Apple, AMD, and Intel shift priorities as chip shortages continue

Cartoon hands reach for a cartoon computer processor being dangled above them.
Enlarge / Sure, it’s cheaply produced clip art… but it’s also a disturbingly accurate picture of the current state of supply and demand in the semiconductor product market.

2021’s infamous chip shortages aren’t only affecting automakers. In a post-earnings conference call Tuesday, Apple CEO Tim Cook said, “We’ll do everything we can to mitigate whatever circumstances we’re dealt”—a statement that likely means the company will ration its chip supplies, prioritizing the most profitable and in-demand items such as iPhones and AirPods, at the expense of less profitable and lower-demand items.

CFRA analyst Angelo Zino told Reuters that Cook’s somewhat cryptic statement “largely reflects the timing of new product releases”—specifically, new iPhone releases in September. Counterpoint Research Director Jeff Fieldhack speculates from the flip side of the same coin, saying the company will likely direct supply chain “pain” to its least lucrative products. “Assuming Apple prioritizes the iPhone 12 family, it probably affects iPads, Macs, and older iPhones more,” Fieldhack said.

Processor manufacturer AMD has also been carefully managing its supply chain in response to pandemic-induced shortages. With flagship products that finally outperform rival Intel’s, AMD is focusing on the more profitable high end of the market while leaving the economy segment—until a few years ago, its strongest performer—to Intel. “We’re focusing on the most strategic segments of the PC market,” CEO Lisa Su told investors on a conference call.

Apple and AMD are two of semiconductor foundry TSMC’s largest customers—but the problem isn’t limited to TSMC. Intel, which operates its own foundries, acknowledges supply problems of its own. Intel CEO Pat Gelsinger told the BBC that shortages will get worse in the second half of 2021—and that it will be “a year or two” before supplies return to normal.

Gelsinger played up the importance of building new foundries, as Intel is currently doing in Arizona. But he warns that the foundries will take time to get up to speed and begin alleviating shortages—predicting “a year to two years until we’re back to some reasonable supply-demand balance.” This news arrives on the heels of a delay Intel announced this week for its forthcoming 7 nm process, now not expected until 2022.

In some ways, Intel may actually benefit long-term from the pandemic-related supply chain shortages. Although Intel is falling behind rivals AMD and Apple in both performance and power efficiency, the market can only move so far in the absence of supply.

With all vendors selling essentially every processor they can build, Intel’s long-standing ability to produce 80 percent of the world’s x86 desktop CPUs and 90 percent of x86 data center CPUs cements its place in the market—for now—despite ceding performance crowns to its rivals.