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Intel Corporation Talks Xeon Scalable Ramp-Up

By Ashraf Eassa - Jul 31, 2017 at 7:30AM

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The ramp-up of Intel's new Xeon Scalable processors should continue into 2018, according to the company's CEO.

Earlier this month, chip giant Intel (INTC 0.12%) introduced its Xeon Scalable processor family for data center applications. Intel seems extremely proud of this new family of chips, marketing it as the "industry's biggest platform advancement in a decade."

On the company's July 27 earnings call, management provided some insight into the customer reception for this product as well as how investors should expect shipments of the product family to ramp up over time.

Intel's Xeon Scalable processors.

Image source: Intel.

Let's see what management had to say.

High enthusiasm

In prepared remarks, Intel CEO Brian Krzanich said that "the enthusiasm for Xeon Scalable resulted in [Intel's] largest early ship program ever."

Intel's "early ship," for those of you unfamiliar with it, is a program under which Intel will sell major data center customers pre-PRQ parts -- that is, products that haven't yet been formally qualified for sale -- ahead of the formal product launch.

This program was seemingly previously limited to the Super 7 cloud service providers, but Intel says that for Xeon Scalable, it shipped 500,000 units to about 30 customers under the early ship program for Xeon Scalable.

Later in the question-and-answer session, Krzanich indicated that Intel expected to see a "large ramp" of these Xeon Scalable parts in the second half of 2017 and that this ramp-up would "continue on into 2018 as well."

2018 should be even bigger for Xeon Scalable

Analyst Harlan Sur wanted to know "how much of the data center growth in June was the initial production revenue shipments of Xeon Scalable." I suspect that he was interested in the answer to this as it might give investors some insight into how much opportunity remains -- given Intel's fairly substantial early ship program -- for the Xeon Scalable processors to engender both upgrades as well as an upward shift in product mix.

If the proportion of Xeon Scalable shipped during the quarter were substantial, then some investors and analysts might think that Intel's data center group business might see any benefit from the new product ramp cut a bit short relative to typical new product ramps.

On the flip side, if the percentage isn't that large, then investors could still believe that the Xeon Scalable upgrade cycle has legs. Krzanich declined to give a hard percentage in response to Sur's question, but he did say that "it's very little."

"But I can genuinely tell you that it is really just the beginning of the ramp of the Xeon Scalable," he said, seemingly understanding the heart of Sur's question. "And, so, its impact into Q2 was minimal at best."

The executive went on to indicate that the percentage of Xeon Scalable as a percentage of Intel's overall Xeon processor shipments will continue to grow during the second half of 2017, with the "big volume" happening in 2018.

"So that's when it really takes over from the way the data center [business] looks from a revenue and profit standpoint," Krzanich explained.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

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