Intel this week reiterated that it cannot meet demand for all of its client and data center processors due to insufficient supply, and specifically mentioned that it could use more Core Ultra 200-series Arrow Lake and Lunar Lake wafers to increase shipments of appropriate processors. Logic tiles of both CPUs are made by TSMC, whereas packaging is performed by Intel in-house, so when placing orders with the foundry, Intel was more conservative than it should have been.
"If we had more Lunar Lake wafers, we would be selling more Lunar Lake, if we had more Arrow Lake wafers, we would be selling more Arrow Lake," said John Pitzer, Corporate Vice President of Corporate Planning and Investor Relations at Intel, at UBS Global Technology and AI Conference 2025. "I think we feel pretty good about where we are in the AI PC transition."
While the PC market is no longer growing at a high pace, demand for client systems appears to be so strong that Intel cannot meet it. One of the reasons for this is that the company outsources production of chiplets for Arrow Lake and Lunar Lake processors to TSMC, and the allocation of wafers that Intel has access to is not enough for the company to meet demand for its products.
Both Arrow Lake and Lunar Lake use TSMC's N3B (3nm-class) manufacturing technology, which is one of the most sophisticated production nodes that the foundry has. TSMC's advanced fabs tend to be fully utilized, so Intel cannot get extra capacity quickly. Therefore, while the company expects growth of Arrow Lake and Lunar Lake supply in the fourth quarter and onwards, it did not say that it would be enough to meet all of the backlog demand. The good news: Intel has enough LPDDR5X memory for its Lunar Lake CPUs that carry on-package DRAM, so the company's costs for these CPUs are not going to increase in the short term.
That said, it remains to be seen whether and when Intel hikes prices of its client CPUs over time amid insufficient supply, high DRAM prices, and DRAM shortages.
Although Intel has invested billions in equipping its fabs with the latest equipment, such as ASML's EUV lithography tools, the majority of Intel's fabs can only produce chips on its 10nm-class process technologies — such as 10nm SuperFin and Intel 7 (aka 10nm Enhanced SuperFin) — using DUV tools. As a consequence, the company cannot meet all the demand for its Xeon 6 'Granite Rapids' processors that use Intel 3 fabrication technology.
"The vast majority of our capacity today is still on Intel 7, 10nm and that is why we are tightest there," said Pitzer. "Quite frankly, if we had more Granite [Rapids] wafers, we would be selling more Granite Rapids. We feel very good about where we are in the initial phase of the Granite [Rapids] ramp, which is our latest generation server part."
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This is not the first time that Intel has complained that it cannot meet demand for all of its products. At its most recent earnings call, the company said it reallocated its internal Intel 7 wafers for Xeon 6 'Granite Rapids' processors that use Intel 7-based I/O tile.
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