Intel apologies for PC CPU shipment delay, blames high demand and recent chip production issue

Posted on Thursday, Nov 21 2019 @ 10:48 CET by Thomas De Maesschalck
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Intel confirmed it's once again struggling with meeting demand for its x86 processors. In a letter to its customers and partners, the chip giant claims that despite investments in extra capacity, the sustained market growth in 2019 pushed demand to a level that exceeded forecasts. As such, Intel is struggling to seed the market with enough chips.

The company promises it's working hard to regain supply-demand balance, but says this is "challenging". The letter reveals that the added capacity allowed Intel to increase second-half PC processor supply by double digits versus the the first half of the year. However, one curious line in the letter reveals some of the recent PC CPU shipment delays are caused by "production variability." Intel didn't provide additional details but it seems the the company got hit by a production issue that resulted in unexpected shipment delays because the company's PC CPU unit is now running on limited inventory buffers.

Intel also reaffirmed its previous guidance for the fourth quarter, which was issued in the earnings release on October 24, 2019.
To our customers and partners, I’d like to acknowledge and sincerely apologize for the impact recent PC CPU shipment delays are having on your business and to thank you for your continued partnership. I also want to update you on our actions and investments to improve supply-demand balance and support you with performance-leading Intel products. Despite our best efforts, we have not yet resolved this challenge.

In response to continued strong demand, we have invested record levels of Capex increasing our 14nm wafer capacity this year while also ramping 10nm production. In addition to expanding Intel’s own manufacturing capability, we are increasing our use of foundries to enable Intel’s differentiated manufacturing to produce more Intel CPU products.

The added capacity allowed us to increase our second-half PC CPU supply by double digits compared with the first half of this year. However, sustained market growth in 2019 has outpaced our efforts and exceeded third-party forecasts. Supply remains extremely tight in our PC business where we are operating with limited inventory buffers. This makes us less able to absorb the impact of any production variability, which we have experienced in the quarter. This has resulted in the shipment delays you are experiencing, which we appreciate is creating significant challenges for your business. Because the impact and revised shipment schedules vary, Intel representatives are reaching out with additional information and to answer your questions.

We will continue working tirelessly to provide you with Intel products to support your innovation and growth.

Sincerely,
Michelle Johnston Holthaus
Executive Vice President
General Manager, Sales, Marketing and Communications Group


About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.



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