• United States

Intel denies reports of Xeon shortage

News Analysis
Jan 29, 20203 mins
Data CenterServers

The PC side of Intel's Xeon processor supply remains constrained, but server customers should get their orders this year.

intel logo
Credit: Intel

Intel has denied reports that its Xeon supply chain is suffering the same constraints as its PC desktop/laptop business. CEO Bob Swan said during the company’s recent earnings call that its inventory was depleted but customers are getting orders.

The issue blew up last week when HPE – one of Intel’s largest server OEM partners – reportedly told UK-based publication The Register that there were supply constraints with Cascade Lake processors, the most recent generation of Xeon Scalable processors, and urged HPE customers “to consider alternative processors.” HPE did not clarify if it meant Xeon processors other than Cascade Lake or AMD Epyc processors.

AMD must have loved that.

At the time, Intel was in the quiet period prior to announcing fourth quarter 2019 results, so when I initially approached them for comment, company executives could not answer. But on last week’s earnings call, Swan set the record straight. While supply of desktop CPUs remains constrained, especially on the low-end, Xeon supply is in “pretty good shape,” as he put it, even after a 19% growth in demand for the quarter.

“When you have that kind of spike in demand, we are not perfect across all products or all SKUs. But server CPUs, we really prioritize that and try to put ourselves in a position where we are not constrained, and we are in pretty good shape. Pretty great shape, macro. Micro, a few challenges here and there. But server CPU supply is pretty good,” he said on an earnings call with Wall Street analysts.

Intel CFO George Davis added that supply is expected to improve in the second half of this year, across the board, thanks to an expansion of production capacity. “In the second half of the year we would expect to be able to bring both our server products and, most importantly, our PC products back to a more normalized inventory level,” Davis said.

Intel’s data center group had record revenue of $7.2 billion in Q4 2019, up 19% from Q4 2018. In particular, cloud revenue was up 48% year-over-year as cloud service providers continue building out crazy levels of capacity.

Hyperscalers like Amazon and Google are building data centers the size of football stadiums and filling them with tens of thousands of servers at a time. I’ve heard concerns about this trend of a half-dozen or so companies hoovering up all of the supply of CPUs, memory, flash and traditional disk, and so on, but so far any real shortages have not come to pass.

Perhaps not surprisingly, Intel’s enterprise and government revenue was down 7% as more and more companies reduce their data center footprint, while communication and service providers’ revenue grew 14% as customers continue to adopt AI-based solutions to transform their networks and transition to 5G.

Andy Patrizio is a freelance journalist based in southern California who has covered the computer industry for 20 years and has built every x86 PC he’s ever owned, laptops not included.

The opinions expressed in this blog are those of the author and do not necessarily represent those of ITworld, Network World, its parent, subsidiary or affiliated companies.