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

#1
mtcn77
Intel is rudderless at this point, as is being run by HR. The chief is the PR Managing Director of the 'Quality' Assurance & Security Department.
[Roast me]
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#2
xkm1948
no rush Intel. Take your time to catch up on lithography improvements and fix your damn security bugs!


Holy shit just saw 8700k processors are now $400 on newegg. Wow
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#3
tech_splitter
if things were going as well as the letter suggests, there would not be a need for a letter in the first place

seems like damage control to me
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#4
Frick
Fishfaced Nincompoop
xkm1948, post: 3912803, member: 50521"
no rush Intel. Take your time to catch up on lithography improvements and fix your damn security bugs!
Was going to say exactly the same thing but with sarcastic airquotes around it.
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#5
Xzibit
No word on why HT is being phased out slowly in most of the consumer parts.
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#6
NdMk2o1o
Is this a standard bi-annual/quarterly update to partners/customers? or is this in response to issues that have been brought to light in recent months such as 10nm yields and issues, losing market share to AMD, supply shortages, security patches etc?

Seems like it could be the former, just a standard industry open letter to partners and customers highlighting progress/updates throughout the year etc though if it's a reaction to the latter I think Intel would have been best to keep schtum as this screams knee jerk and personally confirms by Intel these issues and concerns are indeed correct.
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#7
dwade
Demand for Intel products is insane. I'm expecting another record in profits. No need to rush 10nm when their 14nm is more desirable than their competitors using ARM and other x86 knockoffs.
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#8
Xzibit
Intel
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.
We are focusing on higher margin chips. Lower margin will be cut back. Need to meet out FO or our stock will take a hit.
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#9
Upgrayedd
I just wanted to say that the first paragraph is only 2 sentences.
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#10
SetsunaFZero
Xzibit, post: 3912808, member: 105152"
No word on why HT is being phased out slowly in most of the consumer parts.
they probably wanna sell it as Premium in future Gen
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#11
btarunr
Editor & Senior Moderator
Xzibit, post: 3912808, member: 105152"
No word on why HT is being phased out slowly in most of the consumer parts.
They wanted to beat AMD Pinnacle Ridge, but not by much, leaving room for future generations. I won't be surprised if the 10th generation is 6-core/12-thread for Core i5 and 8-core/16-thread for i7, and i9 only if the core count has increased or some other killer feature. 8th gen Core i5 is already well positioned against Ryzen 5, so 9th gen Core i5 isn't more innovative. Core i3 lost HTT because its core-count increased 100%. They needed something for Ryzen 7.

Core i3 lost HTT because its core-count increased 100%. I don't think it has anything to do with security flaws in HTT.
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#12
ArbitraryAffection
With Ryzen on the market, it does surprise me why people still keep choosing Intel in this 'increasingly competitive market'. Yes, people are going to tell me that Intel still leads in gaming, but that only really matters at really high refresh rates in competitive games. The vast majority of gamers can be served by Ryzen and still have an, arguably, more future-proof platform and superior multi-tasking capability... Intel's product line already looked 'meh' before these price increases and now it's just flat-out moot. i3 8100 is £180-190 here and Ryzen 5 2600 is £150. Need I say more? You would have to be brain-dead to choose the i3.

dwade, post: 3912813, member: 106554"
Demand for Intel products is insane. I'm expecting another record in profits. No need to rush 10nm when their 14nm is more desirable than their competitors using ARM and other x86 knockoffs.
Obviously a poor quality troll attempt, further reinforced by your so-called system specs, lol.
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#13
TheGuruStud
Translation: Wahhhhhhh! Higher core counts costs us yields and wafers. 10nm is broken and killing us. Damn you, AMD, you morons. We had a plan to keep selling high end quad cores till 2020! F you, Lisa!

No, that's not satire. It's what the execs are thinking.
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#14
btarunr
Editor & Senior Moderator
TheGuruStud, post: 3912838, member: 42692"
Translation: Wahhhhhhh! Higher core counts costs us yields and wafers. 10nm is broken and killing us. Damn you, AMD, you morons. We had a plan to keep selling high end quad cores till 2020! F you, Lisa!
That's a spot-on view of the situation. They increased core-counts 50-100% without a new process making the dies smaller, reducing chips/wafer.

If AMD does manage to build that fabled 12 nm 10-core chip, Intel's financials could implode, regardless of whether the market needs a 10-core AM4 chip at this time. AMD is a Mongol horde that's less afraid of taking risks than posh empire Intel right now.
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#15
dwade
ArbitraryAffection, post: 3912835, member: 145270"
With Ryzen on the market, it does surprise me why people still keep choosing Intel in this 'increasingly competitive market'. Yes, people are going to tell me that Intel still leads in gaming, but that only really matters at really high refresh rates in competitive games. The vast majority of gamers can be served by Ryzen and still have an, arguably, more future-proof platform and superior multi-tasking capability... Intel's product line already looked 'meh' before these price increases and now it's just flat-out moot. i3 8100 is £180-190 here and Ryzen 5 2600 is £150. Need I say more? You would have to be brain-dead to choose the i3.

Obviously a poor quality troll attempt, further reinforced by your so-called system specs, lol.
My comment aligns with the article. People want Intel processors more than their competitors.
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#16
ArbitraryAffection
dwade, post: 3912849, member: 106554"
My comment aligns with the article. People want Intel processors more than their competitors.
Ya, and it's not because of the product merit. It's because 'people' are silly. Intel has a stronger brand image and superior marketing. This is how they can even possibly sell 7980XE for £1,600 while costing the same as 2990WX, and why they can command a £50 (at normal pricing) over the 2700X for the 8700K, when in reality you are getting a product that is using inferior build-quality, fewer hardware resources and no included cooling solution. The only selling point is higher single-core performance through higher frequency for high-refresh rate gaming and apps that require it.

Either way I'm not here to argue so I will leave it at that.
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#17
Dante Uchiha
dwade, post: 3912849, member: 106554"
My comment aligns with the article. People want Intel processors more than their competitors.
It's not just that, now due to increased core count they have a 25 ~ 30% lower yield.
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#18
dorsetknob
"YOUR RMA REQUEST IS CON-REFUSED"
redacted (Dear Suckers)
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#19
dwade
ArbitraryAffection, post: 3912852, member: 145270"
Ya, and it's not because of the product merit. It's because 'people' are silly. Intel has a stronger brand image and superior marketing. This is how they can even possibly sell 7980XE for £1,600 while costing the same as 2990WX, and why they can command a £50 (at normal pricing) over the 2700X for the 8700K, when in reality you are getting a product that is using inferior build-quality, fewer hardware resources and no included cooling solution. The only selling point is higher single-core performance through higher frequency for high-refresh rate gaming and apps that require it.

Either way I'm not here to argue so I will leave it at that.
They can because 1) 7980XE is currently the fastest HEDT. 2) 2990WX is a one-trick-pony workstation CPU that fails to attract the HEDT crowd due to compromising gaming performance and overclockability. Hence why AMD added a "W" into its name.
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#20
Bluescreendeath
TheGuruStud, post: 3912838, member: 42692"
Translation: Wahhhhhhh! Higher core counts costs us yields and wafers. 10nm is broken and killing us. Damn you, AMD, you morons. We had a plan to keep selling high end quad cores till 2020! F you, Lisa!

No, that's not satire. It's what the execs are thinking.
Lisa Su is a boss.

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#21
btarunr
Editor & Senior Moderator
dwade, post: 3912858, member: 106554"
They can because 1) 7980XE is currently the fastest HEDT.
Not anymore it's not. Hence the 28-core fig-leaf from Intel.
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#22
GoldenX
I always had this image of a monopoly doing it's earnest to stay in that position, Intel just went lazy and shot himself. How?
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#23
erixx
SHAKESPEARE didn't use moronic terms like CEO, CFO and what not. Are you sure this is common sense and speaking? I reject it all. Stop it NOW.
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#24
Frick
Fishfaced Nincompoop
erixx, post: 3912890, member: 82798"
SHAKESPEARE didn't use moronic terms like CEO, CFO and what not. Are you sure this is common sense and speaking? I reject it all. Stop it NOW.
There are plugins for at least some browsers that lets you replace words. CEO could easily be King of the Danes. Or Drunk Kitten.

Anyway, I really find it odd how they have issues with 14nm production, as some say. They've been on that node for years and should know all about it by now.
TheGuruStud, post: 3912838, member: 42692"
Translation: Wahhhhhhh! Higher core counts costs us yields and wafers.
I assume this is the real reason, and I never really thought of it like that.
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#25
First Strike
ArbitraryAffection, post: 3912835, member: 145270"
With Ryzen on the market, it does surprise me why people still keep choosing Intel in this 'increasingly competitive market'. Yes, people are going to tell me that Intel still leads in gaming, but that only really matters at really high refresh rates in competitive games. The vast majority of gamers can be served by Ryzen and still have an, arguably, more future-proof platform and superior multi-tasking capability... Intel's product line already looked 'meh' before these price increases and now it's just flat-out moot. i3 8100 is £180-190 here and Ryzen 5 2600 is £150. Need I say more? You would have to be brain-dead to choose the i3.
PC euthusiasts are minority, remember that. Don't assume everyone to be expert in PC. And heck, some shitty games stutter on Ryzen, if you are ever open-minded to hear actual feedbacks from Ryzen users.

Someone have to be brain-dead to let PC noobs, who can barely insert pictures in Word, to diagnose their RAM compatibility and flash their BIOS, and tell them that stutters in some games are not AMD's fault.
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