Intel Plans Strategy for Meeting Demand for PC, Server Chips

A resurgent PC market is putting pressure on the chip maker's manufacturing capabilities, but the interim CEO says the company will hit its revenue goals.


Intel’s interim CEO is admitting that the unexpected upswing in the global PC space is putting a squeeze on the supply of 14-nanometer processors but said the company will be able to meet its revenue goals for the year despite the increasing market pressures.

PC shipments increased in the second quarter of this year, according to analysts with IDC and Gartner, marking the first sign of growth in the worldwide market since 2012. That combined with the expansion of Intel’s data-centric businesses fueled by increasing demand for compute performance in cloud environments and the massive increase in the amount of data that needs to be collected, stored and analyzed means that Intel officials need to make decisions where to put their efforts, Bob Swan, the chip maker’s chief financial officer and interim CEO, wrote in a recent open letter.

“The surprising return to PC TAM [total addressable market] growth has put pressure on our factory network,” Swan wrote. “We’re prioritizing the production of Intel Xeon and Intel Core processors so that collectively we can serve the high-performance segments of the market. That said, supply is undoubtedly tight, particularly at the entry-level of the PC market. We continue to believe we will have at least the supply to meet the full-year revenue outlook we announced in July, which was $4.5 billion higher than our January expectations.”

Industry analysts have been questioning Intel’s ability to meet the demand for processors, due in part to the delay in the rollout of its 10nm processors. Such a situation could open the door for rivals such as Advanced Micro Devices and its Ryzen chips to help cover the shortfall in PC processors, enabling them to chip away at Intel’s dominance of the PC chip space.

The demand on Intel for chips is significant, according to Patrick Moorhead, principal analyst with Moor Insights and Strategy.

“There’s not a single 14-nanometer subsegment that is not up,” Moorhead told eWEEK, adding that the company is prioritizing the Xeon and high-end Core processors like the i9 and i7s because of the higher return than lower-end Cores and Pentiums. “They will be able to manage the small upsides but won’t be able to supply the big upside.”

The industry will get a better idea of the overall situation when officials with HP Inc. meet with financial analysts this week in New York to talk about their businesses, including PCs, he said.

Intel’s chip supplies also were pinched when the company increased the number of cores from its seventh-generation Core chips to its eighth generation from two to four, which increased the die size and put a squeeze on the number of chips the manufacturing sites could produce, the analyst said.

In his letter, Swan said the company is taking steps to ensure that the demand this year is met and that Intel can make the transition from 14nm to 10nm chips next year. That includes investing $1 billion in 14nm manufacturing sites in the United States and Israel and taking other steps to improve efficiencies. As far as the 10nm processors are concerned, yields are improving and volume production is on target for next year, he wrote.

In addition, “we are taking a customer-first approach,” the CEO wrote. “We’re working with your teams to align demand with available supply.”

Intel’s data-centric businesses grew 25 percent this year through June, and cloud revenue increased 43 percent during the first half of the year when compared with 2017. On the PC side, Swan wrote that he expects to see “modest growth” in the TAM this year, due in large part to demand for gaming and commercial systems.

Intel is seeing increased competition in many of its traditional markets from not only a resurgent AMD and its Zen-based chips but also from Arm-based chip makers that see an opportunity in the growth of cloud environments and the internet of things (IoT) for small and more power-efficient processors.

That said, it’s still to be seen if AMD can take advantage of Intel’s situation, Moorhead said. The company sells about a tenth of the number of chips that Intel does, but it also leverages Taiwan Semiconductor Manufacturing’s (TSMC) high-margin production capabilities.