Rebounding demand for commercial and gaming PCs creates supply-chain shortages at the market-leading chipmaker
Intel is playing catch-up in its processor supply chain as demand for commercial and gaming PCs unexpectedly surged in 2018. Intel is promising partners that it will improve transparency and communications about supply-chain issues.
The Lowdown: Demand for commercial and gaming PCs surged unexpectedly in 2018, leaving Intel short on processors. The chip manufacturer told partners that it will improve transparency and communications about supply-chain issues to prevent issues down the line.
The Details: Interim Intel CEO Bob Swan issued a letter to partners and customers acknowledging a shortage of 10nm and 14nm processors, particularly in its Xeon and Core product lines. Intel plans to increase processor production in 2019 to meet the increased global demand, prioritizing units intended for high-performance systems.
The Impact: The Intel supply-chain shortage has led to inventory shortages for its OEM and reseller partners. Without processors, PC shipments are delayed, impacting sales and revenue recognition. Some PC manufacturers and partners express concern that protracted processor shortages could disrupt the unanticipated PC comeback.
Background: Sales of PCs — particularly desktops — have sunk over the past decade. Some industry analysts believe the market entered the post-PC world when smartphones and tablets became the primary devices for accessing the Internet. The resurgence in PC sales indicates that people are returning to multi-screen use strategies, using desktops and notebooks for certain things and mobile devices for others.
The Buzz: “Our conversations with PC vendors indicate that the shortage, which started in small magnitude in 3Q, has been progressively worsening and is likely to have the maximum impact in 4Q 2018,” said JPMorgan Chase technology analyst Gokul Hariharan, in a note to clients. “We expect this to affect both notebook and desktop PCs, and [it’s] likely to have a higher impact on commercial and high-end consumer PCs, where using AMD or the older Intel family of CPUs as substitutes is more difficult.”
“One of the big priorities I’ve placed on this year is really working very
Jason Kimrey, Intel’s U.S. channel chief, told CRN. “I would tell you that we are having much more direct, open transparent dialogue with them to help them plan and help our mutual customers plan to road maps and plan around the supply [issue].”
Channelnomics Point of View: PC manufacturers have made tremendous strides in attracting commercial and consumer buyers with products that are more capable and have better designs. Intel can’t be blamed for falling short in its production forecast, as industry analysts have consistently called for steadily declining commercial demand. Intel’s pledged investments in production capacity and output could bring relief, but not in the short term. Partners should expect processor inventory shortages through the first quarter of 2019.