Intel Corporation's Desktop Skylake Supply Appears to Be Improving

My regular readers probably know that over the last several months, I've been harping on PC chip giant Intel for its apparent inability to meet demand for its high-end enthusiast-oriented processors based on its latest Skylake architecture.

I believe the issues Intel faced in meeting demand were due to relatively low manufacturing yields on the new 14-nanometer process on which Skylake architecture was built.

That said, after several months of very scarce availability, it would seem that supply of Intel's top desktop-oriented Skylake processors has improved significantly.

Evidence of improved supplyFor quite a while, I have kept a close eye on the availability of Intel's top Skylake-based Core i7 processor, known as the Core i7 6700K, on the various online retailers. Newegg.com, arguably the most popular vendor of PC components for "do it yourself" PC builders in North America, has generally had trouble keeping these chips in stock for more than a day.

In fact, sometimes the 6700K would go "out of stock" about an hour after it became available for purchase!

However, it would seem that supply is finally improving. According to NowInStock.net, the 6700K became available to purchase on Newegg.com on Dec. 29 and it has been in-stock since then -- a full two days of availability. Given the pace at which prior batches of 6700K chips seemed to sell out, this strongly points to much more robust supply.

Improved supply probably means better 14-nanometer yieldsAlthough one could potentially argue that Intel is simply running more wafers in order to get more fully functional 6700K chips, the fact that Intel actually reduced its capital expenditure plans over the course of 2015 tends to suggest that this isn't the case.

Instead, I believe the yields on the company's 14-nanometer process are improving in line with the plans the company outlined at its November investor meeting.

That said, I don't think it's all "sunshine and roses" for the supply/yields on these chips. Although Newegg.com seems to be able to be keeping these chips in stock for longer than usual, the chips are still being sold at $420 -- a full $70 above MSRP. This still suggests supply is not where it would be if 14-nanometer yields were where they really needed to be at this point.

At this price, Newegg is extracting additional margin from customers who choose to buy the chips, while at the same time directing more value-conscious buyers toward older 22-nanometer silicon.

Why this is good news all aroundObviously, improved supply of Intel's current processor lineup is a good thing, but improving 14-nanometer yields is good news for all of the company's major business segments.

Firstly, in mainstream and value PCs, improved yields should allow the company to see improved product cost structures, thereby serving as a tailwind to gross profit margin.

At the high end of the PC market, as well as in the server market, Intel has indicated that it expects its product cost structures in these segments to go up as the products transition to 14-nanometers during 2016.

Although the evidence of improving 14-nanometer yields doesn't suggest Intel will see upside to those projections, it at least gives me confidence that Intel will meet those projections and not see worse-than-expected cost/margin structures on these products during 2016.

Additionally, it would be very unfortunate if Intel were to suffer from supply issues with its upcoming 14-nanometer server processor families known as Broadwell-EP and Broadwell-EX, respectively. As long as Intel's 14-nanometer yields are improving at the rate the company has been planning for, this shouldn't be a problem.

The article Intel Corporation's Desktop Skylake Supply Appears to Be Improving originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.