Intel processor constraint to continue in 2020, says HPE

Hewlett Packard Enterprise has warned the industry to brace for an Intel processor shortage throughout 2020, specifically the Intel Cascade Lake server processors.

After issuing a statement to The Register earlier this week, HPE’s Canadian division provided IT World Canada with a similar message:

“HPE is experiencing a constraint on certain processors. There are other processors that are still available and we’re urging our customers to consider alternatives. We are in constant dialogue with all of our suppliers and will continue to work through possible options to minimize customer impact and meet their needs.”
Intel’s Tiger Lake processor shown at CES 2020. Image credit: Tom Li

Cascade Lake is a performance and enterprise microarchitecture released in April 2019. As an optimization to Intel’s Skylake family, Cascade Lake brought 3D XPoint memory support, DL Boost instructions, and Spectre and Meltdown mitigations at a hardware level. Server grade Cascade Lake processors are denoted by the SP and AP suffix.

In the other corner, AMD is poised to claw back a bit of the market from Intel’s absolute dominance. At its peak – which was in June of 2017 – Intel occupied 99 per cent of the server market share. But after the launch of AMD’s Epyc server processors in August, AMD is on track to gain back as much as 10 per cent of the market share by the end of 2020, predicted Digitimes.

Intel’s lasting supply issue

Intel’s processor constraint is well known across the industry and has been ongoing for years. Intel initially began having trouble meeting demands for its 14nm processors in 2018 when demanding hyperscalers outpaced its production capacity and depleted its buffer inventory.

The anemic supply’s ramifications manifested soon after. In Q3 2018, the PC market was being burned by the lack of Intel processors, especially in the mobile segments like ultraportables and tablets. According to Digitimes, major vendors like HP, Dell, and Lenovo were hit with a five per cent supply shortfall in 2018.

Simultaneously, Intel was struggling with its 10nm node development and volume production. Technological barricades and high ambition hindered its release to market, which couldn’t translate the products to sales.

In an earlier interview with IT World Canada, Intel Canada country manager Denis Gaudreault explained the 10nm delay.

“When we’re planning 22nm, to 14nm, then more planning for the 10nm so the plan, I think we…went too aggressively on designing the density of the architectures…which adds the complexity of it and that didn’t work that well. So we are to step back. And as you know, that takes months and years to do.”

In an open letter issued in September 2018, Intel CEO Bob Swan broke down the insatiable demand and attributed it to large growth in Intel’s data-centric business, increased growth in PC shipment, and high demand in gaming and commercial systems. Due to these factors, the PC’s total addressable market has put tremendous stress on its production.

To maximize revenue on limited production capabilities, Intel prioritized its fabs for its lucrative Xeon server processors and high-end Core i series processors. In addition, Intel injected an extra billion dollars into its 14nm production sites in Oregon, Arizona, Ireland, and Israel. It also worked closely with partners to directly supply flow to where it’s needed the most.

While it relieved some pressure from the high end, it exacerbated the problem in the entry-level products. The Intel Core i5 series, Celeron, Atom, and Pentium processor families all had to be dialled back to accommodate the tectonic change in production focus. Worse still – as proved evident by HPE’s announcement – demand still exceeded supply even after a year.

On Nov. 20, 2019, Intel issued an updated statement on the shortage:

“We have invested record levels of Capex increasing our 14nm wafer capacity this year while also ramping 10nm production. In addition to expanding Intel’s own manufacturing capability, we are increasing our use of foundries to enable Intel’s differentiated manufacturing to produce more Intel CPU products.”

Intel also said that despite the increased production capacity, the increased market growth still outpaced its capacity.

Industry recommendations

For stranded customers, Intel told HPE to buy older products. The Register reported that a staff document stated that Intel recommended buyers to purchase Skylake Xeon processors for time-sensitive projects.

Dell, Intel, and Lenovo turned down requests for comment.

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Jim Love, Chief Content Officer, IT World Canada

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Tom Li
Tom Li
Telecommunication and consumer hardware are Tom's main beats at IT World Canada. He loves to talk about Canada's network infrastructure, semiconductor products, and of course, anything hot and new in the consumer technology space. You'll also occasionally see his name appended to articles on cloud, security, and SaaS-related news. If you're ever up for a lengthy discussion about the nuances of each of the above sectors or have an upcoming product that people will love, feel free to drop him a line at [email protected].

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