As we exclusively reported almost a quarter back, Intel in a supply exceedds demand situation where they are running out of raw materials to produce their chips. This is something that has now been confirmed by the company. As we reported, only consumer chips are going to be impacted due to ABF shortages as the company is prioirtizing server shipments (Ice Lake specifically) to protect its x86 market share.
The semiconductor industry is running out of ABF substrate, and Intel is rationining consumer CPUs
In terms of priority we are told Intel is dedicating the most resources to servers, then mobility and finally desktop consumer parts. This is also why Tiger Lake has had intermittent supply and price hikes and is something that is expected to get worse with Alder Lake. What we are seeing with GPU prices (premium) is slowly going to be the case with CPUs as well considering the global chip squeeze isn’t expected to end till 2023.
“Persistent industry-wide component and substrate shortages are expected to lower CCG revenues sequentially,” said George Davies, chief financial officer of Intel, said during Intel’s Q2 2021 conference call with analysts and investors (via SeekingAlpha). “We expect supply shortages to continue for several quarters but appear to be particularly acute for clients in Q3. In datacenter, we expect enterprise, government and cloud to show further recovery in Q3.”
Upstream 300mm wafer manufacturers like Shin-Etsu and Global Wafers are already running at a 100% capacity and there is a finite supply of substrate trickling down to downstream foundries like Intel. With the company confirming the shortage to its partners, it looks like gamers are up for a very difficult year ahead with cryptocurrencies and substrate shortages having driven prices up. Since the shortage stems from upstream, there is very little foundries like Intel and/or TSMC can do to mitigate this situation.
This is what Intel had to say when we posted our exclusive:
As we have said in the Financial Outlook press release on March 23rd, demand for semiconductors and Intel products is very strong. We’ve been expanding our capacity to meet this demand and, as a result, we expect to grow our annual client CPU supply double-digits year-over-year versus 2020. However, the unprecedented global demand for semiconductor components and substrates is a challenge for many industries, including ours. We are actively working with our supply chain partners to increase the availability of third-party materials and components to further improve output for our processors and also support the broader PC ecosystem. We remain focused on supporting our customers and we will continue working to increase supply to meet our customers’ needs.
–Intel spokesperson to Wccftech
Of course, one man’s loss is another’s gain. While price hikes due to demand-exceeding-supply are bad for gamers, they are going to be a boon for foundries and design houses like Intel in terms of revenue and might actually help them mitigate some of that margin loss. In an attempt to mitigate ABF substrate issues Intel has invested in several ABF makers and actually installed some equipment inhouse to finish production of ABF substrates in its own packaging facility – one of the many pros of having your own manufacturing in-house.