At the announcement of Intel's third quarter earnings, CEO Brian Krzanich has revealed Broadwell will be delayed until Q1 2014 citing low yields due to defect density issues present in the 14nm process used for the new chip. Krzanich confirmed that Skylake, the chip further along the timeline in Intel's release roadmap, will not be delayed. Intel reported earnings of $3 billion in Q3, in line with projections.
(Reuters) - Intel Corp's third-quarter results modestly beat expectations on Tuesday, but its current-quarter revenue outlook fell short and it warned that production of its upcoming Broadwell processors was delayed.
The world's top chipmaker is betting that its current Haswell PC processor with improved battery life will boost sales for the rest of 2013, beyond the typically strong third quarter when PC manufacturers buy chips in anticipation of holiday demand.
But preparations for the Broadwell chip, which will succeed Haswell, have fallen behind projections by about three months due to technical setbacks, Brian Krzanich told analysts on a conference call following Intel's quarterly report on Tuesday.
He said production of the Broadwell chips, based on the 14 nanometer technology that is ahead of rivals' technology, will not begin until the first quarter.
"We and our (manufacturing) partners have a strong desire to get Broadwell to the market," Krzanich said. "This is a small blip in the schedule."
Chief Financial Officer Stacy Smith said the delay would not affect gross margins in the fourth quarter or impact the competitiveness of Intel's product lineup.
"We're not happy with the one-quarter push but it does point to how difficult these problems are to solve," he told Reuters.
Much of Intel's strength has historically come from its chip manufacturing technology, which is the most advanced in the world and is ahead of rivals by around two years.
Broadwell's delay should have little impact on Intel's sales, said FBR analyst Chris Rolland, although he added that investors were sensitive to any hint of technology trouble at the chipmaker.
"For these guys, their competitive advantage is based on manufacturing. It's certainly a small setback. You don't want to screw with timetables, and you don't want to screw with Moore's law," Rolland said.
With consumers increasingly favoring tablets and smartphones, Intel is wrestling with a slowdown in its core PC market while trying to make inroads in low-power mobile devices.
Adapting to the slow PC industry, Intel also trimmed its 2013 capital expenditure target to $10.8 billion, plus or minus $300 million, from $11 billion, plus or minus $500 million.
