Intel is facing a crisis of supply and demand in the processor market, but it's prioritizing its high-margin server chips. The company reported its earnings for the fourth quarter of 2025 yesterday, revealing that year-over-year revenue was down nearly imperceptibly to $52.9 billion, while quarterly revenue dropped about four percent to $13.7 billion.
In a surprising move, Intel is shifting its focus from consumer chip production to data center chips, citing high demand in the market. The company's client computing group, which sells Core processors and other consumer products, saw a 7% drop in revenue for the quarter. However, Intel's data center division reported a 9% increase in revenue, driven by strong demand for its server processors.
Intel is having trouble meeting demand for its consumer chips due to supply constraints. To address this issue, the company is allocating more of its production to server chip manufacturing. According to CEO Lip-Bu Tan, yields are still below what he wants them to be, but they're improving monthly by 7-8%.
The company's internal wafer supply is being prioritized for data center applications, while consumer chips will be manufactured externally. This move may lead to shortages and higher prices for consumer processors, such as the upcoming Core Ultra Series 3 processors.
Intel's strategy is focused on addressing its supply constraints in the short term. The company expects to improve its position in the market by selling more of its Lunar Lake and Arrow Lake chips for consumers, as well as Granite Rapids chips for data centers.
In the long term, Intel is working on future manufacturing nodes, including different versions of the 18A process and the upcoming 14A process. If external customers decide to use these facilities, Intel expects to build out its manufacturing capacity based on demand.
The company also announced that it will have its first next-generation Nova Lake chips ready by the end of 2026, which will cover both desktop and laptop processors. Part of the chip will be manufactured using the 18A process.
In a surprising move, Intel is shifting its focus from consumer chip production to data center chips, citing high demand in the market. The company's client computing group, which sells Core processors and other consumer products, saw a 7% drop in revenue for the quarter. However, Intel's data center division reported a 9% increase in revenue, driven by strong demand for its server processors.
Intel is having trouble meeting demand for its consumer chips due to supply constraints. To address this issue, the company is allocating more of its production to server chip manufacturing. According to CEO Lip-Bu Tan, yields are still below what he wants them to be, but they're improving monthly by 7-8%.
The company's internal wafer supply is being prioritized for data center applications, while consumer chips will be manufactured externally. This move may lead to shortages and higher prices for consumer processors, such as the upcoming Core Ultra Series 3 processors.
Intel's strategy is focused on addressing its supply constraints in the short term. The company expects to improve its position in the market by selling more of its Lunar Lake and Arrow Lake chips for consumers, as well as Granite Rapids chips for data centers.
In the long term, Intel is working on future manufacturing nodes, including different versions of the 18A process and the upcoming 14A process. If external customers decide to use these facilities, Intel expects to build out its manufacturing capacity based on demand.
The company also announced that it will have its first next-generation Nova Lake chips ready by the end of 2026, which will cover both desktop and laptop processors. Part of the chip will be manufactured using the 18A process.
Intel's shifting focus to server chips is crazy! They're basically saying consumer demand doesn't matter anymore 
I mean, who wants a new gaming PC when you can build a high-end server? 
They're essentially rationing their chip supply like it's a scarce resource 
. And now they're gonna make us pay more for those consumer chips because of it 
. This just smells like a huge power play to me 
[img of a server farm with lots of spinning hard drives] Server chips > Consumer chips 
[gif of a person trying to upgrade their laptop with a sad face]
. but hey, who doesn't love a good chip shortage 
?
And yeah, there might be shortages and price hikes for consumer chips, but Intel's got a plan to get back on track with future manufacturing nodes 
. Plus, those next-gen Nova Lake chips are gonna bring some serious power 
.
. And honestly, it's a pretty bold move considering their financial situation 