Intel Delays 'Sapphire Rapids' Xeon Data Center Chip

Ian King (Bloomberg) -- Intel said this week that a new version of its Xeon server chip line will go into production in 2022, rather than by the end of this year as promised, the latest in a series of delays that have cost the company technology leadership of the chip industry.

Intel's stock fell, while its rival Advanced Micro Devices Inc. rose after Intel said Tuesday that a chip design, code-named Sapphire Rapids, will begin production in the first quarter of 2022 with the “ramp” beginning the following quarter. The world’s largest chipmaker previously said the new version of its most lucrative product line would start to be manufactured this year.

Chief Executive Officer Pat Gelsinger has pledged to return Intel to a dominant position in computer processors and reassert the company’s once unassailable lead in semiconductor manufacturing. Multiyear delays in the introduction of new technology by Intel have ceded leadership to rivals. Gelsinger, who promised the new chip would arrive this year as recently as April, last week replaced the head of Intel’s server chip unit in an executive shake-up.

“Given the breadth of enhancements in Sapphire Rapids, we are incorporating additional validation time prior to the production release, which will streamline the deployment process for our customers and partners,” Intel Vice President Lisa Spelman said in a post on the company’s website. “Based on this, we now expect Sapphire Rapids to be in production in the first quarter of 2022, with ramp beginning in the second quarter of 2022.”

Intel shares declined 1.3% to $56.75 at the close of New York trading while AMD gained 2.8% to $89.52. Intel’s slide limited overall gains by chip stocks. The Philadelphia Stock Exchange Semiconductor Index rose less than 1%.

Given the delays to the 10-nanometer manufacturing process and holdups in bringing its replacement online, the latest announcement will cause concern about further decays in Intel’s competitive positioning, according to Sanford C. Bernstein analyst Stacy Rasgon.

“A less charitable explanation, however, is that the company’s competitive positioning is worsening, and that the downside associated with delaying Sapphire Rapids (both for the products and, it should be said, for the stock) is perceived by management to be less that what would be experienced by launching earlier with a less competitive product,” he wrote in a note to clients. “Recent executive changes in the datacenter business may feed into this as well.”

Intel’s data center unit until recently had more than 99% of the market for chips that are the heart of corporate networks and internet infrastructure. Such processors can sell for the price of a compact car and are the company’s most profitable offerings. Regaining a foothold in that market has been a key part of the turn around in AMD’s fortunes under Chief Executive Officer Lisa Su.

The smaller company is projected to report a 50% increase in revenue this year following a 45% surge in 2020. Intel is one of the few major chipmakers that will suffer shrinking sales, according to analysts’ estimates.