Intel's next-generation 18A process, the company's most advanced manufacturing technology, is ramping more slowly than planned. Until it reaches high-volume production, the company's fully utilized Intel 7 lines will keep limiting output of both client (PC) and data center chips. In the meantime, Intel is prioritizing higher-margin server processors to offset the supply constraints and protect profitability.
Intel's third-quarter rebound in chip demand was held back by ongoing supply limits, which continue to restrict the company's ability to ship both client and data center processors. Although CPU orders have jumped across many product lines, Intel's output is still bottlenecked by limited production capacity and a persistent industry-wide shortage of packaging substrates.
Reliance on Intel 7 Causes CPU Supply Constraints
On a recent earnings call with analysts, Intel CFO David Zinsner said the company continues to face "capacity constraints, particularly on Intel 10 and Intel 7." He noted that these issues limited output of both client and data center products last quarter. Much of Intel's current manufacturing challenge stems from its dependence on the Intel 7 process - formerly known as 10nm Enhanced SuperFin - which debuted many product generations ago.
Despite its age, the process remains central to Intel's CPU lineup. It powers both the 13th and 14th generation Core processors, known as Raptor Lake, as well as the I/O dies for the Xeon 6 "Granite Rapids" and 5th generation Xeon Scalable "Emerald Rapids" chips. Raptor Lake, first launched in 2022, is still a strong seller in the PC market thanks to its steady performance and broad compatibility. However, Intel's decision not to expand capacity on its older process nodes has left supply of these chips tight. With demand still climbing, prices for Raptor Lake processors have risen accordingly.
Intel Prioritizes High-Margin Server Chips to Weather the Supply Crunch
Zinsner acknowledged the challenge, saying Intel is "working closely with customers to maximize available output, including adjusting pricing and product mix," as supply constraints persist. In practice, that means the company continues to favor premium products and higher-margin SKUs (stock keeping units), sacrificing lower-cost, high-volume CPUs.
Intel's constrained Intel 7 production lines (a 7-nanometer-class process) are being allocated aggressively to high-margin data center products, especially the Xeon 6 family. These processors use I/O dies built on Intel 7, tying their output to the same fabrication line that supports Raptor Lake. Management has chosen to shift wafer capacity toward data center CPUs, where each unit can sell for several thousand dollars - far more than even the most expensive client chips, which typically retail for under 600 USD. Zinsner said Intel expects sequential growth in Data Center and AI Group results this quarter, while Client Computing Group revenue will dip slightly because of this shift in product mix.
Beyond wafer capacity, Intel's production outlook is further strained by a scarcity of organic substrates - the thin materials that house and connect CPUs inside their packages. The shortage is industry-wide, adding another layer of complexity to Intel's supply chain management. Because these materials are essential for assembling both desktop and server processors, the constraint affects every segment of the company's CPU portfolio.
Intel expects the supply challenges to extend into next year, due to both process capacity limits and component shortages. The company warned that Q1 2026 could mark the peak of these constraints, with gradual improvement expected afterward. Zinsner noted that the company had been relying on accumulated inventory through the end of 2025 and is "running the factories as hard as we can."
