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Intel CEO releases update on 14nm supply issues - Invests in more capacity

The company's revenue outlook remains unchanged.

Intel CEO releases update on Intel's supply issues - Invests in more 14nm capacity

Intel CEO releases update on 14nm supply issues - Invests in more capacity

Most PC enthusiasts will have already heard about Intel's 14nm supply issue, something which has already seen the cost of new 14nm processors increase significantly in the US and European markets. Today, Intel's CFO/interim CEO Bob Swan has published an open letter, which states that Intel is seeing stronger than expected demand for their processors, but that the company has enough supply to hit their full-year revenue target, which was revised in July to be $4.5 billion higher than earlier estimates. 

This growth comes from their data-centric business, which has grown 25% through June, their cloud group, which has increased 43% in the first six months of this year and their PC-centric business, which has seen shipment growth for the first time in six years. With Coffee Lake, Intel has finally convinced their PC customers to upgrade their systems, showcasing the market's support for higher core count systems. 

To address the challenges posed by increased demand, Intel plans to invest an additional $1 billion in capital expenditure on their 14nm manufacturing sites in Oregon, Arizona, Ireland and Israel. This investment, as well as increased production efficiency, will allow Intel to increase their supply of 14nm chips to meet growing demand.  

On the topic of 10nm, Swan stated that yields are improving and that the company expects volume production in 2019. Below is Bob Swan's full Open Letter. 

 

     To our customers and partners,

The first half of this year showed remarkable growth for our industry. I want to take a moment to recap where we’ve been, offer our sincere thanks and acknowledge the work underway to support you with performance-leading Intel products to help you innovate.

First, the situation … The continued explosion of data and the need to process, store, analyze and share it is driving industry innovation and incredible demand for compute performance in the cloud, the network and the enterprise. In fact, our data-centric businesses grew 25 percent through June, and cloud revenue grew a whopping 43 percent in the first six months. The performance of our PC-centric business has been even more surprising. Together as an industry, our products are convincing buyers it’s time to upgrade to a new PC. For example, second-quarter PC shipments grew globally for the first time in six years, according to Gartner. We now expect modest growth in the PC total addressable market (TAM) this year for the first time since 2011, driven by strong demand for gaming as well as commercial systems – a segment where you and your customers trust and count on Intel.

We are thrilled that in an increasingly competitive market, you keep choosing Intel. Thank you.

Now for the challenge… The surprising return to PC TAM growth has put pressure on our factory network. 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.

To address this challenge, we’re taking the following actions:

  • We are investing a record $15 billion in capital expenditures in 2018, up approximately $1 billion from the beginning of the year. We’re putting that $1 billion into our 14nm manufacturing sites in Oregon, Arizona, Ireland and Israel. This capital along with other efficiencies is increasing our supply to respond to your increased demand.
  • We’re making progress with 10nm. Yields are improving and we continue to expect volume production in 2019.
  • We are taking a customer-first approach. We’re working with your teams to align demand with available supply. You can expect us to stay close, listen, partner and keep you informed.

The actions we are taking have put us on a path of continuous improvement. At the end of the day, we want to help you make great products and deliver strong business results. Many of you have been longtime Intel customers and partners, and you have seen us at our best when we are solving problems.

Sincerely,

Bob Swan
Intel Corporation CFO and Interim CEO

 

Intel CEO releases update on Intel's supply issues - Invests in more 14nm capacity  

This statement is an acknowledgement that Intel is facing difficulties meeting market demand for 14nm silicon. At this time it is unknown how long this production shortfall will last, or how long it will take for Intel's $1 billion investment will take to impact market conditions. Consumer-grade Intel processors have already seen price increases at most major retailers, and these increases are not expected to go away anytime soon. 

You can join the discussion on Intel's update on 14nm supply constraints and their plans to invest in increased production capacity on the OC3D Forums

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