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Bob Swan, Intel's Chief Financial Officer and Interim CEO, on Friday released an open letter to the company's customers and partners about the tight supply of some of the company's products. The senior executive acknowledged the problem and described all of the measures taken by Intel to solve the problem.
The Intel leader noted that the company's demand for PC chips and servers far exceeded expectations throughout 2018. In the first half of 2018, the company's data center grew by 23% slipping annual. . In addition, customer PC demand also increased in the second quarter, increasing demand for Intel products. As a result, the company increased its revenue forecast by $ 4.5 billion in July.
The increased demand for processors has naturally increased pressure on Intel's factory network, particularly as the company has faced increased demand for its high-end products, such as the Intel Xeon line, Core i9
From a manufacturing standpoint, it is naturally more difficult to produce large matrices for servers with up to 28 cores, because they are physically larger than dual-core or quad-core chips for client PCs. On a given wafer, you can install more processors smaller than a few big ones. In addition, the number of platelets that a manufacturing process can process per month is limited. To make things more difficult, the company's enthusiastic-class client processors now include more cores than first-generation 14-nm components. They eat more wafer space than they did a year ago.
In short, due to the growth of the market, the physical increase in chip sizes and Intel's capacity allocation, the demand for Intel processors has exceeded the number of chips it can handle at a time given.
Over the past few months, Intel has had to focus on producing its large, high-margin Core and Xeon processors over other products, which is why the supply of entry-level products using 14-nm technology is currently limited. In particular, the company had to develop a new 22nm version of its H310C chipset to release its 14nm capacity, according to Tom Hardware.
Despite Intel's assurances, there is a limited supply of Intel Xeon processors, not just processors or entry-level chipsets. In particular, we have seen reports that business customers are reporting supply issues, with HPE going so far as to recommend AMD to fill the gaps.
In an effort to increase the production of its 14-nm chips, the company is investing an additional $ 1 billion in its production facilities in Oregon, Arizona, Ireland and Israel, which produce chips using this technology. Intel had initially planned to spend $ 14 billion on investments this year, but then allocated another $ 1 billion to increase the production capacity of its 14-nm plants. Intel naturally does not detail How it plans to upgrade the facilities, but $ 1 billion can allow you to purchase many step systems for processing platelets. One thing to note here is that investment in the manufacturing industry is usually on a scale of one month, so that it is unlikely that any investment will increase until the end of the year. At the end of the first quarter of next year.
In addition to installing additional new scanners to produce more chips using its 14-nm manufacturing technologies, Intel continues to invest in its 10-nm manufacturing process and its appropriate capabilities. The 10nm yields are improving and Intel expects its next-generation CPUs to be in volume production by 2019. At the same time, some of the capabilities used to make chips using Intel's 14nm technology will be used to treat platelets (for example, we believe that Intel's Fab 28 in Israel can be used to make chips at both 14 nm and 10 nm). Therefore, to increase its global production of processors when its 10nm capacity will be put into operation next year, Intel will have to make sure that its yields are high enough and that its die sizes are sufficiently low.
Intel has the merit of being open about the current problems of scarcity, although it is clear that the company simply could not ignore several reports about shortages, some of which were inaccurate. The chip maker recognized the problem and presented solutions. What remains to be seen now, is how Intel plans to meet the demand for its Whiskey Lake processors during the holiday season and how the limited supply of its processors in general affects the plans PC manufacturers for 2018.
This is a breaking news. We update the story.
The entirety of the Intel news is republished below.
An open letter from Bob Swan, Chief Financial Officer of Intel and Interim CEO
To our customers and partners,
The first half of this year has seen remarkable growth for our sector. I want to take a moment to remember where we are, offer our sincere thanks and recognize the work in progress to help you with Intel's cutting-edge performance products to help you innovate.
First, the situation … The continuing explosion of data and the need to process, store, analyze and share it drives industrial innovation and the incredible demand for compute performance in the cloud, network, and network. 'business. In fact, our data-driven business grew by 25% in June, and cloud revenue grew by 43% in the first six months. The performance of our PC business was even more surprising. As an industry, our products convinced buyers that it was time to switch to a new PC. For example, according to Gartner, PC shipments in the second quarter increased for the first time in six years. We now expect modest total addressable market (TAM) growth for PCs this year for the first time since 2011, driven by strong demand for games and business systems – a segment in which you and your customers have confidence and confidence. relies on Intel.
We are delighted that in an increasingly competitive market, you continue to choose Intel. Thank you.
Now the challenge … The surprising return to PC TAM's growth has put pressure on our network of factories. We prioritize the production of Intel® Xeon® and Intel® Core ™ processors so that we can collectively serve the high-performing market segments. That said, the supply is undoubtedly tight, especially at the entry-level PC market. We continue to believe that we will at least have the offer to meet the full-year sales outlook we announced in July, $ 4.5 billion higher than our January expectations.
To meet this challenge, we take the following actions:
- We are investing a record $ 15 billion in investment spending in 2018, up about $ 1 billion from the beginning of the year. We are investing $ 1 billion in our 14-nm production facilities in Oregon, Arizona, Ireland and Israel. This capital and other efficiencies increase our offer to meet your increased demand.
- We are progressing with 10nm. Yields are improving and we continue to expect volume production in 2019.
- We take a customer-centric approach. We work with your teams to align the demand with the available supply. You can expect us to stay close, listen, partner and keep you informed.
The actions we take have led to continuous improvement. At the end of the day, we want to help you create good products and achieve strong business results. Many of you have been long-time Intel customers and partners and have seen us better when we have solved problems.
Regards,
Bob Swan
Chief Financial Officer of Intel Corporation and Interim CEO
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