Intel has adequate chips to meet targets amid supply crunch

Intel has adequate chips to meet targets amid supply crunch

Tech giant focuses on production of Xeon and Core processors

Credit: Reuters

Chipmaker Intel said it has enough supplies to meet annual revenue targets and was boosting PC chip output, allaying fears that rival Advanced Micro Devices was eating into its market share due to supply constraints.

Shares of the world's second-largest chipmaker rose three per cent to US$47.26 after the announcement, while those of AMD fell five per cent.

Intel, the biggest supplier of PC chips, has been increasingly catering to data centres as revenue from the personal computers business flattened since shipments peaked in 2011.

"We now expect modest growth in the PC total addressable market this year for the first time since 2011, driven by strong demand for gaming as well as commercial systems," interim CEO and financial head Bob Swan said in a letter published on the company's website.

"Supply is undoubtedly tight, particularly at the entry-level of the PC market."

Intel said it would focus on the production of its Xeon and Core processors, reiterating its plan to increase capital spending by US$1 billion to about US$15 billion in 2018, largely to meet the rising demand.

"We will have at least the supply to meet the full-year revenue outlook we announced in July, which was US$4.5 billion higher than our January expectations," Swan said.

The announcement potentially assuaged fears of a possible lower fourth-quarter revenue forecast on the back of supply constraints, Bernstein analyst Stacy Rasgon wrote in a client note.

Last year, AMD launched cheaper Ryzen CPU chips based on a new architecture called Zen to challenge Intel's Core chips monopoly in personal computers.

Also, AMD is ready to roll out its first seven nanometer (nm) chips for gaming later this year and its 7nm server CPU in 2019, while Intel has been delaying its 10nm-based chips.

Intel said on Friday it continues to expect volume production for its 10nm chips in 2019.

The company said the return to PC growth has put pressure on its factory network, pushing up shares of companies selling chip manufacturing gear rose.

Applied Materials gained 1.5 per cent. Lam Research added 1.2 per cent, erasing a loss from earlier.

(Reporting by Vibhuti Sharma and Sonam Rai in Bengaluru and Noel Randewich in San Francisco; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila)

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