Intel's UK boss: 'We should be in a healthy place in Q4'

Intel's UK boss Adrian Criddle spoke to CRN about why he isn't concerned about rivals taking advantage of its ongoing chip shortage

Intel's UK head has predicted that its third quarter will herald the end of the chip maker's ongoing supply issues.

Adrian Criddle, GM and EVP at Intel UK, told CRN that the company hopes to be better positioned by the time it reaches the fourth quarter.

"Whenever we go through a technological transition, we're trying to call the mix correctly on a forecast a couple of months out," he explained.

"We don't want to constrain customers…but we are working very hard to mitigate as many of those supply challenges as we can.

"We will see constraint through Q2 and into Q3, but as the factories and long lead time for silicone manufacturing catch up, we hope to be in a healthy place by the time we get to Q4."

Intel's rivals, notably AMD, have taken advantage of the industry stalwart's supply woes, particularly when it comes to cost-effective notebooks and tablets.

Criddle refused to comment on its competition but was nonchalant about losing any more market share.

"Looking at our Q1 results our client computing group (CCG) business grew four per cent year over year," he stated.

"We are selling a far richer mix because we are filling from the top; making sure we are fulfilling our clients with Core i7, Core i9 and Core i5 products.

"We probably are leaving a little bit of a gap at the very low end [of the market] - and I know some of our competitors would be aggressive to take that business - but as we get to the back end of the year we are making sure that we are working closely with our customers and partners to fulfil their demand requirements from us."

Intel's 2018 financial year saw it break a number of revenue records, with CEO Bob Swan optimistically predicting that its Q2 would see the end of the CPU shortage that has plagued the vendor.

Criddle pinpointed the unexpected demand for PCs from the commercial, SMB and government sectors in the past couple of years as the main driver of the vendor's supply constraints.

This demand, coupled with the manufacturing process that can take up to 24 weeks, has resulted in the ongoing chip challenges at Intel.

"We started seeing tightness of supply in the second half of 2018 and then went into official constraint in the back of that year," he explained.

"The main driver for this was that nobody at the start of 2018 forecast the growth back into the PC market in the commercial, SMB and government spaces.

"The combination at the back end of 2018 of more demand than anyone expected means it's taken us a while to catch up on production of our seventh-, eighth- and ninth-generation technology."

Competitor share is 'borrowed'

Dave Stevinson, MD of distie QBS software, told CRN that the supply constraints are more noticeable in the PC market and that the vendor has clearly been prioritising CPUs for high-performance compute (HPC) in datacentres.

"I believe Intel has lent the market to the competitors, but not given it, and when their supply chain kicks back in people will go back to it," he said.

"It has such a position that it can take whatever market share it wants because its technology is superior. AMD will gain some share - but it's borrowed."

Stevinson noted that supply issues can often be a "feast or famine" with customers making multiple bookings in order to get their desired number of chips, but this has a knock-on effect.

"For example, say you ask for 10 CPUs, but you can only get four," he explained.

"People now ask for 20 and get eight. Eventually, things will go back to normal and the people who overbooked will get caught out."

Not all Intel partners agree on this as Cory Lees, product marketing exec at Target Components, said that AMD's Ryzen CPUs can go "toe to toe" with Intel regardless of the current shortage.

"AMD has been handed the greatest opportunity it has had in the last five years," he said.

"Not only has it released some great processors with the Ryzen gen 1 and 2, it just happened to release these at the same time that Intel has a shortage.

"We work with several games developers and we have seen an increase in orders for AMD-based machines as they are now specifically programming games to utilise the AMD chipset and additional cores.

"As a system builder, we have seen an increase in demand for AMD-powered PCs at the entry level, as the AMD offers better value for customers."

Lees added that Target is not witnessing the same supply issues as it was last October and November.

"Supply of the higher-end processors is still plentiful, it's just the lower end where we are still experiencing some shortages and prices higher than would be expected in these performance brackets," he stated.

Pioneering UK

Though Intel does not break out the numbers for regions, the UK wing of the organisation had a "successful" Q1 when measured by the company's internal metrics, according to Criddle.

This was driven by investment in artificial intelligence (AI), increasing demand from corporate clients in the UK, demand for networking infrastructure as 5G is readied to roll out, and high-end gaming.

"With every customer we meet or opportunity we encounter, we are not constrained by the opportunity in the UK," Criddle stated.

"In the UK we are very flexible, adaptive and entrepreneurial. Our worldwide team looks to us to do some pilots and ground-breaking projects that can then be scaled worldwide.

"It's a country with lots of innovation, design, creation and capability. London, for example, has been identified as the second-largest hub for AI behind San Francisco - what a better place to be than being part of that AI revolution."

The run-up to the initial Brexit leave date of 29 March also played a hand in the vendor's Q1 fortunes, Criddle noted.

"In the UK we did see a little bit of anticipation of the 29 March decision, where inventory built across the channel in preparation of a deal or no deal," he explained.

Criddle expects that the relentless drive for digital transformation among UK businesses will neutralise any further impact from a possible Brexit for the remaining quarters of the year.

"I think there will be a little bit of ensuring that the purchases that happened in Q1 will be consumed by the market," he said.

"I think the retail market is down because people aren't buying larger-ticket items, but I think the transformation of businesses into the cloud, both on-premise and off-premise, and hybrid cloud [will drive demand].

"I think the continued migration to the latest secure operating systems and applications is driving business consumption of technology, servers, infrastructure and PCs.

"From our own point of view, we have had a project team on Brexit and are well prepared for a variety of scenarios. We will be able to support our customers and we expect little operational disruption based on the plans we've put in place."