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Intel’s Love Affair With Apple Set To Hurt PC Supply

Intel’s love affair with Apple could have a “profound” impact in Australia with retailers set to struggle to get Intel powered notebooks and businesses having to wait months for PC’s.

The problem is that Intel who struggled to break into smartphone market with several big brands rejecting the Companies technology in favour of Qualcomm have won a deal to supply modem chips for Apple iPhones after they fell out with Qualcomm. Now as a result and as a direct result of cutbacks including the shrinking of their Australian operation, Intel is unable to supply volume production of both PC processors and modem chips at a time when the market is seeing a PC resurgence.

According to insiders that ChannelNews has spoken to Apple is also “favouring” US PC makers Microsoft, Dell and HP, over Asian brands such as Lenovo, Acer, MSI and ASUS, though Lenovo may be sparred “because of their volume” said one insider.

Intel’s exclusive deal to provide modem chips for new iPhones follows claims by Qualcomm that Apple owes them over $10 Billion in none payment of royalty fees. The matter is before the US Courts.

According to Nikki Asian Review Intel’s focus on Apple orders will weigh on the PC market just as it starts to show signs of recovery.

A PC supply chain source told Nikkei that “all the PC vendors are facing a tough situation this Christmas season. It’s a big headache.” The world’s top four PC makers — Lenovo Group, HP, Dell and Apple — may suffer less than smaller vendors like Acer and Asustek, since the front-runners’ larger shipment volumes give them more bargaining power to secure chips from Intel.

Intel’s chief financial officer and interim CEO, Bob Swan recently admitted that Intel was facing “pressure on our factory network” and “tight” supply of processor chip products.

Swan blamed the shortage on stronger-than-expected demand for PC and data center chips. He promised to prioritise high-end offerings for servers, gaming and other applications, while acknowledging tightness in supplies of processing units for low-end PCs.

The problem has also seen several manufacturers turn to AMD for processor supply.

“The iPhone modem chips use the same 14-nanometer-process technology that Intel adopts to make PC core processors, and it’s the first time that Intel has moved to manufacture the componennts in-house,” according to a supply chain source familiar with the matter.

“It really adds big pressure on Intel’s factories making 14 nm chips that are already very tight because of the delay of its next-generation 10 nm chip production technology.”

Intel became the sole supplier of iPhone modem chips in 2018.

Intel generated $1.2 billion in revenue from the segment including modem chips in the July-September quarter, according to the company, compared with well over $700 million in the same period last year.
Intel declined to comment.

Modem chips are crucial components that determine the quality of phone calls and data transfer speeds. Intel has long hoped to diversify away from its PC business, which still generated about half of its revenue in July-September quarter. But it had trailed rivals including Qualcomm and Taiwan’s MediaTek in making energy-efficient chips for mobile devices said NAR.

Acer and Asustek are more vulnerable, as they make cheaper laptops.

Both saw year-on-year declines in shipments for the first three quarters of 2018, according to research firm Gartner. Acer shipped nearly 4% fewer units, while Asustek’s PC volume fell more than 14%. HP, Lenovo and Dell all saw some growth in shipments in the first nine months of this year.

The PC industry saw its first quarterly shipment growth in six years in the April-June quarter — a 2.7% increase — yet it soon fell into decline again in the three months ended September, according to research company IDC.

For the first three quarters of 2018, worldwide PC shipments rose 0.55% to 190.02 million units, marking the first recovery since 2012, IDC data shows. But a shortage of Intel central processing units will loom over PC sales in the upcoming holiday season.

Acer said it cannot comment on behalf of Intel on the supply of CPUs but is working closely with the chip provider to mitigate the impact.