Intel chips problems are hurting these 3 giants of technology – Motley's fool

Intelof (NASDAQ: INTC) The shortage of processors began last year as the growing demand for processors at its data center resulted in a bottleneck in the production of its 14nm chips. The difficult rise of the company's 10nm chips and its exclusive production contract Appleof (NASDAQ: AAPL) IPhone modems, which use the same 14nm process as its data center and PC processors, have compounded the problem.

Intel has invested an extra billion dollars in its 14-nm production sites last year and says the shortage should be resolved in mid-2019. however, DigiTimes recently claimed that Intel's chip shortages could further worsen in the second quarter due to increased market demand for Chromebooks and other low-end PCs.

Source of the image: Getty Images.

This current shortage is a major problem for Intel, but it also poses problems for other technology companies. Let's take a look at three companies that might also be suffering from the shortage of processors: HP (NYSE: HPQ), Microsoft (NASDAQ: MSFT)and Apple.

HP

HP has consistently increased sales of computers as competitors struggle with a saturated market, long upgrade cycles, and competition from mobile devices. HP gained ground with new high-end notebooks and convertible devices, and maintained a strong presence in the desktop market with its Omen gaming computers.

Two-thirds of HP's revenue came from its Personal Systems (PC and Workstations) unit in the last quarter. This unit has generated only an annual sales growth of 2% in the first quarter of 2019, compared to double-digit growth throughout 2018. Its notebook shipments have dropped by 1% and 8%, but HP offset these declines with price increases.

HP mainly attributed its weak PC sales to Intel's shortage of processors. During the teleconference, Steve Fieler, Chief Financial Officer, said that CPU constraints would persist in the first half of 2019, followed by "second half improvement". This forecast is probably based on Intel's, so HP might face more problems if the chip maker fails to solve the problem of processor shortages.

Microsoft

Microsoft and Intel were unwavering allies who ruled the "Wintel" computer market. But in recent years, Microsoft has moved away from Intel's x86 processors by optimizing Windows and Office for ARM-based processors.

Microsoft's first-quarter earnings report indicates that it is a smart long-term strategy. Its cloud, gaming, and hardware businesses all posted strong growth, but Windows PC OEM OEM revenues have dropped 5% per year – non-Pro OEM sales have dropped 11% and its OEM Pro sales dropped by 2%.

During the conference callChief Financial Officer Amy Hood blamed these decreases on "the synchronization of our OEM partners' chip sourcing, which undermined the respect of the otherwise healthy PC ecosystem." Microsoft expects the shortage of chips to last until the end of its third quarter, which ends June 30.

Apple

Apple has transferred the production of all its iPhone modems to Intel after escalating its legal disputes with Qualcomm (NASDAQ: QCOM). This change, however, hurt Apple in two ways: Intel's 4G modems are not as fast as those of Qualcomm, and Intel will not offer a 5G modem until 2020. Qualcomm introduced its first 5G modem earlier this year.

Source of the image: Apple.

This means that the first Apple iPhone 5Gs should to arrive about a year after 5G phones from Android builders. However, Intel has a lot of problems with its 14-nm production plate, and analysts UBS and Cowen recently warned that the chip maker may have trouble launching its 5G modem by 2020.

Intel has refuted these claims, but its previous production problems have little confidence. If Intel drops the balloon next year, Apple may have to make peace with Qualcomm.

DigiTimes also notes that Intel is still facing a shortage of Amber Lake processors powering the Apple MacBook Air. This shortage could weigh on Apple's Mac sales, which rose 9% per year in the last quarter thanks to the launch of its new MacBook Air and Mac mini.

The bottom line

The shortage of Intel chips causes shockwaves in the technology market, and investors should detect potential damage to hardware and software manufacturers. This shortage is not likely to cause long-term damage to HP, Microsoft, or Apple, but it could hinder the near-term growth of these tech giants.