Intel: CPU Shortage Will Extend Into Q3 2019

Intel held its Q1 2019 conference call yesterday. The company disclosed multiple significant pieces of news concerning how it expects the rest of 2019 to play out. The news is mixed overall.

First, Intel doesn’t expect its CPU shortage to end in Q2 as originally expected. Intel CEO Bob Swan had this to say:

Our supply constraints have had a disruptive impact on our customers and ecosystem. We’ve committed never again to be a constraint on our customers’ growth. We’ve increased capacity to improve our position in the second half, although product mix will continue to be a challenge in the third quarter as our teams align available supply with customer demand.

The implication of this announcement is that AMD will have more opportunities to compete for business, at least in the lower end of the desktop and laptop segments. Intel has been concentrating its availability in top-line products to keep them flowing, but we’ve seen AMD launch new CPUs for Chromebooks and gain market share in mobile overall since the start of 2019.

Second, Intel claims its 10nm ramp is going fairly well. Here’s Swan again:

[O]ur confidence in 10-nanometer is also improving. In addition to the manufacturing velocity improvement I described earlier, we expect to qualify our first volume 10-nanometer product, Icelake, this quarter and are increasing our 10-nanometer volume goals for the year.

Intel expects to ramp 10nm initially in Q2, but with volume introduction still set for holidays, 2019. Nothing in Swan’s remarks refuted or addressed the recent roadmap leak, which predicts no Intel 10nm desktop CPUs until at least 2021-2022. It is possible that Intel will skip 10nm on desktop and wait for 7nm before launching new parts.

Finally, Intel doesn’t expect to see the near-term data center recovery that it had previously predicted. After initially suggesting in Q4 that a recovery would begin in the back half of the year, Intel is pushing back that date and lowering its own guidance. Revenue is now expected to be $69B, down 3 percent year-on-year, a decrease of $2.5B from Intel’s previous estimate. Swan:

Our conversations with customers and partners across our PC and data-centric businesses over the past couple of months have made several trends clear. The decline in memory pricing has intensified. The data center inventory and capacity digestion that we described in January is more pronounced than we expected, and China headwinds have increased, leading to a more cautious IT spending environment. And yet those same customer conversations reinforce our confidence that demand will improve in the second half. So we’ve reassessed our ’19 expectations based on the challenges we’re seeing.

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