RealTime IT News

Atom Proves Too Hot for Intel to Handle

There is such a thing as being too popular, and Intel is finding that out. Its newest processor family, the Atom, is such a hit the company is having trouble meeting demand.

The problem is not in manufacturing the chip. One 300mm wafer can yield 2,500 Atom chips, and Intel has no shortage of manufacturing capacity. The problem is in testing capacity, of which Intel does not have enough, according to one analyst.

"Intel obviously has lots of manufacturing capability and test capability as well, but they were bumping up test limits and it was an issue of resource allocation. You can't just pull Core 2 Duos out and put Atoms in their place for testing," Dean McCarron, president of Mercury Research, told InternetNews.com. "You have to expand it to add capacity for the new products and it takes a while to expand that capacity."

To say the Atom is proving a hit would be an understatement. McCarron estimated 100,000 Atom processors would be sold in the fourth quarter of last year and it ended up selling 400,000. He now estimates the company will sell five million units this quarter and six million in Q4.

Intel spokesman Bill Calder said "demand is better than anticipated, that's for sure, and we are working with OEMs to meet demand." Beyond that, he declined to comment on how long the backlog would be or when Intel would get caught up.

McCarron said Intel (NASDAQ: INTC) did underestimate the popularity of the chip but then again, so did everyone else. "We saw some hints of the elasticity of the market with the original EEE-PC but I don't think anyone comprehended how strong interest would be in Atom once it showed up and vendors got on board," he said.

Hopping on the Atom bandwagon

A number of OEMs have signed up to release Atom-based products. Dell (NASDAQ: DELL) declined to comment since it has not officially announced anything Atom-powered, while ASUSTeK Computers did not return inquiries by InternetNews.com.

MSI Computers has one Atom product line, the Wind Netbook, which comes in five different configurations. A spokesperson said the shortage in CPUs did affect delivery "a little, but the situation is getting better. We are still trying to fulfill all of the back orders, because the product was very popular. I think the situation will get back to normal soon." She could not say when all back orders will be filled.

What's notable is that even with its popularity, Atom isn't really eating anyone's lunch. The ARM processor is used in different products, Intel's low-end Celeron has not been affected, and VIA Technologies' C7 chip experienced significant growth in the recent quarter.

McCarron said it's hard to find a precedent for this kind of ramp rate. "We're really looking at native market development," he said. "These products have pioneered a new product segment and price point, so we're seeing a whole new market expansion, which is why Intel is doing this to begin with."