Sales of personal computers have been sluggish in the recent quarters, which decreased revenue of PC makers and PC hardware manufacturers. Apparently, Intel Corp. has prepared for slow demand for PCs and significantly reduced shipments of its central processing units in the first half of the year, draining inventory at PC makers. As a result, the company can now sell more “Skylake” processors.
Traditionally, Intel Corp. ships more central processing units in the first half of the year to prepare for increased demand for personal computers in the second half. In fact, the chip giant ships more CPUs in the first half than PC makers and other partners can sell. The tactics allows manufacturers of computers to assemble enough systems for the back half of the year. However, this year new processors from Intel and new operating system from Microsoft were released in the second half of the year, which means that demand for PCs was expected to be low in the 1H 2015. As a result, Intel changed its traditional tactics this year.
“Our analysis suggests the company has in fact been draining channel inventory in the first half of the year, in stark contrast to their typical pattern (namely, first half channel builds, followed by second half channel drains), in a market where PC vendors themselves are also flushing inventory, and suggesting the idea of a 2H fill on the back of Windows 10 and Skylake may not be entirely crazy,” wrote Stacy Rasgon, an analyst with Bernstein Research, reports Tech Trader Daily. “In 1H 2015 Intel seems to have under-shipped the PC market by ~three million units, versus their normal behavior to over-ship by ~eight million, suggesting ~two weeks of inventory out of the channel vs where they would normally be positioned.”
Since PC makers may not have enough microprocessors in stock right now, they will need to buy Intel’s new chips, thus increasing revenue of the chip giant. Such situation also helps Intel to maintain its prices despite of slow demand for PCs. In addition, it helps to transit to newer “Skylake” platforms faster, which is a good news for the industry in general.
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KitGuru Says: Keeping in mind slow demand for PCs, it made a great sense for Intel to drain inventories of old chips in the first half of the year. This greatly helps Intel and the industry to transit to “Skylake” processors, DDR4 memory, Windows 10 operating system and new PC platforms faster. On the other hand, this increases pressure on smaller PC makers as well as Advanced Micro Devices.