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Intel Ramps Up Foundries As CPU Supply 'Remains Extremely Tight'

'This has resulted in the shipment delays you are experiencing, which we appreciate is creating significant challenges for your business,' Intel sales exec Michelle Johnston Holthaus says in a letter to partners and customers.

Intel said it is increasing its use of external foundries in addition to expanding its own manufacturing capacity to address a continuing shortage of its 14-nanometer CPUs for PCs and laptops.

In a letter sent to customers and partners and published to its website on Wednesday, Intel sales executive Michelle Johnston Holthaus said supply of the 14nm processors "remains extremely tight" despite the record levels of investment the semiconductor giant has made to increase its 14nm wafer capacity this year.

[Related: Intel's F-Series CPUs Meant To Ease Shortage, Top Sales Exec Says]

"This has resulted in the shipment delays you are experiencing, which we appreciate is creating significant challenges for your business," wrote Holthaus, who is executive vice president and general manager of Intel's Sales, Marketing and Communications Group.

It's been more than a year since the Santa Clara, Calif.-based company admitted that supply of its 14nm CPUs has been "undoubtedly tight." For partners, the shortage, in some cases, has meant delayed shipments and deferred revenue as well as higher prices in the channel.

While Holthaus did not provide an update on when the CPU shortage could end, she said Intel representatives are reaching out to customers and partners with additional information since "the impact revised shipment schedules vary."

In the company's third-quarter earnings call in October, Intel CEO Bob Swan said the shortage was expected to last through the fourth quarter as stronger than expected demand continued to surpass supply. He said Intel increased manufacturing capacity by 25 percent this year, which had resulted in a double-digit bump in processor supply for the second half of 2019 compared to the first half.

Despite these investments, however, supply remains a challenge.

"Sustained market growth in 2019 has outpaced our efforts and exceeded third-party forecasts," Holthaus said in the letter. "Supply remains extremely tight in our PC business where we are operating with limited inventory buffers. This makes us less able to absorb the impact of any production variability, which we have experienced in the quarter."

Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based distributor, told CRN last month that the shortage has largely affected Intel's small form factor NUC PCs. He said supply issues, combined with the company's increased focus on its data-centric businesses, likely had more of an impact on the PC business than increased competition from AMD.

"We've been in short supply on client products for a long time, so they've been put an emphasis on data center and capacity in that area to continue to grow that business," he said in October.

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