a price war the company had with ARM Holdings plc (NASDAQ:ARMH) (LON:ARM) in 2006 and 2007. They said any price war on any of Intel’s other products could have a big impact on the company’s profitability.

They also note that problems not just in the declining PC market—which Intel gets two-thirds of its revenue from—but also the netbook market are causing problems for Intel. They said the low-cost Atom processor made by Intel had some big success in the netbook market, but netbooks are now being cannibalized by tablets, most of which do not use Intel’s processors. The analysts also note that tablets are impacting notebook sales, another core market for Intel. They said if the company doesn’t “gain meaningful market share in tablets going forward,” it will miss a big opportunity.