Stronger-than-expected PC demand will force Intel to focus on the high end of the chipset market later this year, as rapidly filling factories put the squeeze on the company's production capacity.

Intel spokesman Bill Kircos denied reports that Intel plans to exit the low-end chipset business altogether, but said Intel is "prioritizing manufacturing schedules" to focus on certain types of chipsets amid capacity constraints. He declined to specify which products would be affected by the adjustments, but a source familiar with Intel's plans said the move would affect various chipsets for low-end PCs.

Demand drives decision

Andy Bryant, Intel's chief financial officer, warned reporters and financial analysts last month that Intel might have problems with chipset supplies in the second half of the year. So far this year, PC demand has been much stronger than forecast by market researchers such as IDC and Gartner and Intel's factories were full during the second quarter, traditionally the slowest quarter for PC and chip vendors.

Intel will meet previous supply commitments with PC manufacturers, but it won't be able to capitalize on all of the excess demand it is seeing, Kircos said.

The Centrino factor

Chipsets have become a much more important piece of Intel's strategy in the last year as the company brings the "platform" concept pioneered by its Centrino notebook chips to other products. A chipset is a collection of chips that connects a PC or server's main processor to system memory, I/O and storage components. Intel's Pentium M processor and mobile chipsets were designed in concert as part of the Centrino package to save power and improve performance, and Intel plans to emphasize chipset features such as virtualization technology as a main selling point for PCs in the future.

However, with its factories running at or near capacity, the world's largest chip maker needed to adjust its manufacturing lines to meet customer demand, Kircos said. Right now, demand is strongest for mobile products such as Centrino, he said.