PC Makers To Bear Brunt Of Intel Chipset Recall

Some analysts argue that the financial troubles caused by Intel’s recall of a flawed chipset will be borne by OEMs

PC makers are starting to plan how they’re going to deal with the ramifications from Intel’s chipset problem.

Intel executives announced on 31 January that a design flaw in a supporting chipset tied to the company’s “Sandy Bridge” Core-i processors is forcing a recall of the chipset. The recall could cost Intel $1 billion (£619m) in lost revenue and related expenses and delay the release of a fixed chipset until late February, with full production coming in April at the latest.

8 million flawed chipsets shipped

About 8 million of the flawed chipsets have been shipped, according to Intel, though executives say they expect few have reached consumers. They said they made the decision to stop shipping the chipsets in question on 30 January and began talks with OEMs the next day.

Those PC makers are mapping out strategies to deal with issues, ranging from product roadmaps to costumer concerns. Samsung Electronics reportedly is offering full refunds to customers who bought PCs with the flawed chipset, company spokesman James Chung told The Wall Street Journal. He said six PC models – including one in the United States – carried Intel’s 6-Series chipset, also known as “Cougar Point”, and upwards of 3,000 of these PCs were sold to customers. Chung said Intel would likely foot the bill for the replacement costs.

Other vendors, including Dell, Acer and NEC, also are weighing their options. An Acer spokesperson said the company had recently begun shipping models with the Cougar Point chipset to retailers and that the company is working with the retailers to see if customers bought any of those PCs.

“We will be collaborating with Intel to rework any systems with the affected parts, and we expect to have an update by end of day [2 February] about any potential impact to consumers and the associated recall plan, should one be required,” the spokesperson said in an email to eWEEK. “Because we are still early in the launch cycle for our Sandy Bridge product line, we expect the impact to Acer’s business and our customers to be minimal.”

A Dell spokesperson said the company had four current products that were affected: the XPS 8300, Vostro 460, Alienware M17x R.3 and Alienware Aurora R.3. In addition, three other planned products, including XPS 17 with 3D, also were affected.

“Dell and Intel are in communication regarding the design issue,” the Dell spokesperson said in an email to eWEEK. “Dell is working to address concerns of customers who have purchased affected systems.”

OEMs to bear the brunt

The issues reportedly also may delay the release of the next Apple Macbook Pro, which analysts said could be powered by Intel’s Sandy Bridge chips.

Charles King, an analyst with Pund-IT Research, said that for Intel, the chipset problem is “a relatively minor blip”. The problem, which the chip maker caught early in the cycle, only affects mid- and high-end Core i5 and i7 consumer systems that have been sold in January.

“While the cost of the fix isn’t insignificant … it’s all relative to a highly profitable company like Intel,” King said in an email to eWEEK. “Any joy [rival Advanced Micro Devices] or other Intel competitors enjoy will be relatively short-lived, and I expect the PC industry will get back to business as usual in a few weeks.”

However, he said, it is the OEMs who will “bear the brunt of this, both in facilitating consumer exchanges and repairs and in pulling/fixing stock that has been manufactured but not shipped”. King said he expects Intel to pay back the PC makers for their time and expenses.

Intel rolled out its 32-nanometre Sandy Bridge platform – which the company calls its second-generation Core-i chips – at the Consumer Electronics Show 2011 in early January. The chips offer discrete-level graphics technology integrated onto the same piece of silicon as the CPU, rivaling AMD’s Fusion platform, which also launched at CES.

Intel executives on a 31 January conference call with analysts and journalists said there was no problem with the chips themselves, only with the 6-Series chipset. According to the company, a design flaw in the SATA (Serial ATA) ports in the chipset could over time cause problems in the performance of such PC components as the SATA hard disk drive or optical drive.

Quality tests

The Intel executives said the chipset passed its quality tests, as well as those of OEMs. However, after the company started to ship the chipsets, there were complaints about some of them. Intel conducted tests again last week, and a team of engineers found the problem and developed a fix. Intel officials said that the issue could affect anywhere from 5 to 15 percent of the chipsets made.

Roger Kay, an analyst with Endpoint Technology Associates, told eWEEK 31 January that the situation was “a very technical thing that has a very direct financial effect”. The real beneficiary, at least in the short-term, was AMD, which saw its stock price climb after Intel’s announcement and gained a little leverage in the system-on-a-chip competition with Intel. AMD’s Fusion APUs (accelerated processing units) also feature graphics and CPUs integrated on the same die.