Intel Finds, Fixes Design Flaw In Sandy Bridge Chipsets

Intel said that the error in its Cougar Point chipset in some cases will cause the SATA ports in the chip to degrade over time. That would impact the performance of attached SATA hard disks and DVD drives in PCs using the "Sandy Bridge" Intel Core processors, the company said.

The news caught investors by surprise, who responded by initially driving the stock price of Intel down by 2.5 percent to $21.08. However, share prices have recovered over half that loss by mid-day.

The chip error was good news for AMD, which saw investors drive its stock up 5 percent to $7.87 by mid-day.

Shipments of the affected chipset have been halted, and Intel has started manufacturing a new version, which the company said will resolve the error.

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Intel said it will contact those system builders and customers who purchased potentially affected chipsets or systems, which first started shipping on January 9, about required replacements or modifications. Those systems, specifically Intel's Second Generation Core i5 and Core i7 quad-core systems, should work as expected while Intel works with its systems builders on a permanent solution.

Intel said the fixed version of the chipset is expected to ship in February, with full volume expected in April.

Intel also said that the chipset issue will cost the company about $700 million to repair and replace affected materials and systems, which will impact its financial reports for its fourth fiscal 2010 and first fiscal 2011 quarters.

The news of the chipset error could has big implications for the channel, said Todd Swank, vice president of marketing at Nor-Tech, a Burnsville, Minn.-based system builder.

Swank said his company had received OEM samples of the Sandy Bridge and related products, and already had two SKUs lined up, before he heard the news this morning.

"We were totally in preparation mode," Swank said. "Intel has been out there preparing for the launch for a month. This is a big move."

Customers will be disappointed at the delay in the Sandy Bridge products, Swank said. "But the current Intel stuff out there in the market is pretty good," he said.

Swank praised Intel for getting the news out as quickly as it did and for taking care of the error before it hit the systems market.

"Good for Intel for stepping up and delaying shipments instead of sending them out and later dealing with issues related to the SATA drives," he said. "Good for Intel, which prides itself on its manufacturing."

Intel did not respond to requests for more information by press time.