Friday, September 28th 2018

Intel CFO and Interim CEO Writes an Open Letter on Processor Supply

Growing anger among PC manufacturers, retailers, and consumers in general, over supply issues with Intel processors, compounded with rising prices, and prompted Bob Swan, CFO and Interim-CEO of Intel, to write an open-letter, addressed to customers and partners, which counts you, since we received it in our main news channel from Intel. The language in the e-mail is straightforward and we wouldn't want to interpret it further than Intel grappling with a combination of massive demand from both its cloud-computing customers, and PC manufacturers hit by a surge of customers upgrading their machines (probably because it took Intel 10 years to increase CPU core counts, giving people a reason to upgrade).

To mitigate this, Intel is firing up all its manufacturing assets, across Oregon, Arizona, Ireland and Israel, in addition to its main foundries, by pumping in an additional $1 billion in capital expenditure (which is now at $15 billion). The letter doesn't miss out mentioning 10 nm, that the company is making progress with yields, and that volume production should roll out in 2019 (without offering guidance as to when). Intel also reassured PC OEMs that their supply teams will be in closer contact with them over the coming weeks. Without further ado, the open-letter follows verbatim.
The letter follows.

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 compute 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 14 nm 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 10 nm. 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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54 Comments on Intel CFO and Interim CEO Writes an Open Letter on Processor Supply

#51
AsRock
TPU addict
SIGSEGVtake your time intel, please no rush. I am very happy with my AMD rig and I don't have to buy a new board on every processor being released for small damn improvement.

:peace::nutkick:
How's that Intel's fault ?, fault there is the people who were buying them. Yes the people who kept buying their small ass improvments were the people to blame, maybe some at least have woke up.

One of the reason's i have not upgraded, the other being security.
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#52
john_
cadavecaThen what is that graph showing, exactly?
Sales of CPUs to consumers. Every dot on those lines where probably calculated based on number of processors sold in a specific sort period of time.
Well, I love my 1950X, but I wouldn't suggest it for anyone. I also have a system with a 2200G, and THAT... that is a great office desktop option.
Here you go. From two AMD options you would suggest at least one. 2 years ago you would probably have zero AMD systems or suggest none of those as an option.
So you have to ask, is that graph considering pricing market share or volume?
I broke that paragraph because I can not make the connection between your two systems and this question. English is not my native language so probably there is the problem. But this graph shows only volume of sales from one retailer. 1000 retailers where AMD is winning represent probably, if not certainly, an insignificant market share compared for example to Dell. But those graphs do show a change.
Posted on Reply
#53
bonehead123
word: Capitalism101

Supply is (supposedly) down + demand is up + little competition = prices stay high, which is what virtually every company on the planet wants for its products, not just intel.....
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