Intel acknowledges supply issues, will prioritize premium chips

Intel interim CEO Bob Swan issued an uncharacteristically frank letter today, highlighting the company’s supply issues. The executive blames the surprising growth of an unexpectedly rebounding PC industry for the shortage. Swan says that rebound is driven by “strong demand for gaming as well as commercial systems.”

It’s a bit of a perfect storm here. Higher demand coupled with the longstanding yield issues for its 10nm architecture have spread things thin for Intel. Though Swan says it’s “making progress” with those chips, with production ramping up in 2019.

“[S]upply is undoubtedly tight,” Swan acknowledged in the letter, “particularly at the entry-level of the PC market.” But he believes that Intel does have enough supply to meet its full-year revenue outlook.

In the short term, Intel plans to prioritize the premium market, including Xeon and Core processors, so it “can serve the high-performance segments of the market.” Beyond that, the company plans to invest $15 billion in capital expenditures this year, including $1 billion going toward the manufacture of 14nm silicon in the U.S., Ireland and Israel.

These issues have left the broader PC industry in a rough spot. On the face of it, a shortage due to increased demand seems like a good problem to have, but ultimately a lack of processors could create a major issue if the market continues to grow, perhaps ultimately reversing some of that success.