How much does a mistake cost? For Intel, $1 billion

Wednesday, February 2, 2011

INTEL says it has found a design flaw in one of its recently released computer chips and is working with laptop makers to replace affected computers.

Sales lost while the company rushes out a replacement chip, and the cost of replacing computers with the flawed chip, will cost the company $US1 billion ($1 billion), it said.

Intel said it had shipped 8 million of the defective chips, but computers using the chips had only been on sale since January 9, so "relatively few" of them reached consumers.

The main processing chips in these computers are branded "Core i5" and "Core i7".

The affected chips aren't the main processors — which are based on the so-called "Sandy Bridge" technology that Intel announced in January — but a support chip.

The flaw means the chip may degrade with use over a period of months or years, slowing down the transfer of data to and from the computer's hard drives and DVD drives.

Intel said consumers could "continue to use their systems with confidence, while working with their computer manufacturer for a permanent solution".

Intel shares slid 25 cents to $US21.21 in early afternoon trading.

The Santa Clara, California, company said it had already started making a new version of the support chip, and hoped to start delivering it to computer-makers in late February.

Production of computers using Intel's "Sandy Bridge" chips will be on hold in the meantime.

Intel said it expected the delay to reduce revenue by about $US300 million in the first quarter. It put the repair and replacement cost at $US700 million.

Despite the setback, Intel raised its overall revenue outlook for the first quarter because of the recent acquisition of the phone-chip business of Infineon Technologies AG. It also expects to complete the acquisition of McAfee by the end of the first quarter.


teampl4yer said...

"It put the repair and replacement cost at $US700 million." 700 million is a shitload of money!!!

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