The consumer personal computer market continues to contract, and Intel does not expect its recovery in the coming quarters. However, the company has made a strategic decision: to redirect some production resources from client processors to server chips, where demand exceeds supply by multiple times. According to Intel CEO Lip-Bu Tan, the industry is experiencing «one of the largest product deficits in history, driven by unprecedented demand for superintelligence technologies.» Against this backdrop, Intel is accelerating the expansion of capacities for producing Xeon processors and advanced chip packaging in several regions of the world.
AI Boom Reshapes Intel’s Manufacturing Map
A key expansion area has been the Fab 24 plant in Leixlip, Ireland, where Intel is ramping up production of Xeon 6 Granite Rapids processors on the Intel 3 process node. The company acknowledges that the introduced capacities will not launch until late 2027 at the earliest, unless the project can be accelerated. Simultaneously in Oregon, some production resources initially intended for client chips of the Panther Lake family on the Intel 18A node will be repurposed for Intel 3 to serve data center needs. Additional capacities in Oregon will come online in the second half of 2027. Thus, Intel is effectively sacrificing a portion of client production in favor of the more lucrative server segment.
Arizona: Accelerated Installation at Fab 62
At the Fab 52 facility in Arizona, Intel is scaling up output using the Intel 18A process node, while at the neighboring Fab 62 site, equipment installation began ahead of schedule. Fab 62 will become the second manufacturing complex for chips using 18A and 18A-P technologies, laying the groundwork for future server and client products. The company does not disclose the capacity distribution between client solutions and data center products, but emphasizes its intention to increase its market share in consumer chips via Core Ultra 400 Nova Lake processors. To set up their production in Q3, Intel actively purchased new equipment.
DCAI Financial Results: Up 80% Year-over-Year
Intel’s Data Center and AI (DCAI) division reported Q3 revenue of $7.3 billion — up 17% sequentially and 80% higher than a year earlier. The Granite Rapids server processor family became the fastest-growing product by production volume, though company management admits that demand still outpaces supply. To improve efficiency, Intel is working on increasing product yield and shortening the production cycle. Since the beginning of the year, production costs for the Intel 3 process have dropped by about 15%, allowing for a higher volume of functional processors with existing capacities.
Substrate Shortages and Packaging Expansion
One of the bottlenecks for Intel has been a shortage of advanced organic substrates required for packaging multi-die processors using EMIB and Foveros 3D technologies. The company is actively cooperating with substrate suppliers, helping them expand capacity: in the second half of 2027, Intel expects supply volumes to grow by about 40%. Concurrently, advanced packaging capacities are expanding in New Mexico and Malaysia. In Granite Rapids processors, EMIB technology is used to connect compute dies, while in the new Clearwater Forest series Xeons, a combination of EMIB, Foveros Direct 3D, and hybrid bonding is employed, allowing Intel 18A dies to be placed on top of base Intel 3 dies.
Outlook for 2027–2028
Intel expects demand for server processors to remain high at least through 2028. The company prioritizes increasing the output of Xeon 6 Granite Rapids and adopting more complex multi-die solutions. Lip-Bu Tan emphasizes that in the coming quarters, the company will face «quite a few challenges to keep up with server demand.» The strategic shift toward data centers and AI essentially means that the consumer PC segment will remain in the shadow of the server boom in the medium term, and Intel will compete for limited manufacturing resources between the two markets.
