In a move that I don’t believe has precedence within the x86 CPU industry, Intel this afternoon has publicly published a letter to its customers and partners apologizing for ongoing CPU shipment delays. The letter, from Intel’s EVP and GM of Sales, Marketing and Communications, Michelle Johnston Holthaus, addresses the ongoing supply shortage, with Intel acknowledging the difficulties it has created for its customers (e.g. OEMs and hyperscalers), as well as updating customers on their efforts to boost chip production. None the less, it’s also a sobering letter, with Intel informing customers that the current supply shortages still haven’t been resolved, and not offering any further guidance on when Intel might finally catch up to demand.

For more than a year now, we’ve been covering the ongoing story of Intel’s efforts to supply enough CPUs to meet customer demands. In a process that has been exacerbated by their 10nm delay – with 10nm chips just now shipping in high volume – as well as Spectre/Meltdown having the unexpected side effect of driving the major hyperscalers to buy additional/replacement hardware, Intel has had its hands full trying to keep up with demand. Even after bringing online additional 14nm fab capacity and shifting some ancillary 14nm products to 22nm, boosting overall 14nm capacity by 25%, Intel still hasn’t been able to produce as many CPUs as it could otherwise sell.

This of course is not a bad problem for a business to have, at least in small doses. Having demand exceed supply means that Intel’s CPUs are still highly coveted, and that the overall volume of chips shipped along with the prices Intel can fetch for those in-demand chips have driven them to record revenues, particularly in the datacenter business. Very rarely can a semiconductor manufacturer run multiple high-volume fabs at maximum production and still have demand outpace them. None the less, with the problem going on for over a year now, customers who rely on Intel’s chips are growing increasingly weary of being unable to acquire all the chips they need in a timely manner, and the resulting impacts it’s having on their own businesses.

Of particular interest in the letter (published below) is a section talking about particularly recent CPU shipment delays. As outlined in the letter, the high demand means that Intel has little-to-no buffer for variations in fab output, which means its customers are more directly feeling these variations. While we previously haven’t been aware of any specific Intel supply issues (other than the general, ongoing supply shortage), the letter confirms that Intel has experienced “production variability” this quarter, and as a result there have been new CPU shipment delays. It’s these delays in particular that Intel is apologizing for.

While I won’t hazard a guess as to precisely what has happened for Intel, the company has spent the last year trying to maximize the output of its 14nm fabs, while also ramping up 10nm. This includes significant new orders for equipment and other capital expenditures to boost fab production. Based on the tone of the letter, it sounds like these efforts haven’t gone quite as well as what Intel was planning for – perhaps indicating that chip yields have taken an unexpected hit or that Intel hasn’t been able to run as many wafers as they intended. Though whatever the issue, Intel has also confirmed that they aren’t changing their Q4 revenue guidance; so it would seem the company still believes it can ship all the processors it planned for this quarter.

Either way, I cannot recall Intel (or any other x86 vendor) ever publicly publishing a letter in this fashion. Normally these kinds of interactions take place in the back room between chip suppliers and their customers, so the fact that it’s significant enough to warrant a public letter – presumably for legal reasons – is remarkable. Unfortunately it also means that it doesn’t look like Intel is going to be able to meet demand for its chips any time soon, something that I’m sure Intel’s competitors are happy to hear.

To our customers and partners,

I’d like to acknowledge and sincerely apologize for the impact recent PC CPU shipment delays are having on your business and to thank you for your continued partnership. I also want to update you on our actions and investments to improve supply-demand balance and support you with performance-leading Intel products. Despite our best efforts, we have not yet resolved this challenge.

In response to continued strong demand, we have invested record levels of Capex increasing our 14nm wafer capacity this year while also ramping 10nm production. In addition to expanding Intel’s own manufacturing capability, we are increasing our use of foundries to enable Intel’s differentiated manufacturing to produce more Intel CPU products.

The added capacity allowed us to increase our second-half PC CPU supply by double digits compared with the first half of this year. However, sustained market growth in 2019 has outpaced our efforts and exceeded third-party forecasts. Supply remains extremely tight in our PC business where we are operating with limited inventory buffers. This makes us less able to absorb the impact of any production variability, which we have experienced in the quarter. This has resulted in the shipment delays you are experiencing, which we appreciate is creating significant challenges for your business. Because the impact and revised shipment schedules vary, Intel representatives are reaching out with additional information and to answer your questions.

We will continue working tirelessly to provide you with Intel products to support your innovation and growth.

Sincerely,
Michelle Johnston Holthaus
Executive Vice President
General Manager, Sales, Marketing and Communications Group

Source: Intel

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  • smilingcrow - Wednesday, November 20, 2019 - link

    That's what can happen when the competition falls asleep for a decade, you get lazy.
    Intel thought AMD were like a drunk spouting gibberish and didn't take them seriously as they had been drunk for a decade, almost living on the street.
    Now that AMD have sobered up and got serious Intel have to get serious again.
    Although a lot of their woes are down to their 10nm debacle.
    Reply
  • escksu - Wednesday, November 20, 2019 - link

    No, it has nothing to do with competition from AMD. As you have said, its pretty much due to their 10nm issues. Then their 14nm couldn't keep up with demand.

    Demand outpace their production capacity. So, business is too good for Intel actually.....
    Reply
  • Smartcom5 - Thursday, November 21, 2019 - link

    If so, then why they ramping up 14nm production-volume by about 25%?

    Remember, their shortages are existing for a reason …
    It's no coincidence that the shortages Intel is facing on 14nm coincided with the release of any higher core-count mainstream CPUs like the 8700K. Yet it's not only the increased core-count on their desktop-products which suddenly eats up die-size. The ongoing increased demand within the HPC- and Server-space hits them too as well (XCC server-chips are huge, 698mm²).

    It's obvious that they just can't satisfy demand due to yield or rather yield-throughput.
    → 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒𝑑 𝑐𝑜𝑟𝑒-𝑐𝑜𝑢𝑛𝑡 𝑒𝑎𝑡𝑠 𝑑𝑖𝑒-𝑠𝑖𝑧𝑒 𝑒𝑎𝑡𝑠 𝑤𝑎𝑓𝑒𝑟-𝑠𝑖𝑧𝑒 𝑒𝑎𝑡𝑠 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦.
    So increased core-count directly eats up quantity-numbers → Lower number of final chips.
    It's simple as that.

    You only can process a given (rather small) number of wafers each month, and Intel just horribly miscalculated the demand of actual chips (and AMD with the War on Cores™ helped them with that greatly) which would have to be fabbed (as any greater part should've already being fabbed on 10nm), hence the shortage on their 14nm nodes everywhere.

    That being said, given how Intel is forced to play along in the AMD-dominated race for higher core-counts, and how they're forced to compete and helplessly run short on wafer-throughput by doing so – we shouldn't await it to lessen anytime soon, as the core-count won't stop by for Intel's 10-Core parts or higher 56-Core Xeon-parts …

    𝒕𝒍;𝒅𝒓: Increased core-count eats die-size eats wafer-size eats quantity. → Lower number of final chips.
    Reply
  • imaheadcase - Thursday, November 21, 2019 - link

    Um they don't just tear out 14nm production equipment and put in 10nm. lol Reply
  • milkywayer - Thursday, November 21, 2019 - link

    10nm will be ready when it'll be ready. But his point is valid. AMD caught Intel by surprised and forced Intel to cut down number of cpus per wafer by making 6 core the new mainstream. Intel had calculated milking the market with dual core i7 mobile parts e.g. For several years were it not for AMD to disrupt the market with higher core ryzen parts. Reply
  • imaheadcase - Thursday, November 21, 2019 - link

    You can't say "a point is valid" when someone just showed it wasn't. Thats not how that works at all. lol

    You keep using the term "milking the market", they make a product that sells well, and people buy it, so they keep making it. People buy what works for them. AMD has awesome product going on right now, intel was not caught off guard, intel simply tried to do what AMD did but a different way of going about it fab wise. It didn't go like they planned so revamping it.

    Every single one of these people shitting on Intel right now would be doing the exact same to AMD if it was other way around. Intel didn't fail with any product, they just failed at making new ones as fast. AMD can have the life snatched right back out of them in a year and no one would care.
    Reply
  • milkywayer - Thursday, November 21, 2019 - link

    You're confused about what people are saying. These are corporations who are out there to make money. Everyone gets that. Some are just happy to see Intel in panic mode Caz it got lazy due to no competition and kept selling the same 4 core cpus for 5+ years. Had they innovated and brought in 6 and 8 core mainstream cpus in time, they'd have enough capacity even on 14nm. Of course now they run around and burn more of the wafers on 6 core which they thought would be used for 4 core cpus until 2025. Hah Reply
  • Qasar - Thursday, November 21, 2019 - link

    imaheadcase, the SAME thing can be said about amd's power usage before Zen, and now. they shit on amd for that, but now that intel uses more power, its ok... Reply
  • tamalero - Thursday, November 21, 2019 - link

    Pretty sure it has to do with competition. intel needed 10nm to compete with TSCM and Samsung's 7NM.
    Yet it was a cluster f** for years for intel.
    And since they tried to retool a lot of fabs into 10nm. This lead to 14nm constraints.

    They literally shot their own foot while expecting too much and doing badly in the switch to 10nm.
    Reply
  • Targon - Thursday, November 21, 2019 - link

    You may not have done much thinking on the issue, because the situation is entirely due to how things played out between AMD and Intel. I'll try to keep this short:
    When AMD wasn't terribly competitive, Intel became very complacent. 2 and 4 core chips were all Intel put out there, and there was no actual design improvements since Skylake, so IPC improvements stopped, with only tiny clock speed improvements over the years.

    Now, when all you had was 2 and 4 core chips, and designs also did not improve, that made it so there was virtually zero reason to upgrade a computer. Think about it, unless your old computer died, why buy a new one if it won't be faster? Years went on, and the entire industry felt like it was stagnant.

    And then, Ryzen 7 launched in March of 2017, competitive performance, but 8 cores/16 threads compared to the 4 core/8 thread from Intel. Even with a BIG clock speed advantage, the majority of people out there suddenly saw that AMD had a GOOD product that was better in many ways compared to what Intel had in the consumer space. Threadripper came out later and raised the bar as well. It took a bit, but Intel did respond, 6 core/12 thread, and then 8 core/16 thread.

    Now, think about that, what had been a situation of, "no reason to upgrade your computer" turned into a, "I want a new computer!". Sales improved between 2017 and 2019, and Intel wasn't ready for what would happen if they actually made new products that were better than what they sold the year before! So, Intel had a production problem, because it was used to relatively low demand!

    The fact that Intel also tied their core design with a lack of improvements to the fab process has also really caused problems at Intel. There really isn't a good reason why an improved CPU core design couldn't be made on 14nm with an improved IPC. Seriously, that is NOT how it should work! 10nm chips can't hit anywhere near the clock speeds that the very mature 14nm process can hit at this point, so Intel can't put a new core design on 14nm, can do a new core design on 10nm but losing 25% clock speed, or come up with excuses for why everything is messed up at Intel.

    Their solution was to blow smoke up the asses of the analysts and hope the SEC doesn't come down on the company for continual lies about 10nm fabs told at quarterly results(Q4 2015 was when Intel claimed that 10nm was on track, and it's been one lie after another since then). So, 10nm laptop chips are shipping with a 18% IPC boost that no one can test, but with horribly low clock speeds and the TDP ratings, which are all about heat released at BASE speed...well, if you have the same TDP for 10nm as you have for 14nm, but clock speeds are lower, how is that an improvement?

    A lack of parts...it's all because AMD woke the entire industry from the nap that Intel put it into, and Intel just wasn't ready for it. It's all the fault of AMD for increased demand for Intel chips.
    Reply

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