The first signs of the shortage emerged in May. Intel's chipsets typically lag a node behind the flagship processors. meaning that until recently, Intel fabbed its chipsets on the 22nm process. Intel's recent 300-series chipset refresh found its new chipsets coming to market with the 14nm process, which is necessary to meet California's new power standards. Shortly after that, several vendors reported that Intel's H-series chipsets were in short supply, or simply not available, due to overbooked 14nm production.
In July, Intel finally confirmed the 14nm supply challenges during its earnings call, saying, "Our biggest challenge in the second half [of 2018] will be meeting additional demand, and we are working intently with our customers and our factories to be prepared so we are not constraining our customers' growth."
The company cited an unexpected $4.5 billion increase in demand as a key contributor, but other aspects, such as the delay of the company's 10nm node, likely play a role. Planning silicon production capacity is a multi-year process that involves getting the production facilities and tooling in place for mass production, but Intel fully planned to be in high volume production of 10nm processors at this point. As a result, the delayed 10nm process has likely exacerbated production challenges by pushing more unanticipated demand back to the 14nm production lines.
DigiTimes reported on September 1 that Acer chairman and CEO Jason Chen confirmed that tight supply of Intel's 14nm processors is already impacting supply chains. CP Wong, president of notebook ODM Compal Electronics, also told DigiTimes that 14nm supply issues could have more of an impact on the PC industry during the latter half of the year than the U.S.-China trade war.
Intel is known to prioritize high-volume customers, like large OEM and ODMs, during supply shortfalls, meaning it diverts limited supply to high-volume customers first. Intel's struggles to fill those prioritized orders could be an ominous sign for the retail market.
Intel also recently launched its Whiskey Lake and Amber Lake processors. As with all launches, that required a significant production ramp to meet initial demand. That ramp is occurring as Intel is also bringing production of its 14nm XMM 7560 modems online for Apple during the second half of this year. The new Apple contract, which consists of millions of modems for iPhones, will certainly be a top priority at Intel's fabs.
Much of the 14nm demand also stems from Intel's data center business, which grew 27 percent quarter-over-quarter. The company's Purley platform is immensely successful and continues to ramp while the company begins production of the Cascade Lake Xeons that arrive this year. These large processors range up to 28 cores, which reduces the number of die Intel can harvest per wafer, thus reducing overall supply. Intel's current Coffee Lake lineup also has two more cores than Kaby Lake, which consumes more silicon, and the new 9000-series processors feature up to eight cores, again chewing into more of the company's wafer output.
All of these factors suggest the shortage could become more severe. That could also mean the much-anticipated 9000-series launch will mirror the Coffee Lake launch last year, with rampant shortages and sky-high pricing being the norm for the first few months.
Meanwhile, AMD has a seemingly solid supply of 14nm and 12nm chips from GlobalFoundries as it heads into the holiday season, and the company is working to transition quickly to the 7nm node early next year. GlobalFoundries recently abandoned the 7nm node, which might eventually create challenges for AMD as it competes with Nvidia, Apple and Qualcomm for production capacity at TSMC. But the short-term outlook for AMD's production capacity looks strong headed into the holiday season, while Intel could struggle. That could lead to a repeat of AMD's strong holiday performance last year.