Intel is trying to head off a PC chip shortage by investing $1 billion in its manufacturing sites.
On Friday, Intel's interim CEO Bob Swan said that "supply is undoubtedly tight" for the company's processors, amid a return to growth in the PC market. Intel has been prioritizing production of its Xeon and Core processors, which are used in servers and PCs. However, Swan warned that chip supplies for PCs in the lower-end "entry-level" market could get thin.
"We continue to believe we will have at least the supply to meet the full-year revenue outlook we announced in July," he wrote in an open letter posted to Intel's website.
Nevertheless, Intel is investing $1 billion into the company's 14-nanometer chip manufacturing facilities. "This capital along with other efficiencies is increasing our supply to respond to your increased demand," he added.
Worries over an Intel chip shortage have been bubbling up among PC manufacturers and on Wall Street. Earlier this month, a JP Morgan analyst said the chip shortage began in this year's third quarter, and will worsen in the fourth, limiting supplies for both notebook and desktop PCs.
The Intel chip shortage occurs as the PC market has been experiencing some solid growth for the first time in six years. Analysts partly attribute the demand to businesses refreshing their commercial PCs and switching over to Windows 10. Unfortunately, the growth is putting pressure on Intel's factory network, which is also trying to meet demand in the server market, Swan said in his letter on Friday.
For weeks now, PC makers in Taiwan have been warning they may be forced to ship fewer products due to the supply shortfall. As a result, prices for PCs could get higher.
However, Intel's supply chain issues may give an opening for rival AMD, which has been launching new Ryzen and Athlon chips to compete with Intel's Core and Pentium processors in the PC space.
"I believe the industry will have some challenges meeting the demand for about three to six months," Patrick Moorhead, an analyst at Moor Insights, told PCMag. "What AMD can deliver and exactly which parts Intel can't deliver enough of will be the deciding factors."
Intel is facing the increased pressue as the company is also trying to develop a new 10 nanometer chip, which promises to offer a 25 percent performance increase over the existing 14nm processors. Unfortunately Intel has repeatedly delayed the launch date for the new silicon, which is now expected to arrive at the end of 2019 during the holiday season. On Friday, Intel's interim CEO said the company remains on track to bring the 10nm processors to "volume production" next year.