Intel chip shortage may hurt laptop market

A shortage of the latest Intel laptop PC microprocessors appears to be worsening and could cause some PC vendors to delay the rollout of new laptop computers, chip distributors and industry researchers say.

The shortfall is in Intel's new laptop microprocessors codenamed Arrandale, including some Core i3 and Core i5 chips. The shortage has caused chip buyers to bid the price of the microprocessors up to a 20 percent premium over contract prices on the open market, according to US chip distributor Converge. The shortage hit in March and will last throughout April, the company added in a monthly research report.

A dearth of the chips could cause delays in the rollout of sleek new laptops by three months or more, according to securities researcher CLSA Asia Pacific Markets. It could also give Intel's main rival, Advanced Micro Devices (AMD), a chance to win market share in supplying microprocessors for laptops, the fastest growing segment of the PC business.

"It is unusual to find a device shortage that cannot be solved in the open market," Converge said. Most laptop manufacturers have been able to keep up with demand by using older Intel Montevina processor family chips, the distributor said, but "we also believe the Arrandale shortage must ease soon or it will have a prolonged effect."

Shane Rau, a research director at IDC, said the shortage of Arrandale chips is mostly affecting smaller PC vendors. Large vendors get first priority from component makers during shortages, while smaller vendors have to find other solutions.

"I don't think that the shortage will be so acute as to hold back the market and raise system prices significantly," he said.

Intel's Arrandale processors are designed so PC vendors can create slimmer laptops. They come in a two-chip package that includes an Arrandale processing core made using 32-nanometer production technology and a graphics processor made using 45nm technology.

Hewlett-Packard, Acer and Asustek Computer all declined to comment on the issue.

An Intel spokesman declined to comment specifically on the shortage concerns, but said the company constantly works to meet customer demand.

However, Intel executives noted some supply issues during on a conference call last week to discuss the company's first quarter.

"We were slightly behind, quite frankly, satisfying all the demand our customers wanted on 32nm in the first quarter even though we were producing much more than we first thought," said Paul Otellini, Intel's CEO. "We expect to catch up to that demand in the second quarter on 32nm over the course of the quarter."

Stacy Smith, Intel's chief financial officer, noted that "because of the increases we saw over the course of the quarter in demand on the new mobile platform, Arrandale, I wasn’t as able to get as much inventory in place as I'd hoped."

Intel is moving quickly to increase production at new factories that make chips using 32nm production technology.

"32nm is our fastest ramping process ever, and I am pleased to note we are accelerating the ramp of our third and fourth 32nm factories faster than our original plan such that by early Q4 we will have four factories in production on 32nm," Otellini said.