Intel Repurposes Fab Capacity for Data Center CPUs Amid AI Surge
Intel is reallocating manufacturing capacity from client CPUs to data center CPUs to address unprecedented supply shortages driven by AI demand. The company is accelerating expansions at Fab 24 in Ireland, Fab 62 in Arizona, and Intel 3 lines in Oregon, anticipating sustained strong demand for data center CPUs through 2027-2028.
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IT Home reported on November 1 that, according to Tom's Hardware yesterday, although the consumer PC market is shrinking, Intel remains confident that demand from the AI industry will offset the decline in the client segment.
To this end, Intel is reallocating some production capacity from client CPUs to data center CPUs, expanding Fab 24 in Ireland to produce more Xeon chips, accelerating equipment installation at Fab 62 in Arizona, USA, and committing to the production of 18A chips while simultaneously scaling up advanced packaging capabilities in New Mexico and Malaysia.
During the company’s earnings call, Intel CEO Lip-Bu Tan stated: "The industry is still experiencing one of the most severe supply shortages in history, driven primarily by unprecedented demand for superintelligence. Against this backdrop, I am pleased with our progress in increasing server supply during Q3. However, I recognize that we face ongoing challenges in meeting server demand over the coming quarters."
The company’s Data Center and Artificial Intelligence (DCAI) segment generated $7.3 billion in revenue in Q3 2026 (Note: approximately RMB 48.688 billion at current exchange rates), marking a 17% quarter-over-quarter increase and nearly an 80% year-over-year growth. Intel expects strong demand for data center CPUs throughout 2027–2028 as AI infrastructure operators deploy more CPU-intensive agents and inference workloads.
To meet future demand for Xeon CPUs, one of Intel’s immediate priorities is ramping up production of the Xeon 6 "Granite Rapids" processors, which are manufactured using the Intel 3 process technology. The company recently began expanding capacity at its Fab 24 manufacturing complex near Leixlip, Ireland, though this additional capacity is not expected to come online until late 2027.
To further boost Intel 3 capacity, Intel plans to convert some manufacturing resources at its Oregon fab from Intel 18A to Intel 3. These lines were initially dedicated to producing Panther Lake desktop processors, but due to weakening PC demand, Intel will prioritize higher-demand data center products. The company expects the new Intel 3 capacity in Oregon to enter production in the second half of 2027.
Intel is also accelerating the expansion of its leading-edge manufacturing operations in Arizona. The company is speeding up Intel 18A production at Fab 52 and accelerating equipment installation at the adjacent Fab 62, which will become Intel’s second high-volume manufacturing facility for 18A, 18A-P, and derivative process technologies.