Apple, AMD and Intel are shifting priorities as chip shortages persist
Enlarge / Sure, it’s cheap clip art … but it’s also a worryingly accurate picture of the current supply and demand situation in the semiconductor product market. The notorious chip shortage of 2021 will not only affect automakers. In a conference call following the earnings on Tuesday, Apple CEO Tim Cook said, “We will do everything we can to mitigate the circumstances we face” – a statement that likely means the company is rationing its chip supplies and making the most profitable will prioritize and in-demand items like iPhones and AirPods at the expense of less profitable and less sought after items.
CFRA analyst Angelo Zino told Reuters that Cook’s somewhat cryptic statement “largely reflects the timing of new product releases” – particularly new iPhone releases in September. Jeff Fieldhack, director of Counterpoint Research, speculates on the flip side of the same coin, saying the company is likely to channel the supply chain “pain” onto its least lucrative products. “Assuming Apple prioritizes the iPhone 12 family, this is more likely to affect iPads, Macs, and older iPhones,” Fieldhack said.
Processor maker AMD has also carefully managed its supply chain in response to pandemic bottlenecks. With flagship products finally outperforming the competition from Intel, AMD is focusing on the more profitable high-end segment of the market, while the economy segment – which was the strongest performer until a few years ago – is left to Intel. “We are concentrating on the strategically most important segments of the PC market,” said CEO Lisa Su to the investors in a conference call.
Apple and AMD are two of the TSMC semiconductor foundry’s biggest customers – but the problem isn’t limited to TSMC. Intel, which operates its own foundries, admits its own delivery problems. Intel CEO Pat Gelsinger told the BBC that bottlenecks will worsen in the second half of 2021 – and that it will take “a year or two” for supplies to return to normal.
Gelsinger has hyped the importance of building new foundries, as Intel is currently doing in Arizona. He warns, however, that foundries will need time to update themselves and remove bottlenecks – and predicts “a year to two years before we have a reasonable balance between supply and demand”. This news follows a delay Intel announced this week for its upcoming 7nm process, which is now not expected before 2022.
In some ways, Intel could actually benefit from the pandemic-induced supply chain bottlenecks in the long term. Although Intel lags behind its competitors AMD and Apple in both performance and energy efficiency, the market can only go that far if there is no supply.
With all vendors selling virtually any processor they can build, Intel’s longstanding ability to make 80 percent of the world’s x86 desktop CPUs and 90 percent of the x86 data center CPUs cement its place in the market – for now – despite the assignment of achievement crowns to his rivals.