PC makers like Dell Technologies Inc (NYSE:DELL) and HP Inc (NYSE:HPQ) lowered guidance for 2020 on the shortage of CPUs from Intel Corporation (NASDAQ:INTC). According to Dell and HP, the supply of CPUs from Intel is getting worsened quarter after quarter. Though Intel issued an apology to Dell and HP for the chip shortages, its strategy is not clear because the chipmaker issued strong guidance for Q4 2019. Intel said the demand for CPUs is more than its installed capacity. The company is depending on contract manufacturers to meet the growing demand for its CPUs.
Chip shortages show a negative impact
Jeffrey Clarke, Vice Chairman of Dell, said the shortage of CPUs would hurt the future revenues. Dell will also suffer from a dent in Q4 PC shipments in the consumer segment. The company reported stronger revenues of $11.41 billion (up 4.6%) in Q3 2019.
HP reported revenue growth of 4% in Q4 2019. However, its PC sales expected to decline in Q1 2020 because of CPU supply worries. The company expects to face an uphill in meeting the demand for Christmas and holiday season. CFO of HP, Steven Fieler, said supply constraints of CPU will harm on the personal systems business. It expects a drop in revenues from Q4 2019 to Q1 2020. HP stock trades at $20.36 (up 1.50%) in premarket on November 27, 2019.
Advanced Micro Devices at an advantage
HP and Dell expect to meet the CPU supply needs from Advanced Micro Devices, which is waiting for the opportunity. Advanced Micro already proved to be a reliable supplier when compared to its rival Intel, which is struggling to meet the demand for CPUs.
Intel partners with MediaTek for 5G modems
Intel entered a pact with Mediatek for 5G solutions. As part of the deal, Intel will provide the specification of 5G solution, and Mediatek develops and delivers the 5G modem. Intel will validate and optimize 5G technology and provide engineering support to the OEM partners. HP and Dell will be the first OEMs to use the 5G solution of Intel and Mediatek and ship the laptops in 2021.