Intel confirms major chip shortages

$8bn financials boosted by VC activities

Demand exceeded supply for Intel microprocessors in the first half of this year, and that has led to an uncomfortable shortage of chips, CEO Craig Barrett conceded yesterday as the firm reported its Q1 financial results. That is leading Intel to spend more money investing in increased fab capacity, Barrett said. "While supply remains tight entering the second quarter, we are ramping our .18 micron manufacturing technology rapidly in five facilities, and expanding to eight facilities by year-end, which will substantially increase supply in the coming quarters. We are excited about our product introductions slated for the second half, when we will refresh our entire microprocessor line." Barrett claimed that Intel will have eight .18 micron fabs running by the end of 2000. Last week, as reported here, Intel notified many of its PC customers that they would have supply constraints until June or July, and those would be particularly tight for processor speeds of 700MHz and above. The firm's turnover rose to $8 billion in its Q1, a 13 per cent increase year on year, but a two per cent drop compared to the last financial quarter it reported. Net profit for the Q amounted to $3.1 billion, a rise of 52 per cent year on year, and 28 per cent higher than its last quarter. However, a slab of this impressive profit figure arose from Intel venture capital activities. The firm, over the last two years, has built up its Intel Capital portfolio. There are also tax advantages built into the figures. Barrett predicted that revenues and gross margins will be flat or even down a point or so for its next financial quarter, as a result of it "ramping" more .18 micron facilities. Nevertheless, many companies would give their eye teeth and much more for the gross margin of around 60 per cent expected for the next quarter. However high the gross margins, and however big the contributions made by Intel Capital, the company is finding it harder to disguise the fact that there have been problems supplying Coppermine processors since launch date on 25 October. Further, Intel has committed to major product launches during the second half of the year, potentially compounding its problems. At February's Intel Developer Forum, senior executives at the firm were predicting that the tightness in supplies would be over by the end of March. Its biggest launch this year will be of the Itanium 64-bit microprocessor, but it has also said it will introduce a low-cost system on a chip part, codenamed Timna, as well as Willamette and Foster, two high end IA-32 microprocessors. ® Related Story Intel CuMine supply problems a twisted complex tale Disaster hits Intel Coppermine supplies

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