Components & Peripherals News

Intel: Xeon Supply Is Not Constrained, Delays Can Happen

Dylan Martin

'When demand is very strong like in [the fourth quarter of 2019], it can sometimes take a little longer to fulfill orders and support each customer’s desired product mix. However, we believe we have supply to meet market demand in [the first quarter] and the full-year,' Intel says after Hewlett Packard Enterprise warned of a Xeon Cascade Lake shortage last week.

Share this

Intel said its supply of Xeon server processors is not constrained, while admitting delays can happen for customers depending on their individual demand level and what kind of products they're looking for.

"Overall, we are not supply constrained in our server business," an Intel spokesperson said in a statement to CRN. "When demand is very strong like in [the fourth quarter of 2019], it can sometimes take a little longer to fulfill orders and support each customer’s desired product mix. However, we believe we have supply to meet market demand in [the first quarter] and the full-year."

[Related: Intel Data Platforms Group: New Executive Office Chases ‘Big Picture’]

The statement was provided after HPE, one of Intel's largest server OEM partners, reportedly said last week that it expects supply constraints of Intel's second-generation Xeon Scalable Cascade Lake processors for the rest of the year after telling customers to seek alternative products to avoid delays.

"Based on demand, we are expecting supply will remain constrained through 2020," according to an HPE statement in The Register. "Server platforms which use these processors are affected. In order to minimize customer impact as a result of these supply constraints with Cascade Lake processors, HPE urges customers to consider alternative processors, which are still available."

Santa Clara, Calif.-based Intel gave an update on its ongoing CPU shortage during Thursday's earnings call for the fourth quarter. Since the shortage began in mid-2018, Intel's PC and laptop processors have been impacted the most.

In Intel's fourth-quarter earnings call, CEO Bob Swan said while the company is in "pretty good shape" when it comes to meeting demand for server processors, the double-digit growth of the company's Data Center Group in the fourth quarter "depleted our inventory level."

With "that kind of spike in demand, we're not perfect across all products or all SKUs," he said.

George Davis, Intel's CFO, said on the call that supply for both server and client CPUs is expected to improve in the second half of this year as the result of expanded production capacity.

"In the second half of the year we would expect to be able to bring both our server products and, most importantly, our PC products back to a more normalized inventory level," he said.

HPE is likely experiencing a shortage of Xeon Cascade Lake processors for one of two reasons, according to Patrick Moorhead, president and principal analyst at Moor Insights and Strategy. For one, he said, it could come down to product mix issues, which Swan referred to in the latest earnings call.

"There must be a mix issue because HPE wouldn't make this stuff up," Moorhead said. "Look at the number of Cascade Lake SKUs there are. There's a lot of them."

The other possibility is that HPE has seen so much demand for servers with Intel Cascade Lake processors that Intel wasn't able to fulfill that additional upside because the remaining inventory was going to cloud service providers or Intel's other major OEM partner, Dell Technologies, according to Moorhead.

"If HPE was looking for upside and the cloud guys had already spoken for those, then that would make sense to me," he said.

Daniel Newman, principal analyst at Futurum Research, said HPE's CPU supply issues are likely tied to Intel's breakout four-quarter financial results in the Data Center Group, which saw a 48 percent year-over-year increase in sales from cloud service providers and a 14 percent increase from communications service providers.

"I think some of that surprise high demand can drive some slower delivery, but that happens in any business," Newman said.

But while the CPU shortage is causing some delays for partners, Intel's latest earnings show that the chipmaker has demonstrated resilience in the face of multiple challenges, he added.

"During a [CEO transition] and massive delays in yield and process technology, the company was able to protect the vast majority of its market share, even while its competitors were able to take the lead in process technology and offer greater price-performance metrics," Newman said.

Dylan Martin

Dylan Martin is a senior editor at CRN covering the semiconductor, PC, mobile device, and IoT beats. He has distinguished his coverage of the semiconductor industry thanks to insightful interviews with CEOs and top executives; scoops and exclusives about product, strategy and personnel changes; and analyses that dig into the why behind the news.   He can be reached at

Sponsored Post