Sandy Bridge problem means tough Q1 for PC market

Intel's damage limitation efforts likely to save face, but what will PC vendors do?

Tags: DesktopsIntel CorporationMicroprocessor
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Sandy Bridge problem means tough Q1 for PC market Intel won't resume full volume of manufacturing of the flawed support chipset until April.
By  Mark Sutton Published  February 5, 2011

Intel announced last week that a flaw in the supporting chip set for its new Sandy Bridge processor would mean a partial recall of Sandy Bridge systems, that could cost the chipmaker up to $1 billion dollars in recall and replacement and lost revenues.

More importantly, while the problem has already been fixed, and Intel says it identified the problem before it had shifted many units, there remains the question of the cost to the wider PC industry as a whole.

It seems unlikely that Intel's reputation with the consumer will suffer too badly. The problem was spotted, Intel communicated the problem in a timely fashion and was able to announced that it already had a fix. The problem had been caught early enough after the launch of Sandy Bridge, the next-generation of quad-core Core i5 or Core i7 processors, that Intel had not ramped up to ship large volumes, but Intel says 8 million had shipped so far.

The flaw does mean a complete recall of systems however, leading vendors including Dell, HP, Acer, Asus, Lenovo, MSI and Toshiba to announce provisions for a recall.

Of course, the recall, and loss of revenue while chips production is restored to full capacity, will hit Intel, but this is a company that posted full year revenue of $43.6 billion in FY2010, so it's a hit it can afford to take.

The real issue, as I see it, is that there was a lot of expectation around the Sandy Bridge line, with many companies pinning their hopes of a desktop PC market recovery on Sandy Bridge. The launch of Sandy Bridge at CES was highly anticipated, and generally well received, creating some excitement in the press and the market as a whole. The worldwide PC market did make it back to double-digit growth of 13.8% in 2010, after single digit growth in 2009, but Q4 2010 missed expectations, with only 3.1% growth compared to the quarter in 2009, according to preliminary figures from Gartner. The poor results were most attributed to weak consumer sales, but the fact that the industry missed a usual strong performance in Q4 off the back of seasonal sales does not bode well.

Now, with no shipments of Sandy Bridge expected until the end of this month, and volumes not recovering until April, vendors are faced with a ‘hot' new processor that they can't sell yet. HP has said that it will re-evaluate its PC product roadmap, but while it could prove to be an opportunity for AMD and its Fusion processor, if vendors push those systems instead, it seems most likely that product lines will be put on hold until the fixed chips are available. A month or two hold on manufacturing, and a lack of highly-anticipated Sandy Bridge systems, is not going to help lift the market in 2011.

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