- Intel just had an impressive Q1 report that somehow beat revenue expectations
- This is reportedly due in part to “turning around what may have been scrap or output with low revenue expectations,” according to one analyst firm
- This essentially means recycling silicon that hasn’t made the grade for its intended use, but it’s not a reflection of CPU quality, it should be noted
Intel has reportedly been able to boost its revenue by selling CPU chips that in the past would effectively have ended up on the scrap heap.
Tom’s Hardware spotted a post on X from the CEO of analyst firm Creative Strategies, Ben Bajarin, who claims to have received feedback from Intel’s investor relations about where some of Team Blue’s extra profits have come from (in its just-reported Q1 earnings).
Add your own pinch of salt, but Bajarin says, “Intel got an unexpected margin boost from better yields. Chips that would normally have been a lower-value edge die on the wafer were dumped and still sold into usable SKUs, turning what may have been scrap or low-expectation output into incremental revenue.”
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Multiple chips are cut from a single wafer, but not every chip is up to its intended use, and so some – especially those cut from close to the edge of the wafer, as mentioned – are either downgraded for use as a lower-tier CPU (where defective cores are simply disabled), or they’re just thrown away (well, reused for other ends).
That’s a boiled down, basic view of what’s happening, but you get the point, and apparently part of Intel’s big jump in revenue for this quarter was down to being able to sell chips that would normally have been “scrap” to its customers.
As Bajarin further noted, “The customers didn’t care, just said I’ll take it all. That’s the demand environment we’re in for CPUs.”
It’s interesting to note that Bajarin is optimistic about Intel’s CPU production capabilities, to the point where in another post he imagines that before long AMD might have some of its processors made at the Intel Foundry (to make up for what it can’t get produced at TSMC, which is struggling to keep up with demand).
Analysis: bad omens?
There are some important points to note here. First, we don’t know for sure that this is happening; we only have one analyst’s word for it. Although it does shed some light on how Intel pulled a whole lot more money into its coffers for Q1 than those in the financial lore had predicted (revenue beat expectations by 10%, in fact).
The other thing that needs to be made crystal clear is that these ‘subpar’ chips are not in any way risky, meaning that you are not taking a risk by buying such an Intel CPU. It is common practice in the industry to use chips that do not achieve the grade of their intended product, as mentioned, in a smaller product.
A chip that has not been able to cope with a Core Ultra 9 can e.g. is transformed into a Core Ultra 7, with the defective cores simply disabled (since they are not needed for the latter’s core count). This doesn’t make such a chip any different from another Core Ultra 7, or those that were made to be Core Ultra 7 models – they all have exactly the same number of functional cores, without much chance of anything going wrong. Failed Core Ultra 7 models can then become Core Ultra 5, and so on.
All of this is to say that you don’t have to worry about anything related to chip quality here. All that’s happening is that Intel is making more money on chips that wouldn’t normally be sold as hardware manufacturers are buying those CPUs because there’s such a high demand for silicon right now that supply is looking tighter.
Does that sound familiar? Yes, this may remind you of the scarce supply of memory chips – which affects RAM and storage – and as predicted, the same problems are now being visited on processors. With more and more data centers being built to serve the AI demand, the servers in these giant buildings not only need RAM and SSDs, they are of course also powered by processors.
Now, here’s the grim part. Remember early in the RAM crisis when prices started to rise? And also remember that they then shot up at an unimaginably fast speed. Well, we could also see an acceleration in processor prices. In fact, a recent report has already observed some big price hikes for AMD CPUs in Japan, which comes on top of other rumors that both server and consumer-targeted processors are getting more expensive.
Don’t get me wrong, I don’t think this will have the same upward trajectory as memory prices, but nonetheless, this rumor is another sign that yet another PC component, and a key one, could become quite a bit more expensive as 2026 progresses.
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