Intel Hard Pressed
In spite of the recent setbacks in housing and the credit markets in the U.S., most component makers of computer equipment are in the midst of a boom. Results of the previous quarter ended even better than most third quarters, which are usually pretty strong.
The strength that was manifested in the previous period shows signs of continuing into the present period. For instance, the last two weeks of September saw an inordinate number of orders for Intel chipsets. Since chipsets precede CPUs, this boded well for the period we are currently in.
Chipsets “tend to lead microprocessors in terms of purchases because they get put onto a motherboard before the processor”.
The time it takes between ordering chipsets and ordering CPUs to go with the chipsets can take anywhere from about “four to ten weeks”.
The danger to the current period is not one of insufficient demand, but of too much demand: not being able to make all the CPUs and related chips that people want, or having a glitch in production and too little inventory to fall back on.
An overabundance of demand may sound like a nice problem to have, but maybe not if it’s severe.
Below the Comfort Zone
Chips and chipset reserves were already low from the exceptionally robust third quarter. Inventories were “below the comfort level”.
Inventories now appear to be lower still for certain types of chips, like mobile chips and chipsets.
Intel recently entertained the possibility that they would be unable to meet demand for processors in the present period: “if demand is significantly above the range that we’re expecting we’ll be hard pressed”.
This scenario of too-much demand appears to have in fact materialized.
Maybe the first to break the news was Fudo. “Intel expects massive shortages” (Fudzilla).
Other reports soon followed. “Intel isn’t meeting demand”, said the president of one computer company (IDG).
And “the most needed components are Intel’s CPU and WLAN modules” (DIGITIMES).
Not All Silicon Wafers Qualify
Lean inventories and tight supply might not hurt so much so long as the ramp of Penryn–Intel’s first 45-nm family of microprocessors–proceeds as planned.
The potential problem is that this is a period of transition for Intel, which is moving away from 65-nm to 45-nm transistors, and in any transition between process technologies there will be large numbers of silicon wafers that are not good enough to sell. In the previous period, Intel built lots of 45-nm processors “that did not qualify for sale”.
While this appears normal for the ramp of a new process, if Intel experiences complications, things could turn ugly: Intel supplies most of the world’s CPUs and has little 65-nm inventory in reserve.
Yield rates should improve as process technology and microprocessor designs mature. For the sake of the industry, let’s hope so.