Intel 14nm Processor shortages continue until mid-2019 (+ Open letter Update)

by Hilbert Hagedoorn on: 09/28/2018 02:59 PM | source: digitimes | 31 comment(s)

We've addressed this topic a number of times already, with the problems at 10nm, Intel is running out of fabrication space on 14nm, and they have a lot of processors and chipsets on that node. The fabrication shortage at 14nm means fewer processors fabricated, resulting in processors shortages on a global scale. And that drives up prices.

A few days ago we already reported that the current Coffee lake (Core 8000 series) is currently suffering from increased prices, some procs even have risen 40 to 60% in price, overall for the higher end product it's 15 to 25% of an increase. The news on this keeps piling up as Compal (the company who fabs laptops for Acer, Apple, Dell, HP and Lenovo) has mentioned that these shortages are likely to last way into mid-2019, and that is a mighty long time.

Intel now has moved back chipset fabrication of for example the H310C chipset back to 22nm, just to free up space at 14nm. Intel also outsourced some production towards TSMC. The problems now also have moved into he data-centers, as 14nm Xeons and respective chipsets are facing shortages as well. Basically the shortages are not solely the effect of issues on the 10nm node, worldwide higher demand for chips is the main cause, and in fact maybe even a luxury problem for Intel. Intel also has extended desktop processors in 14nm, for example, the pending Core 9000 series will also be based on the very same 14nm fabrication node. Intel is simply sitting at this 14nm process longer than it expected as well, btw 10nm production has been postponed until the end of 2019.

Weirdly enough this all is still good news for Intel, as they can sell as much as they can deliver. It's just on the consumer and business side that due to these shortages, prices go up.

Update September 29th:

The Intel CEO has posted an open letter on their website on this very topic.

An Open Letter from Bob Swan, Intel CFO, and Interim CEO

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 computing 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

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sverek

Posts: 5361
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#5590029 Posted on: 09/28/2018 03:04 PM

Intel got envy of Nvidia and AMD's GPU shortages caused by BitMining, so they created their own shortage! Genius!

Guess it's a new trend to create shortages and sell for more.

ThEcLiT
Senior Member

Posts: 432
Joined: 2006-12-08

#5590033 Posted on: 09/28/2018 03:11 PM

What is happening to PC Gaming? I really don't like this...

tunejunky
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#5590034 Posted on: 09/28/2018 03:12 PM

Jagman
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#5590063 Posted on: 09/28/2018 04:03 PM

This will help AMD for sure and when Zen 2 / Ryzen 3 appears in 6 months or so, things will get even better for them.

P.S. To AMD, please send me a Zen 2 engineering sample for me to try out (with motherboard)

Endymion
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#5590075 Posted on: 09/28/2018 04:34 PM

Madness.

H83
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#5590077 Posted on: 09/28/2018 04:39 PM

hey Hilbert, not quite the windfall for Intel as you hinted. most of the oem sales are case and tray prices to start with (at lower prices), it's Compal et al who are marking up the price to compensate for the loss of bulk.

AMD is delighted because of the Xeon issues, just in time for Epyc and Ryzen Pro. Epyc was already forecasted to steal 5% in servers...looks to be much, much more considering lower power/ heat/ "moar" cores.

Maybe not but the fact that Intel has already all the production sold for the next year is already great news for them because having fabs at full capacity is essential. And because of the shortages they can sell with less discounts leading to higher prices and higher profits.

Intel got envy of Nvidia and AMD's GPU shortages caused by BitMining, so they created their own shortage! Genius!

Guess it's a new trend to create shortages and sell for more.

This^^

tunejunky
Senior Member

Posts: 881
Joined: 2017-08-18

#5590090 Posted on: 09/28/2018 05:18 PM

H83, you can shine my apples anytime you want.
meaning (if not lost in translation), you are looking at a silver lining on dark clouds. everything you said is true, but lacks the important context of the market and Intel's reputation.
and i love Intel (if not their management).

this year, Intel became for the first time the second largest fabricator in the world. after almost inventing the category and leading it against all competition for decades.
and only for the reason of bad management and lack of capital investment at the wrong time.
the eight-ball they're behind is of their own making and being philosophically trapped by what had worked before.

corporately, Intel is going through Kubler-Ross' diagnoses of loss. they are just out of denial and are progressing, but slowly.

D3M1G0D
Senior Member

Posts: 1953
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#5590125 Posted on: 09/28/2018 07:35 PM

Looks like Intel has provided an update on the supply situation:

https://newsroom.intel.com/news-releases/supply-update/

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.

m4dn355
Senior Member

Posts: 138
Joined: 2007-06-15

#5590140 Posted on: 09/28/2018 08:05 PM

So basically, it's a checkmate for intel until 2020!?

EspHack
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#5590231 Posted on: 09/29/2018 06:16 AM

cant wait for phone hardware shortages, and car shortages, who knows maybe even a plastic shortage, so credit cards and disposable forks get x68 pricing and so on, its a brilliant business strategy and thanks to the korean nand flash cartel everyone can now join in on the party

Quicks
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#5590234 Posted on: 09/29/2018 06:26 AM

Certainly seems that way, started with ram and now everybody is like they got away with it, lets join in...

Herem
Member

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Joined: 2014-01-30

#5590236 Posted on: 09/29/2018 06:39 AM

If 7nm Ryzen matches or beats Intel this is really bad news for Intel. In the past when this happened they stopped AMD by flooding the market with cheap processors through the major manufacturers. If Intel have no capacity this option won't be available. AMD need to strike while the iron is hot.

Neo Cyrus
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#5590244 Posted on: 09/29/2018 07:17 AM

Intel got envy of Nvidia and AMD's GPU shortages caused by BitMining, so they created their own shortage! Genius!

Guess it's a new trend to create shortages and sell for more.
Pffft, amateurs. Hard disk manufacturers were at least a decade ahead of Intel/AMD/nVidia with their "shortages". After 1 Western Digital factory supposedly got flooded making them lose 0.012% of their stock and 0.01% of their manufacturing capability they literally tripled their prices, which were of course coordinated with Seagate and other manufacturers in order to make it possible. The prices remain inflated to this day. Western Digital knows what's up when it comes to illegal price fixing.

Valerys
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#5590252 Posted on: 09/29/2018 07:57 AM

This is absolutely ridiculous. Where I live the mainstream Intel CPU prices went up 20-25% and the performance/dollar is skewed off badly in favor of AMD. At the moment Ryzen 1700 is the same price as i5 8400, only a gaming purist would go for Intel now.

moo100times
Senior Member

Posts: 113
Joined: 2012-06-24

#5590299 Posted on: 09/29/2018 12:58 PM

At the end of the day, Intel can have or declare shortages and change their prices accordingly, as can all the resellers of their products. The market, personal and business, shall be what decides if any of this is a viable strategy in the long run. As long as AMD continues to put out a competitive product at an equivalent or better price point, they will eat into Intel's sales now, but also Intel will risk eating into their own rep and sales, which will create much more long term damage.
Furthermore, Intel screwed themselves at their own game in the long term, and really flies in the face of that "customers first" approach in that open letter. The rapid changing in socket between generations does mean that if people are looking to upgrade anything, there is no real question around sticking to Intel CPU's to reduce overall cost, as they will likely need a whole new set of kit, which means that total cost of new system will make AMD a viable option where it otherwise might not have been if an upgrade path had been available.
And lastly "You can expect us to stay close, listen, partner and keep you informed." - call me cynical, but last time they partnered up this closely they tried to illegally drive AMD out of the market with "rebates" and other unfair practices, and whilst they were caught the damage was already done. I would not be surprised if they tried to play the same game again, particularly as we saw Nvidia trying a similar tactic recently with their GPP program from an already leading dominant position. Seems there is little to deter companies in the dominant positions. $3 billion in fines is nothing when you make $20 billion in revenue a year from the end result of your practice.

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