Intel has been struggling with its transition from 14-nanometer manufacturing to 10-nanometer manufacturing, and it has been talking about that for the past year. But interim CEO Bob Swan reassured customers and partners today that the world’s biggest maker of PC chips has the capacity and supply in place to meet its revenue targets for the year.

After the announcement, Intel’s stock price rose 3 percent, and it is currently trading at $47.29 a share, with a market value of $218 billion.

In July, Intel’s Swan, who is also chief financial officer and took over on an interim basis after CEO Brian Krzanich resigned in June, said that Intel forecasted full-year non-GAAP revenue of $69.5 billion. In a letter to customers and partners on Friday, Swan said the “data-centric” businesses grew 25 percent through June, and cloud revenues grew 43 percent, while the strength of the PC business has been “even more surprising.”

“Together as an industry, our products are convincing buyers it’s time to upgrade to a new PC. For example, second-quarter PC shipments grew globally for the first time in six years, according to Gartner,” Swan said. “We now expect modest growth in the PC total addressable market (TAM) this year for the first time since 2011, driven by strong demand for gaming as well as commercial systems — a segment where you and your customers trust and count on Intel.”

But the problem is that the factory network is now challenged.

Above: Intel’s latest chips.

Image Credit: Intel

“We’re prioritizing the production of Intel Xeon and Intel Core processors so that collectively we can serve the high-performance segments of the market. That said, supply is undoubtedly tight, particularly at the entry level of the PC market,” Swan said. “We continue to believe we will have at least the supply to meet the full-year revenue outlook we announced in July, which was $4.5 billion higher than our January expectations.”

Intel is investing a record $15 billion in capital expenditures in 2018, up approximately $1 billion from the beginning of the year.

“We’re putting that $1 billion into our 14-nanometer manufacturing sites in Oregon, Arizona, Ireland, and Israel. This capital along with other efficiencies is increasing our supply to respond to your increased demand,” Swan said. “We’re making progress with 10nm. Yields are improving and we continue to expect volume production in 2019.
We are taking a customer-first approach. We’re working with your teams to align demand with available supply. You can expect us to stay close, listen, partner, and keep you informed.”

“I’m not surprised as I have heard rumblings in the supply chain,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “While I am sure Intel would want to have 10nm online now, most of the current challenges stem from upside demand for 14-nanometer parts. Every market is up, even PCs, which is putting a strain on 14-nanometer. Moving notebooks parts from two to four cores I am sure contributed to the upside challenges, but not the primary reason.”

Moorhead thinks that it’s good news that Intel has the capacity to meet its financial obligations, but with all the industry growth, it likely will have a challenge of meeting “upside demand.”

“So it’s good news, bad news,” he said in a message to VentureBeat. “PC pricing will likely go up, but I think a lot of that will depend on if AMD ramps up to meet that demand. I can see Intel incent the industry to consume parts that maximize profit dollar per wafer.”

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