Intel has a wafer-level assembly problem, and it’s hurting Core Ultra sales

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The large image: Clients are clamoring for Intel’s Core Extremely CPUs, however the chipmaker is going through a bottleneck in wafer-level meeting on the again finish. It is a important drawback – dire sufficient that Intel is projecting flat revenues for the second quarter, partly as a consequence of this constraint. Intel is shifting swiftly to broaden capabilities on this space, however demand exhibits each signal of continuous to outpace provide, at the least within the close to time period.

Intel faces a problem. Its ramp-up of Core Extremely, led by Meteor Lake, continues to speed up past its authentic expectations, with models projected to double sequentially within the second quarter. Particularly, the three Core Extremely households – Core Extremely 100 (Meteor Lake), Core Extremely 200 (Arrow Lake), and Core Extremely 200V (Lunar Lake) – are projected to push shipments above 40 million AI PC models by the tip of 2024.

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This appears like nice information, proper? Certainly, it’s. Nevertheless, right here lies the issue: Intel’s manufacturing is being hindered by its provide of wafer-level meeting, in keeping with CEO Pat Gelsinger.

In Q1, Intel’s revenues grew by 9 % yr over yr to $12.7 billion, pushed partially by a 31 % YoY enhance in consumer computing gross sales, which accounted for $7.5 billion of its general revenues. Regardless of the surge in demand for AI PCs, the chipmaker reported an general lack of $437 million for the quarter. Moreover, the income forecast for the second quarter, ranging between $12.5 billion and $13.5 billion, fell wanting the $13.6 billion anticipated by monetary analysts.

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One cause for the anticipated flat revenues in Q2, in keeping with each Gelsinger and CFO David Zinsner, is the bottleneck in wafer-level meeting.

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“Seasonal consumer income is constrained by wafer degree meeting provide, which is impacting our means to satisfy demand for our Core Extremely-based AI PCs,” Gelsinger mentioned throughout the earnings name.

Intel has been addressing this challenge by increasing semiconductor capability within the US, Europe, and Asia. Gelsinger talked about in a media briefing in Taipei late final yr that the corporate is deploying wafer-level meeting and chip packaging manufacturing capabilities in Malaysia. Moreover, within the US, Intel is establishing new fabs in Oregon, Arizona, New Mexico, and Ohio. It has additionally unveiled main funding plans in Eire, Poland, and Germany to construct modern semiconductor factories.

Nevertheless, like its opponents, Intel is discovering that demand is overwhelming provide. Gelsinger defined that Intel has been assembly its current buyer commitments, however many are returning and requesting extra shipments throughout totally different markets.

The corporate is “racing to catch as much as these upside requests,” he mentioned, attributing the constraint to the back-end wafer-level meeting, which is likely one of the new capabilities included in Meteor Lake and subsequent consumer merchandise. “So with that we’re working to catch up and construct extra wafer degree meeting capability to satisfy these.”

Gelsinger acknowledged that demand will solely intensify with Microsoft’s anticipated replace to Home windows 11. “Add in a second-half Home windows improve cycle, which we consider is underway, and Core Extremely is scorching,” Gelsinger mentioned.

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