Tech industry hit by a supply shortage
The technology industry faced a GPU (graphics processing unit) supply shortage in Q1 2018 as crypto miners gobbled up inventory. After recovering from this shortage, the industry was hit with a CPU (central processing unit) supply shortage. Intel (INTC), the world’s largest CPU maker, has been unable to meet the unexpected growth in CPU demand.
While PC sales have been falling for the last six years, the growing need for high processing and graphics capabilities has encouraged consumers to upgrade their PCs. IDC estimates that PC shipments rose 2.7% YoY (year-over-year) in Q2 2018, marking the strongest growth in over six years. The demand for servers also rose as cloud companies increased their capital spending. According to IDC, server shipments rose 20.5% YoY in Q2 2018.
Strong demand from the PC and server markets saturated Intel’s 14nm (nanometer) production capacity. Intel owns 90% of the CPU market. A post in British PC maker Novatech’s blog stated that the chipmaker gave priority to Xeon server CPUs over PC CPUs. This prioritization worsened the PC CPU supply shortage but created an opportunity for rival Advanced Micro Devices (AMD) to increase its share of the market.
CPU shortage impacts worldwide PC shipments
PC vendor Acer has stated that Intel’s CPU shortages could affect the entire notebook market. DigiTimes reported that many Taiwanese (EWT) PC original design manufacturers cut their shipment forecast for H2 2018. Wistron cut its Q3 2018 sequential growth forecast for notebook shipments from 5%–10% to 5% or below, while Inventec expects its Q3 2018 PC shipments to grow by single digits and remain at the same level in Q4 2018. Quanta gave a similar forecast for Q3 2018 but did not provide any figures for Q4 2018.
Novatech stated that CPU prices are increasing as traders are capitalizing on the CPU supply shortage by selling CPUs at a higher price to customers not sensitive to prices. Next, we’ll look at Intel’s strategy to tackle this supply shortage.
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