Intel’s processor shortages have impacted enterprise PC sales, meaning IT leaders may not be able to refresh some legacy Windows 7 PCs before support ends.
Intel has been experiencing central processing unit (CPU) supply constraints throughout 2019, which is having a knock-on effect on the ability of some of the major enterprise PC manufacturers to fulfil orders for the replacement of older PCs in their customers’ Windows 7 estates.
As Computer Weekly has previously reported, organisations have until 14 January 2020 to update corporate PCs to Windows 10, before Microsoft pulls the plug on support for Windows 7. While many businesses have had years to prepare for this end of support deadline, the pace of upgrading to Windows 10 is often driven by the IT department’s PC replacement cycle. In fact, during 2018 and 2019, sales of enterprise PCs were boosted by Windows 10 upgrades.
Intel said it has been putting in place additional manufacturing capacity to meet demand. But given that a large proportion of business PCs are powered by Intel processors, any delay in the fulfilment of new orders from the leading PC manufacturers that use Intel chips has an impact on IT departments’ Windows 10 plans.
According to one expert Computer Weekly spoke to, large enterprises that have kept their PC supplier in the loop regarding placing large orders should be able to ride the processor shortage. However, new orders may well end up at the back of the queue, as PC suppliers are unable to give guarantees that orders will be ready to meet the deadline.
At the end of November 2019, both Dell and HP Inc admitted their ability to ship Intel-powered enterprise PCs was materially impacted by the ongoing shortage of Intel processors.
During its Q3 2019 results, Intel CEO Bob Swan acknowledged the issues would continue well into 2020. In a transcript of the earnings call, posted on the Seeking Alpha financial blogging site, Swan said: “As we see fourth quarter, we’re still going to be a constraint in our customers’ growth, which is absolutely where we do not want to be. But with the higher demand, we will be constraining their growth in the fourth quarter.”
In a letter seen by Computer Weekly, Intel admitted that sustained market growth in 2019 had outpaced the company’s efforts to add extra manufacturing capacity, which has meant that demand for Intel-powered PCs exceeded third-party forecasts. “Supply remains extremely tight in our PC business where we are operating with limited inventory buffers,” the letter stated.
Swan said that during 2020, Intel would be building out 25% capacity to manufacture 14 nanometer and next generation 10 nanometer processors. “We expect to be able to do a mid-to-high single-digit unit volume growth next year and that we don’t expect the market to grow that fast. But we need to have more inventory buffers so we’re there when our customers need it.”
He admitted that Q4 would remain a challenge for processor supply. “In 2020, we expect to be able to rectify things,” he said.
PC manufacturers are not confident all the processor supply issues will be rectified. HP Inc CEO Enrique Lores told analysts during the company’s Q4 2019 earnings call posted on Seeking Alpha that the availability of Intel processors will be constrained through the first full half of 2020.
In the transcript of Dell’s Q4 2019 earnings call, posted on Seeking Alpha, chief financial officer Thomas Sweet discussed how two-thirds of its customers had gone through the Windows 10 refresh cycle. He anticipated the refresh would spill over into the first half of next year given the continued challenges within Intel supply.
Chip evolution makes matters worse
Alan Priestley, vice-president and analyst at Gartner, said: “IT purchasers are advised to work closely with their PC suppliers to understand the suppliers’ ability to supply specific products. Providing suppliers with a good forecast of future demand is also strongly advised to ensure they can provide Intel with accurate forecast.”
According to Gartner, PC products using older generation processors may be in shorter supply than those using the latest generation. “IT purchasers should ensure they have validated and can deploy latest generation PCs rather than continuing to specify older products,” said Priestley.
He pointed out that PC vendors also regularly transition their products to new processors. “Irrespective of Intel’s supply situation the PC supplier may not have older generation products available,” he said. To combat the Intel processor supply problem, Priestley said: “Where available, it is also worth evaluation the use of AMD-based PCs as an alternative to Intel based PCs.”
However, the leading PC makers tend to power their enterprise PCs with Intel chips and while they may use alternative CPUs, the majority of their PC products are Intel-based. We continue to be committed to using multiple CPU providers.
“We are working with other suppliers,” said HP Inc’s Lores. “We have been growing the mix of other categories, but Intel is still a very large part of our portfolio and therefore there are shortages. We need to navigate through those and manage our business that way.”
This means many IT departments are likely to stick with Intel-based PCs. But with continued supply issues, some are unlikely to complete their Windows 10 refresh programme before Microsoft ends support.
To get around the supply problems, it’s believed that in the PC channel, prioritisation is being given to new PC shipments relating to Windows end of support.