Not invulnerable to substrate shortages until 2021

As part of Intel’s Partner Connect conference last month, AnandTech has learned that information has been provided to customers and partners in Europe, Middle East and Asia (EMEA) regarding the current level of semiconductor supply during the remainder of the year. Intel is working closely with its major distributors and customers in each region to ensure that they have sufficient support to effectively sell to their customers, but the recent strong demand for semiconductors has put additional pressure on the company. Intel’s ecosystem, perhaps more than the period of high demand for server processors a few years ago. In a panel discussion led by Intel’s Managing Director for EMEA, Maurits Tichelman, it was highlighted that May should be a testing time for distribution, with the rest of the year still being subject to market forces. It was also mentioned that despite Intel’s decades of experience with peak demand, 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 the local level for each region, to get broader updates on Intel’s plans and distribution networks . The event is partly informative, educating partners on Intel’s overall growth strategy, but also an opportunity for Intel partners to interact directly with key sales managers, rather than just their own chain of sale. The event features numerous breakout sessions involving Intel’s portfolio, how Intel sees its business evolving, how Intel can help and accelerate the growth of its partners in a changing era, and the wide variety of Intel’s product portfolio. Intel that some partners might not have considered selling. In addition to this, there are a number of discussions around major Intel OEM partners, such as Dell, VMWare and others, as well as Intel partner programs that offer financial and marketing cooperation based on the numbers. of sales and expenses.

The EMEA session was hosted by Intel’s Managing Director for EMEA Region, Group Vice President of Sales, Marketing and Communications. The purpose of this session was to inform the local region of updates to Intel’s product portfolio, distribution channels and ultimately, in the current climate, the ability to adequately supply its customers with the hardware. necessary to meet localized end user demands. This scans the entire line, from boutique PC builders to suppliers of white-box educational machines, to integrated IoT or 5G solutions.

Maurits explained in detail how Intel’s period of high demand aligned between the excessive demand for servers a few years ago and the current high demand on high-performance computing devices and entry-level devices. Meanwhile, Intel has dramatically increased its manufacturing capabilities to supply more and more silicon, but even then, industry forces have made the current climate difficult for this supply chain.

The effect of the offer until 2021 on customers and end users

Based on the rest of this year, Maurits explained that while 2021 will be better for Intel customers than 2020, the low point of the year is likely May, with the rest of the year seeing an increase in l ‘offer. Despite this, Maurits was hesitant to put anything concrete into how this offering will evolve in the second half of the year, except that at the end of May there should be better visibility. the supply situation in the third and fourth quarter.

A key point of the initial discussion was a dive into one of the critical elements of today’s supply chain issues – the production of substrates. It was explained that Intel has worked with its substrate partners for several decades and they know the company well, but 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 had detailed discussions about the substrate situation with Intel partners in a bid to fully understand the depth of the limits we ultimately assume. to understand where the investment is needed.

From the presentation:

When it comes to the supply situation, it’s always easy to respond from us to say that the demand is exceeding the capacity we have because it is so strong. It’s great – we’ve been in this situation for a few years, in different scenarios of course, but we went from 14nm to 10nm, which caused us so much pain, which we have been open and transparent about. We’ve significantly increased our capacity and it’s now 2021 and Intel partners say they still can’t get enough CPUs from us, so what’s 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 take that off a bit, we mentioned the tiles – when you have the processor tile or the processor silicon chip, then when you traditionally look at the PC, you have a motherboard to install the processor, then you start to build the device that surrounds it. If you upgrade it to the processor, you basically have the silicon chip, and you have the substrate which is like the motherboard of the chip, where we put all the connections, we put the packaging around. This substrate is one of the key things right now, most of the sourcing challenges are being hit and that’s what you hear about the industry as a whole, that it’s having an impact. on anyone who builds silicon.

The good news is that Intel obviously has decades of experience working with the ecosystem, working with substrate vendors, so we’re pretty healthy in terms of getting enough substrate to build the majority. of our products. We still anticipate growth, but that doesn’t mean we are immune to constraints, supply shortages and constraints on substrates.

We’ll see implications on the substrate and try to be as transparent as possible when talking about our forecast 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’ll give a bit more guidance in the May period on what the next quarter, Q3 and Q4, is going to look like.

There are tensions in the system’s supply chain, but given the investments Intel has made in the ecosystem, we’re pretty confident that we’re able to handle these tough times reasonably well. But we are not immune, but it is important that we remain closely connected with our partners, that we have the experience and that we will do everything possible to put the capacity in the hands of key customers.

Pat Gelsinger, in the early days of his new role, he met with substrate foundries, met with key ecosystem partners, making sure he has a very clear picture of what needs to happen and where we can help speed up.

In the final part of the presentation, one of Intel EMEA customers also asked about expectations for the rest of 2021.

We will have more parts for sale in local channels compared to 2020, but there will be constraints. From an office perspective, we will have our challenges and we will have to make choices. The second quarter (April-June) is the most difficult quarter – we went through April and May. I think May is, in my opinion, the most difficult month for us, if we look at what we bring into our countries, then in June or at the end of June we start the arrival of these additional quantities.

So my advice is, I don’t have an answer. From what I can see, the first trimester was pretty healthy compared to the first trimester of last year. I think Q2 is the most difficult, then in the second half we will start to increase again. Net, we will also have in our territory a higher return than in 2020, but we will certainly not be able to meet all the demand.

We have to make our own judgment about what we can do, what we cannot do, make sure that if you are working, for example, on critical government tenders, educational projects, then work closely together with account managers (Intel). which can hopefully optimize and prioritize where we can.

But it won’t just be “wait and see” and place your order a day before you need it. The forecast will be a little more stringent. Let me give you an example here, not purely PC related, but I had a conversation with one of my FPGA sales managers, and it’s a pretty well planned lifecycle and people are working and negotiate, and now we’re starting to see companies and people placing orders six to nine months because they now know they have the orders, yes they don’t need to ship to the end customer yet , but they want to start making sure they are securing the supply, so Now, due to the dynamics of the industry, you see everyone placing orders, trying to get parts allocated, so we ( Intel) should also be clear and focused on our priorities and what do you need at what time, so that we can hope to work together for a better balance in the system.

We’re not immune to the whole ecosystem, and governments here are playing an interesting role in sounding their own alarms about what they need. But getting back to PC demand, the simple answer is that the second half looks better than the first half, but truth be told, May is probably the hardest month for all of us.

There have also been discussions about Intel’s future graphics plans, but nothing new or concrete has been given.

It should be noted that this was Intel’s Partner Connect event – it is not an end-user focused event, but rather an opportunity for Intel to interact with its customers. customers and distribution partners. So everything that is said here is done in the context of Intel speaking to this group of individuals. The message to end users is often similar, but explained with a distinct purpose.

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