Intel commits $1bn to 14nm chip production

With the greater uptake of mobile devices and new working practices in business, it’s perhaps no surprise that demand for traditional microprocessor chips is falling.

Despite lower demand, global hardware giant Intel continues to struggle to fulfill entries in its order books, with the company’s chip shortages unlikely to be resolved by the end of the year, according to DigiTimes.

Intel’s interim CEO (and chief financial officer), Bob Swan, has announced that the company will invest an additional US$1 billion over the rest of this year to expand production at its 14 nm manufacturing plants to address the supply shortfall.

In an open letter, Swan admitted that “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.”

Two factors are currently making the situation less severe than it might be for the Santa Clara-headquartered manufacturer.

Firstly, demand for PCs in the second half of 2018 is not as strong as many industry pundits predicted.

At the same time, many PC vendors still hold stock of older PCs or are deploying AMD processors in entry-level and mid-range products while the shortage continues.

Despite Intel’s claims that the shortfall in its production is due to increases in demand for its CPUs, most industry sources are of the opinion that the overriding factor in Intel’s output shortage is the company’s transition from 14nm to 10nm manufacturing technology.

In general terms, the smaller the components in a chip, the faster they can pass current, and the less power needed to do so. 10nm fabrication is generally seen as the next step in microprocessor manufacturing.

Swan’s statement that the company is to add to Intel’s capital expenditure shows its commitment to 10nm technology, but products containing the more powerful chips from that range are unlikely to enter mass production until the final few months of 2019:

“We are investing a record US$15 billion in capital expenditures in 2018, up approximately US$1 billion from the beginning of the year,” said Swan in the open letter.

“We’re putting that US$1 billion into our 14nm 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 10nm. Yields are improving and we continue to expect volume production in 2019.”

The powderkeg of US-China trade relations is likely to place pressure on global server markets, as well as on PC sales in general.

Fluctuations in the availability of newer server hardware may well affect prices of cloud-based applications, as throttled supply of microprocessors will drive up data center equipment costs — with price rises potentially passed on to end-users.