Intel apologizes for new CPU shortages due to production setback

Intel apologizes in an open letter for the CPU shortages that the company is dealing with due to the high pressure on its 14nm process. In the past quarter there were ‘variations in production’ that could not be accommodated. Intel will outsource more.

According to Intel, the cpu supply is ‘extremely tight’ and therefore ‘variations in production’ could not be absorbed well in the past quarter. With this, Intel seems to indicate that yields on a certain production line were disappointing. The processor manufacturer does not provide more details about this.

Intel indicates in a Supply Update that it will use more foundries for the production of its chips. It is unlikely that Intel will outsource the production of processors, for example chipsets. These are often made on the same 14nm process as the vast majority of current Intel processors. Earlier this year there were already rumors that Intel would partly shift production to Samsung.

Intel has been unable to meet the demand for CPUs for more than a year because of the high pressure on its 14nm process. The first 10nm processors were released this year and Intel says production is increasing, but the Ice Lake processors are only for laptops and for now they are only in a few models. Intel says it has invested a lot in increasing the capacity of 14nm production, but admits that the shortages have not yet been solved.

A year ago, Intel also issued an open letter addressed to customers and consumers to discuss the shortages. In 2018, the prices of many processors had risen sharply due to the shortages. During that period, Intel also released a 22nm chipset, as a variant of a chipset that was previously made 14nm, to relieve the production process.

Open letter from Intel

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