On the semiconductor giant’s third-quarter earnings call, Intel CFO David Zinsner says that ‘supply has tightened materially,’ mainly driven by ‘capacity constraints’ on the company’s older Intel 10 and Intel 7 manufacturing nodes.
Intel on Thursday warned of a CPU shortage that could last well into next year due to current demand “outpacing supply” as the semiconductor giant reported its “fourth consecutive quarter of improved execution” in its ongoing comeback effort.
The Santa Clara, Calif.-based chipmaker issued the warning in its third-quarter earnings release, where it reported a “fourth consecutive quarter of improved execution,” with revenue, gross margin and earnings per share all coming “above guidance,” Intel CEO Lip-Bu Tan said in the company’s earnings call Thursday night.
[Related: Intel Shares Details Of Forthcoming Intel 18A Chips Key To Its Comeback]
For the three-month period that ended in late September, Intel said revenue grew 3 percent year over year to $13.7 billion. This was mainly driven by Intel’s Client Computing Group, which grew 5 percent year over year to $8.5 billion, and offset by the Data Center and AI segment, which declined by 1 percent year over year to $4.1 billion.
The company’s gross margin was 38.2 percent, up 23.2 points from the same period last year while its earnings per share, when accounting for generally accepted accounting principles, was 90 cents, up from a negative $3.88 a year ago.
Intel’s stock price was up more than 7 percent in after-hours trading.
Expanding on his prepared statement about supply exceeding demand through 2026, Intel CFO David Zinsner said on the call that “supply has tightened materially,” mainly driven by “capacity constraints” on the company’s older Intel 10 and Intel 7 manufacturing nodes.
This shortage “limited our ability to fully meet demand in [the third quarter] for both data center and client products,” he added.
While the shortage is most pronounced around the Intel 10 and Intel 7 nodes, they are happening “pretty much across our business,” Zinsner said later in the call.
Products built using the Intel 10 and Intel 7 nodes represent older generations of Intel Core processors for PCs and Xeon processors for data centers. These products include the 14th-generation Core “Raptor Lake Refresh” lineup and the fifth-generation Xeon Scalable “Emerald Rapids” lineup, both of which debuted in 2023.
More recent products like the Core Ultra 200V “Lunar Lake” lineup and the Core Ultra series 2 “Arrow Lake” lineup rely entirely or almost entirely on Asian foundry giant TSMC for manufacturing. Meanwhile, the Xeon 6 “Granite Rapids” products rely on the Intel 3 node for the compute tile and Intel 7 for two I/O tiles as part of their chiplet-based design. The Xeon 6 “Sierra Forest” products are manufactured entirely using Intel 3.
To work through the shortage, Zinsner said Intel has been “working closely with customers to maximize our available output, including adjusting pricing and [product] mix to shift demand towards products where we have supply and they have demand.”
Asked by a financial analyst if the high demand for older Intel products is undercutting growth for AI PC products like Lunar Lake, Zinsner said the company is seeing double-digit sequential growth in the segment and expects to ship processors for about 100 million AI PCs by the end of this year, as previously promised.
“Clearly, though, the older nodes have also done well, and that was probably the part that was more unexpected,” he said. “I think we’ve just got to participate in making sure that the ecosystem drives enough applications for AI in the PC space.”
A significant demand driver for older products, including Raptor Lake, is the Windows 11 refresh, according to Zinsner. Microsoft ended normal support for Windows 10 on Oct. 14, which has resulted in a majority of businesses moving to the newer operating system.
Despite pushes by Intel and other companies to encourage adoption of AI PCs powered by newer processors like Lunar Lake as an upgrade path to Windows 11, Zinsner indicated that many users are opting for less advanced hardware to do so.
“What clearly is happening is the Windows refresh is happening more significantly than I think we expected. And you know that that’s not necessarily an AI PC story, and so Raptor Lake is also a product that addresses that. And so we’re just seeing upside in that part of the market as well,” he said.
As for how long the shortage could last, Zinsner said supply issues could peak in the first quarter of next year before Intel “can get ourselves caught up” in the following months.
Kent Tibbils, vice president of marketing at Fremont, Calif.-based distributor ASI, told CRN that Zinsner’s comments line up with the Intel CPU shortage his company is seeing.
“It feels like a combination of better demand and product transition,” Tibbils said of the supply-demand dynamics he is seeing on the client side.
