A shortage of high-end computer chips from Intel is being felt in other parts of the tech sector. The question is how far it might spread.
This was apparent late Thursday, when memory chip maker Micron Technology MU 2.22% issued a disappointing forecast with its fiscal fourth-quarter report. The company now expects revenue to grow by 16% to 22% year-over-year for the quarter ending in November, which would be its slowest rate in two years. A major factor, according to Micron, is that some personal computer makers aren’t buying as many of its memory chips because they are slowing production due to a shortage of the CPU chips they need.
Intel supplies the vast majority of CPU chips for the PC market today. Most are produced with circuitry measured at 14-nanometers—the most advanced manufacturing node Intel currently has in mass production. Intel has three facilities capable of producing chips at that level, but those facilities are also in high demand for the type of processors that power data centers, which is Intel’s business line with the best growth. Some of that capacity is also now going toward producing modem chips used in the latest generation of iPhones, which hit stores on Friday.
Production constraints for high-end Intel processors are hitting other tech segments. Photo: Justin Sullivan/Getty Images
Intel, in other words, has many demanding customers competing for a finite amount of manufacturing capacity. And while the company has already boosted its planned capital expenditure for the year by $1 billion, such facilities can’t be expanded quickly—especially while the company is struggling to shift some of its production to a new, more advanced 10-nanometer process. That makes it difficult to respond to rapid changes in the market, like the recent surprising jump in PC demand. Second quarter PC shipments grew globally for the first time in six years, according to Gartner.
Server-chip demand is also booming, fueled mostly by capital spending from tech giants like Google, Amazon.com , Microsoft and Facebook , which are building data centers to power cloud-based services. Those four invested $34.7 billion in the first six months of this year, up 59% from a year earlier.
Micron CEO Sanjay Mehrotra says the CPU chip shortage has so far mainly hit its production of memory chips for PCs; the company also supplies chips for servers. But he conceded the impact could last beyond the company’s current quarter that ends in November. Micron shares slid more than 7% after hours Thursday.
Some analysts have expressed concern that capital spending by big tech companies could slow if those they aren’t able to get enough server processors to meet their own expansion plans. That hasn’t yet proven to be the case, and Intel will understandably focus sharply on keeping its biggest customers happy. Micron’s investors, meanwhile, will have to live with unhappiness a while longer.
Write to Dan Gallagher at [email protected]