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Sales of Intel Corp.'s New Z370 Platform Reportedly Falling Short of Expectations

DigiTimes says motherboards based on microprocessor giant Intel's (NASDAQ: INTC) new Z370 platform "are seeing weaker-than-expected sales," citing "sources from motherboard players." Intel's Z370 platform launched alongside the company's latest eighth-generation Core desktop PC processors, commonly referred to by the code name Coffee Lake.

Since any computer that incorporates one of Intel's new chips requires a Z370-based motherboard to function, as processors and other key PC components plug into motherboards, the information from DigiTimes could indicate that Intel's new chips and associated platform aren't selling well because of poor demand.

Here's why you shouldn't rush to that conclusion.

Image source: Intel.

The Coffee Lake supply shortage

The first wave of Intel Coffee Lake processors is targeted explicitly at the enthusiast segment, as are motherboards based on the Z370 chipset. Moreover, while personal-computer vendors will eventually roll out pre-built computers based on Coffee Lake and Z370, the initial volley of Coffee Lake chips and Z370-based motherboards are targeted at those who will build their own PCs.

DigiTimes' claim, then, can be interpreted to mean that sales of Z370-based motherboards into the do-it-yourself PC market are reportedly falling short of expectations.

If that's the case, I'm not surprised.

Although some individuals in the do-it-yourself market will buy different parts at different times, depending on component availability and available funds, many like to buy all the components required to build a computer all at once. And right now, there's a shortage of Coffee Lake processors. If you check any of the major online retailers that sell computer parts, you'll quickly find that it's difficult to get hold of chips such as the Core i7 8700K and the Core i5 8600K, the two enthusiast-grade parts that would most likely be paired with a Z370-based motherboard.

Since potential customers can't easily buy processors, they're probably going to put off motherboard purchases until they can.

An Intel spokesperson, commenting on the supply situation, said the Coffee Lake chips "are on sale globally" and that the company is "actively working with our retailers to fulfill strong interest from customers."

Impact to Intel's business

Until Intel can dramatically improve supply of its Coffee Lake-based processors, there's little reason to be hopeful that Z370-based motherboard shipments into the do-it-yourself PC market will improve. And since Intel's Coffee Lake processors and Z370-based motherboards are significantly better than their predecessors, do-it-yourself desktop PC builders will be tempted to hold off on building new computers rather than buy potentially price-reduced last-generation Intel parts.

Fortunately for Intel and its stockholders, this segment of the market is rather small relative to the overall desktop PC market, let alone to the overall PC market, in which notebook computers easily outsell desktop computers. For the bulk of the market -- that is, the market outside the enthusiast segment -- Intel's readily available older-generation Kaby Lake processors should continue to adequately serve the market.

I wouldn't expect the Coffee Lake shortage or the reported shortfall in Z370-based motherboard shipments to adversely affect Intel's client computing group revenue, let alone its overall sales performance.

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