Print 15 comment(s) - last by Samus.. on Dec 21 at 4:16 PM

Intel will likely receive boost in opposite direction once shortage ceases and OEMs rebuild their inventories

Globally, personal computer sales and market demand continues to rise, posting their fourth consecutive quarter of growth.  You'd think Intel Corp. (INTC), the world's largest maker of personal computer central processing units, would be celebrating.  Instead its financial staff are reporting some unpleasant news.

Intel announced yesterday that it was dropping its outlook for fourth-quarter revenue from $14.7B±$500M USD to $13.7B±$300M.  GAAP and non-GAAP gross margins also dropped half a percentage point.  The cuts were due to shrinking microprocessor sales.

It turns out that the recent flooding which ravaged Vietnam, producers of one quarter of the world's hard drives, is still sending shockwaves through the personal computing market.  Hard drive shortages have hit the OEMs hard.  As they can't build computers without hard drives, they've turned to pushing much of their backup inventories onto the market.

wet hard drive

Meanwhile, the OEMs have cut their CPU orders from Intel to lower levels.  Sales won't be restored until the hard drive supply picks up again and the OEMs begin to rebuild their inventories.  

The good news is that Intel could enjoy a very strong H1 2012, the exepcted timeframe where the hard drive market will return to normalcy.  OEMs will be trying to build up their stock, while meeting the growing demand at the same time, and that adds up to a lot of component purchases.

In that sense, this revenue drop looks be more of a deferment that a true loss of business.  That said, it is still a painful one for Intel's investors.  The company's stock fell  1 a quarter percent following the news, which aired lated yesterday.

Source: Intel

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By Flunk on 12/13/2011 11:29:01 AM , Rating: 3
As they can't build computers without hard drives

Of course they can, they just can't sell many of them because most people are looking for a computer in the $300-500 range and if a 240GB SSD is $400 alone you can't possibly get a system with one of those installed into that price range.

RE: hmmm....
By Dr of crap on 12/13/2011 12:33:42 PM , Rating: 2
Well then now would be the time to push the SSDs and if volume goes up, price comes down.

Maybe even cut the cost to sell even more, and reap the benefits of big volume later.

RE: hmmm....
By ilt24 on 12/13/2011 12:52:29 PM , Rating: 2
Well then now would be the time to push the SSDs and if volume goes up, price comes down.

you could cut the price in half for SSDs, but the increase over the price of a HDD would still be significant especially when your looking at sub $500 PC's.

..also, most of the missed sales in Q4 will show up as a bump of sales in Q1 or Q2 of next year once the HDD supply line gets fixed, so they probably don't see the need to slash SSD prices to get the sales earlier.

RE: hmmm....
By Da W on 12/13/2011 1:43:58 PM , Rating: 2
For most people a 240GB SSD would be sufficient.

RE: hmmm....
By MrTeal on 12/13/2011 3:53:01 PM , Rating: 2
Only in the long term. There are only so many fabs making NAND flash right now, and the SSD market is still fairly niche compared HDDs. There's only so much flash out there and fabs are expensive and time consuming to build, so it's not like they could just transition people over to SSDs. We're stuck with hard drives for awhile

According to Gartner, in 2010 the NAND industry produced just over 11 exabytes of flash, of which ~10 exabytes went to consumer devices like smartphones, tablets and SD cards. Only 0.86 exabytes was used in SSDs. They predicted production rising to 21 exabytes in 2011, with 91% of that going consumer devices.
Total laptop storage for 2011 is expected to be 91 exabytes with an average capacity of 350GB, so even if the 1/10th of just the laptops out there started shipping with 120GB SSDs instead of mechanical drives, you'd need an extra 3.2 exabytes of NAND production. That doesn't even factor in desktops. There just isn't the extra capacity to move a decent percentage of computers over to SSDs, even with an almost doubling of capacity from 2010 to 2011. According to the numbers I read, the capital cost to build a fab to produce 3.75 exabytes is about $10 billion, so it's not like they can be brought online quickly.

I'm not convinced
By bug77 on 12/13/2011 11:18:06 AM , Rating: 2
Sure, pricier HDDs mean less computers sold, but it also means more computers sold with an SSD. $1B hit seem a bit of a stretch to blame on the flooding.

RE: I'm not convinced
By Samus on 12/13/2011 11:51:11 AM , Rating: 2
I completely agree.

It's pretty obvious Tablet sales and AMD 'Fusion' E350-E450 and C50/C60 sales have hit Intel's bottom line in that less computers overall were sold (because Tablets are denting PC sales) and Intel has no competitive solution for the $300-$500 price segment. If you are lucky, you might land a low-end i3 at that price, but most laptops, especially sold on BF, were AMD laptops.

RE: I'm not convinced
By IntelUser2000 on 12/14/2011 1:28:18 AM , Rating: 2
It's said that the Thailand flood can affect 30% of the entire HDD supply.

Imagine what happens to AMD that are only in bottom-barrel pricing systems that almost always use HDD, if Intel with much more diversified lines are impacted like this.

The cheapest laptop in Newegg is a $379 one that's based on Pentium with Sandy Bridge core. That'll kick ass of E-350/E-450 in both CPU AND graphics performance.

So AMD loses not only because Intel has a formidable lineup even in the low end, but again because of this HDD shortage.

What about the Tablet market?

Say what? It's actually an "iPad" market?

Delusional people are delusional.

RE: I'm not convinced
By Samus on 12/21/2011 4:16:11 PM , Rating: 2
Your name makes your post biased and irrelevant. Try, try again.

By yomamafor1 on 12/13/2011 10:54:46 AM , Rating: 4
It turns out that the recent flooding which ravaged Vietnam , producers of one quarter of the world's hard drives, is still sending shockwaves through the personal computing market.

I thought it was Thailand that suffered from flooding? The link also goes directly to the news story about Thailand flooding.

RE: Vietnam?
By Phynaz on 12/13/11, Rating: -1
RE: Vietnam?
By Hieyeck on 12/13/2011 3:17:02 PM , Rating: 2
Give it up. Mick's vastly improved from his fear-mongering days. Anyone would slip up once or twice after hammering out and editing half a dozen articles.

RE: Vietnam?
By Cypherdude1 on 12/14/2011 7:42:45 AM , Rating: 2
It turns out that the recent flooding which ravaged Vietnam, producers of one quarter of the world's hard drives, is still sending shockwaves...
Thailand, it's Thailand. Ya made a wrong turn there bud.

Knowing that part of the world is subject to strong storms and flooding, it's kind of a strange place to build high tech plants. Now we're stuck with doubled up prices for the foreseeable future. I guess now SSD's will be more attractive, considering they're 10 times faster.

By autoboy on 12/13/2011 1:41:30 PM , Rating: 2
I wouldn't blame all the downturn on the shortage. Some of it may be that Intel is taking some accounting losses while it has an excuse for them. The stock price is already down so why not take some extra losses on your balance sheet this month while everyone assumes you are going to be down this quarter due to a situation out of your control.

By JonnyDough on 12/13/2011 3:17:11 PM , Rating: 2
So because Intel says it makes it news...

You know, this applies to hardware vendors of all types. Intel seems to be grabbing press and/or making excuses.

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