Canalys Channels Forum There's still no light at the end of the tunnel for PC makers as Intel's CPU constraint – a problem that showed up in anger 13 months ago – is on course to continue for another couple of quarters.
At the start of the year, Intel claimed its chip supply drought would end by the summer but it continues to run and run as Chipzilla switches fabs from 14nm to 10nm, and prioritises production of higher-margin Xeons and top-end Core. This has shunted PCs to the back of the queue. More on that later.
Talking at the Canalys Channels Forum in Barcelona, Alex Cho, president of HP's Personal Systems Business, claimed Intel's supply worries were across a portfolio of products, "not just specific CPUs".
He added: "No surprise that it's been a hard year, it makes life more complex and expect it to continue for another quarter or two."
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At the same event in the Catalonian capital, Gianfranco Lanci, chief operating officer at Lenovo, branded the lack of chips as a "concern" and a "limitation", saying the global PC market shipments could have grown at 7 to 8 per cent in Q3 if availability had improved, rather than the 4 per cent recorded.
He said Lenovo has been told repeatedly, presumably by Intel account managers, that supply would improve but quarter-on-quarter that has yet to happen, leading him to speculate on the causes.
There are two possibilities, according to Lanci: production issues, though he said Intel should have rectified this by now, or a "problem with the architecture of the CPU. If this is the problem, it is unpredictable."
Steve Brazier, CEO at Canalys, said the "short answer is that we don't know [what is causing Intel's shortages]. And they are not telling anybody, so nobody completely knows why. All we can do is speculate that they made a serious software design flaw."
He added: "The interesting thing is the PC vendors do not know, they have no better information than we have. There is no sign of a short-term fix."
Of course, this has played into the hands of Intel nemesis AMD, which Brazier claimed was "now equal or ahead in performance – and it's cheaper". The Register is awaiting CPU market share figures from the analyst.
Cho at HP said: "The AMD portfolio has improved. They've made good progress on the performance of their products, it is a viable alternative for our customers."
Supply chain sources close to the matter said Intel is retooling factories for 10nm and 7nm processes so has fewer remaining 14nm fabs making processors. PC CPU shortages are compounded by Intel prioritising supply for higher-margin Xeon chips for hyperscale cloud builders and server makers.
The 10nm rollout delays have ensured plants have been out of commission for longer than planned.
We are also told that organisations, including financial institutions and cloud providers, are replacing current Intel chips with ones that have Meltdown and Spectre fixes built in.
An Intel spokesperson sent us a lengthy statement: "We continue working to improve the supply-demand balance for our PC customers. We invested an added $1bn in capital to achieve more capacity and flexible supply. As a result, we increased our 14nm capacity by 25 per cent while also ramping 10nm production.
"We've improved our supply every quarter. However, in the first half of 2019 we saw PC customer demand that exceeded our expectations and surpassed third-party forecasts. We are actively working to address the supply-demand challenge, and we expect supply in the second half will be up compared to the first half. We continue to prioritise available output toward the newest generation Intel Core products that support our customers' high-growth segments, and we plan to further increase our output capacity in 2020." ®