Intel shifts production capacity from consumer to server CPUs in face of 'unprecedented' AI demand — company navigating 'one of the most significant supply shortages in history'
Intel is expanding chipmaking and advanced packaging capacity across the U.S., Ireland, and Malaysia to meet surging AI-driven demand for data center CPUs amid shrinking PC market and persistent supply constraints.
Intel is reallocating manufacturing capacity from consumer to server processors in response to unprecedented demand for AI-driven computing and storage. The company is expanding its Fab 24 in Ireland and installing equipment at Fab 62 in Arizona ahead of schedule to boost Xeon production. Intel is also increasing Intel 3 capacity in its Oregon facilities, previously designated for client processors.
CEO Lip-Bu Tan emphasized the company's confidence in AI-driven demand to offset shrinking consumer PC sales. Intel's Data Center and AI business generated $7.3 billion in revenue in Q3, up 17% sequentially and nearly 80% year-over-year. The company expects strong demand for data center CPUs through 2027-2028 as AI infrastructure operators deploy more CPU-intensive workloads.
Intel is focused on ramping up production of Xeon 6 Granite Rapids processors, which require Intel 3 process technology, with Fab 24 in Ireland coming online by year-end. To meet demand for Xeon CPUs, Intel is converting some Oregon resources from Intel 18A to Intel 3, which will enter production in the second half of 2027. While Intel 3 manufacturing costs have declined by 15% since Q1 2026, the company faces substrate shortages that could impact its supply chain.
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