As part of Intel’s Partner Connect conference last month, AnandTech has learned that information has been provided to European, Middle East and Asia (EMEA) customers and partners regarding the current level of semiconductor supply through the rest of the year. Intel works closely with its key distributors and customers in each region to ensure that they have sufficient support to effectively sell to their customers, however the recent high demand for semiconductors has put additional strain on Intel’s ecosystem, perhaps more so than the high demand period for server processors a couple of years ago. In a discussion session led by Intel’s GM for EMEA, Maurits Tichelman, it was highlighted that May was set to be a testing time for distribution, with the rest of the year still subject to market forces. It was also mentioned that despite Intel’s decades of experience with demand surges, it is not invulnerable to substrate shortages.
Intel Partner Connect
Intel’s Partner Connect 2021 event is an opportunity for OEMs and system integrators, especially at a localized level for each region, to get wider updates about Intel’s plans and distribution networks. The event is partly informative, educating partners on Intel’s general growth strategy, but also an opportunity for Intel’s partners to interact directly with lead sales executives, rather than simply their own sales chain. The event features numerous breakout sessions involving Intel’s portfolio, how Intel sees its business changing, how Intel can assist and accelerate partner growth in changing times, and the wide variety of Intel’s product portfolio that some partners might not have considered selling. On top of this are a number of talks around Intel’s key OEM partners, such as Dell, VMWare and others, as well as Intel’s partner programs that offer financial and marketing cooperation based on sales numbers and expenditure.
The EMEA session was hosted by Intel’s GM for EMEA, VP of Sales, Marketing and Communications Group. The purpose of this session was to inform the local region about updates to Intel’s product portfolio, distribution channels, and ultimately in the current climate, the ability to adequately supply its customers with the hardware needed to fill the localized end-user requests. This scans the whole gamut from boutique PC builders to white-box education machine suppliers up to integrated IoT or 5G solutions.
Maurits went into detail about how Intel’s high demand period has dovetailed from excess server demand a couple of years ago to the current high demand on both high-performance compute and entry education level devices. Through that time Intel has aggressively increased its manufacturing capabilities to deliver more and more silicon, but even then, industry forces have made the current climate tough for that supply chain.
The Effect of Supply through 2021 on Customers and End-Users
Based on the rest of this year, Maurits explained that although 2021 will be better for Intel customers than 2020, the low point of the year is likely to be May, with the rest of the year seeing an uptick in supply. Despite saying this, Maurits was hesitant to put anything concrete in how that supply will change through the back half of the year, except that by the end of May there should be better visibility into the supply situation through Q3 and Q4.
A key point in the initial discussion was a dive into one of the critical elements of the current supply chain issues – substrate production. It was explained that Intel has had several decades working with its substrate partners and they know the business well, however Intel is not immune to the current limitations of substrate supply. Maurits details that new CEO Pat Gelsinger, in the first few weeks of his new role, has already been in detailed discussions about the substrate situation with Intel’s partners in an effort to fully understand the depth of the limitations, ultimately we presume to understand where investment is needed.
From the presentation:
On the supply situation, it’s always an easy answer from us to say that the demand is outstripping the capabilities we have because it’s so strong. That is great - we’ve been in this situation for a few years, in different scenarios of course, but we have transitioned from 14nm to 10nm which caused us so pain, which we’ve been open and transparent about. We’ve increased our capacity significantly and now we’re in 2021 and Intel partners say they cannot still get enough CPUs from us, so what is going on? Michelle (Johnston Holthaus, CRO) mentioned in the keynote that it’s the ecosystem itself – it’s a major challenge for 2021.
Just to peel that back a little bit, we mentioned the tiles - when you have the CPU tile or piece of CPU silicon and then when you traditionally look at the PC, you have a motherboard to put the CPU in, and then you start building the device around it. If you up-level it to the CPU, you basically have the silicon die, and you have the substrate which is like the motherboard for the die, which we put all the connections on we put the packaging around. That substrate is currently one of key things most of the challenges on supply is being impacted and that’s what you hear about the whole industry that it’s impacting everyone who is building silicon.
The good news is that Intel obviously has decades of experience of working with the ecosystem, working with the suppliers of substrates, so we are pretty healthy in terms of getting enough substrate for building the majority of our products. We still predict growth, but that doesn’t mean that we are immune for the constraints, the supply shortage and constraints on the substrates.
We will see implications on substrate and we try to be as transparent as we can be talking about our forecasts for our channel partners who are building their own devices here in the region. When we start looking at the second half of the year, we will be giving a little bit more guidance in the May timeframe on what the next quarter, Q3 and Q4, is going to look like.
There is tension in the system supply chain, but given the ecosystem investments that Intel has been doing, we are pretty confident that we are able to manage reasonably well through these tough times. But we’re not immune, but it’s important that we stay closely connected with our partners, we have the experience, and we will do our upmost to get the capacity into the hands of key customers.
Pat Gelsinger, in the early days of his new role, he met with the substrate foundries, getting with the key partners in the ecosystem, making sure he gets a very clear picture on what needs to happen and where we can help accelerate.
In the later part of the presentation, one of Intel’s EMEA customers also asked about expectations through the rest of 2021.
We will have more parts to sell in the local channels compared to 2020, but there will be constraints. From a desktop perspective we will have our challenges and we will have to make choices. The second quarter (April-June) is the most difficult quarter – we’ve been through April, and getting into May. I think May is, in my opinion, the toughest for us, if we look at what we’re getting into our countries, then in June or the later part of June, we’re starting these additional quantities coming in.
So my guidance is, I don’t have an answer. Q1 was pretty healthy from what I can see, compared to Q1 last year. Q2 I think is the toughest, and then in the second half we will start to increase again. Net, we will also have in our territory a higher output than we had in 2020, but we definitely will not be able to meet all the demand.
We have to make our own judgement call on what we can do, what we can’t do, make sure that if you work on, say, being a critical government tenders, educational projects, then work closely with the (Intel) account managers who can hopefully optimize and prioritize where we can.
But it’s not going to be a just ‘wait and see’ and place your order one day before you need them. It’s going to be a little bit tighter with forecasting. Let me give you one example here, not purely PC related but I was having a conversation with one of my sales leaders on FPGAs, and that’s a lifecycle that is pretty well planned out and people work and negotiate, and we now start to see companies and people placing orders six-to-nine months out because they now know that they have the orders, yes they don’t need to ship to the end-customer yet, but they want to start to make sure that they secure supply, so now because of the dynamics in the industry, you see everybody placing orders, trying to get parts allocated, so we (Intel) need to be also be clear and focused on what are our priorities and what do you need by when, so we can hopefully work together to better balance into the system.
We’re not immune to the whole ecosystem, and the governments here are playing an interesting role ringing their own alarm bells on what they need. But purely back to the PC demand, the simple answer is that the second half looks better than the first half, but truth to be told, May is probably the month where it’s the toughest for all of us.
There was also some discussion about Intel’s future graphics plans, however nothing new or concrete was given.
It's worth noting the fact that this was from Intel's Partner Connect event - this is not an end-user-focused event, but more an opportunity for Intel to interact with its distribution customers and partners. So everything said here is done within the context of Intel speaking to that group of individuals. The messaging to end-users is often similar but explained with a separate focus.
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