Intel has published a document that outlines the opening an additional 14nm test facility to "assure a continuous supply" of some 14nm processors as it grapples with a shortage of manufacturing capacity. The move suggests that, aside from record demand, some of the issues with 14nm production capacity stem from the availability of the company's chip-testing facilities.
Intel's 14nm CPU shortage impacts nearly every aspect of its business, including its desktop, server, and laptop processors. The shortages, which Intel self-reported during a recent earnings call, have exploded into the mainstream eye as partners have revealed the impact to their businesses. The record demand, and resulting supply constraints, have led the company to move its H310C chipset back to the older 22nm node as it grapples with the consequences of its delayed 10nm node.
Intel's document (click to expand) outlines the move of some 14nm product testing to a facility in Vietnam under its Copy Exactly! program. This program assures that all production, testing, and methodologies used in Intel's various facilities aligns perfectly, thus speeding up the time to production in new facilities and ensuring product quality is consistent across manufacturing sites.
Intel will test finished goods in the new facility to assure supply of many seventh-gen processors (listed in the image), but it also suggests that testing capacity, and not necessarily wafer production capacity, is becoming the bottleneck.
As we've covered in detail, Intel has several new 14nm products ramping simultaneously, such as Cascade Lake and Coffee Lake Refresh processors, and perhaps most importantly, the XMM 7560 modems that are used in the new line of iPhones. These new modems are small, as outlined in iFixit's iPhone XS and XS Max teardown that it posted today, so these chips consume very little real estate on wafers. Consequently, Intel can pack a tremendous number of chips per wafer, which means modem production would likely not consume an enormous number of wafers, and thus production lines, to satiate Apple's demand.
But the sheer volume of chips is daunting. Apple ships ~50 million iPhones a quarter, and while all of those won't feature Intel's modems, a large number will.
More chips per wafer equate to more time and steps required to cut the wafers. The number of these tiny chips could also present a challenge for testing facilities, as each chip likely has to undergo rigorous test processes. These same concepts would apply to chipsets, which are also small yet still consume time in cutting and test facilities. That could be yet another impetus for Intel to shift the H310C chipset back to 22nm.
In fact, other reports suggest Intel's biggest challenges may lie in testing capacity. A recent report from CRN reinforces the impact, which Intel purportedly outlined during a presentation to its partners:
The company also attributed the shortage to additional factory and assembly test capacity required for higher-end 14nm processors from the latest families of Core client and Xeon products that are seeing fast adoption from customers, said the source, who spoke on the condition of anonymity because the person wasn't authorized to speak publicly about the matter.
The impact of Intel's production limitations is also having a tangible impact on the broader PC market: Recent reports from industry analysts predict that the shortage could reduce PC sales five to seven percent, and it is also having the knock-on effect of reducing demand for other PC components, and thus sending prices plunging for both DRAM and NAND.
In fact, during its earnings call yesterday, Micron CEO Sanjay Mehrotra attributed some of the DRAM and NAND company's recent performance to the ongoing shortage (via Seeking Alpha):
In our fiscal first quarter, we see some impact to our client compute customers, due to a shortage of CPUs.
And in the following question and answer session, Mehrotra indicated that the shortage could last beyond Q1 of next year:
And I would just add that the CPU shortages, we expect it to be short-term; it’s possible that it goes beyond Q1 as well.
All signs point to challenging times ahead for both Intel and the industry, and although Intel is obviously taking steps to address the production capacity issues, the industry may suffer well into 2019.