Higher-than-expected demand for Intel’s server and PC processors has been an interesting topic of discussion since the middle of 2018, when Intel first informed investors of its backlogged status. Since then, the situation has continued to dog the company, as executives have noted in virtually every quarterly conference call since that they haven't been able to meet the demand that's already pushed the company to record revenues. Since mid-2018, Intel has invested billions of dollars to increase its output of CPUs made using its 14 nm fabrication process, its most widely used technology these days. And yet even with that increase in 14nm capacity, the company expects that in the coming quarters they will contine to struggle.

The world’s largest supplier of processors boosted its 14 nm capacity in terms of wafer starts per month (WSPM) by 25% in 2019 as compared to 2018, Bob Swan, CEO of Intel, told analysts and investors during the company’s earnings conference call on Thursday. In the first three quarters of the year the firm spent $11.5 billion of CapEx money to buy new production equipment and now expects its total CapEx for the year to hit a whopping $16 billion, which is $0.5 billion higher than expected. Besides increasing its 14 nm capacity, Intel is also preparing to ramp up production of chips using its 10 nm technology, as well as start making enterprise-grade GPUs using its 7 nm process in 2021.

While the increase of the number of 14 nm wafer starts per month is a very good news – and Intel certainly deserves respect for the achievement – it's worth noting that 25% more wafers does not necessarily mean 25% more CPUs. Demand for processors with a higher core count and a bigger die size means that Intel has to produce more wafers just to maintain the number of CPUs it can ship. It is hard to estimate whether or not a 25% WSPM increase is sufficient, but Intel itself says that in the fourth quarter the supply-demand balance for its PC customers will not be met, despite the fact that shipments of Intel's CPUs will be up 'double digits' in the second half of the year compared to the first half of the year. 

Here is what the CEO of Intel had to say:

"We expect our second-half PC client supply will be up double-digits compared to the first-half. And we expect to further increase our PC client supply by mid-to-high single-digits in 2020. But that growth has not been sufficient. We are letting our customers down, and they are expecting more from us. PC demand has exceeded our expectations and surpassed third-party forecasts. We now think the market is stronger than we forecasted back in Q2, which has made building inventory buffers difficult. We are working hard to regain supply demand balance. But we expect to continue to be challenged in the fourth quarter."

The company is looking forward to finally catching up to total demand in 2020 as it ramps up additional 14 nm capacity, but for now it will give priority to production of Xeon as well as advanced Core i5/i7/i9 processors.

Related Reading:

Source: Intel

POST A COMMENT

27 Comments

View All Comments

  • TristanSDX - Saturday, October 26, 2019 - link

    more cores in CPU = higher profit per core, think before writing Reply
  • FreckledTrout - Monday, October 28, 2019 - link

    You are correct but you inversely have less chips sell as well. Reply
  • Marlin1975 - Friday, October 25, 2019 - link

    This is a double edge sword though. they ramp 14nm up but what happens if they have break through on 10nm+++, or what ever they are on now, and yields and performance look good? Then they will have a large glut of 14nm to dump which may hurt the newer chip sales.

    Doubt that will happen but may read more into that intel has less faith 10nm will be truly viable anytime soon. Looks like they are putting all their eggs into 7nm now. I hope it works better than their 10nm designs.
    Reply
  • drothgery - Friday, October 25, 2019 - link

    If there's anything to Intel's claims that future cores are going to be designed to be less process dependent, they could make chips with lower core counts for the target power envelope on 14 nm pretty much indefinitely and just use 10nm for higher density CPUs. They'd certainly be doing that now if they could. Reply
  • brantron - Friday, October 25, 2019 - link

    Intel chipsets moved back and forth between 14nm and the newer low power 22nm over the past several years.

    SSDs with PCIe 4.0+ bandwidth need faster controllers. Optane memory can be scaled down further.

    They have also shown packaging examples which combine everything from 22nm to 7nm. The DDR5 and PCIe 5.0 controllers of future Xeons likely are somewhere in the middle.

    And then there are wild cards, like MRAM and ReRAM. 14nm CPUs may be boring, but this will be fun.
    Reply
  • Zizy - Friday, October 25, 2019 - link

    There is no magic bullet to make 10nm work. Like most of these problems, it requires many little fixes to get viable. It isn't like chips are just fine until the last step kills them all. It is not impossible to make it work eventually, but even a massive improvement will take at least 3 months to show in chips - and nobody plans for the best case that failed to materialize for several years now. Reply
  • lejeczek - Friday, October 25, 2019 - link

    What shortages? Who cares?? Reply
  • PeachNCream - Friday, October 25, 2019 - link

    "...it's worth noting that 25% more wafers does not necessarily mean 25% more CPUs."

    This statement pretty much captures the problem in a nutshell. Intel, like any other manufacturing and production line company, predicts demand and uses that to make judgement calls about expanding or shrinking production capacity relatively far in advance. Although there may have been poor planning, I think the problem was mainly unexpected competition. AMD's abrupt return to competition using higher core count processors forced Intel to increascecore counts outside of its own predictions whcih in turn reduced yield per wafer and decreased the number of sellable items that a single wafer produces. Other factors like the technical problems associated with 10nm development and the high demand for EUV fab units from other companies may have been factors that planning didn't predict either, but I feel that increasing core counts by necessity was not something people within Intel we able to forecast.
    Reply
  • sgeocla - Friday, October 25, 2019 - link

    25% might seem like a lot but if you consider Intel had to increase 50% to 100% the number of cores to compete with AMD in the last 2 years, it's actually quite insufficient. So now that Intel cannot actually increase physical core they finally allow hyper-threading across the whole CPU stack. Should have done it sooner. Reply
  • eddman - Friday, October 25, 2019 - link

    Are you referring to the desktop comet lake rumors? They actually do seem to plan to launch a 10-core part, but you are probably right.

    If the shortage is really that bad, they'd limit that part to the i9 line only, meaning that for the first time there won't be a core-count overlap among the tiers, meaning each tier can have HT without ending up with more threads than the next one.

    Still, it won't do anything to counter AMD's physical core count advantage. At least i3 to i7 won't be so crap for productivity workloads anymore.
    Reply

Log in

Don't have an account? Sign up now