The chipmaker Intel has halted shipments of hardware incorporating its new "Sandy Bridge" processors and says it will have to spend a total of $1bn (£600m) fixing a fault, delaying hundreds of new PC models for up to three months and potentially stifling growth in the personal computer market.
Launched early in January, the Sandy Bridge chip combines standard processing and graphics units on a single die. But Intel said today it had found flaws in a support chip, called Cougar Point, which would have led to failures over time in connections to hard drives and DVDs.
The fault will upset production on more than 500 computer models that were to have used the processors. That in turn will hit the PC industry, which has already been suffering from slowing growth in the US and other regions last year.
It could also open the door to Intel's longstanding rival, Advanced Micro Devices, which has a similar processor, named Fusion. After the news AMD shares jumped by 5% in early trading in New York, while Intel shares slid by 1.5%.
Intel said the systems with the affected chips have only been shipping since 9 January, so "relatively few" consumers were likely to be affected. Only top-end processors, the second-generation Core i5 and Core i7, which each have four processing "cores", have been included in PCs sold to customers.
Intel said consumers can "continue to use their systems with confidence, while working with their computer manufacturer for a permanent solution".
The company said it has shipped 8m of the defective chips, but that it is already working on new versions of the support chips and that they could be shipping as soon as February. Had the problem gone undiscovered, about 5% of PCs using the new chipsets could have failed over a three-year period, said Stephen Smith, vice president and director of PC Client Operations at Intel. "It would be a low and continuing failure rate over the life of the systems," he said.
Intel said it would cut its revenue target for the coming quarter by $300m (£187m) and that repair and replacement for the flawed chips would cost another $700m. In the quarter just finished it reported record revenues of $11.5bn, up 8%, and net income of $3.4bn, up 48%. However it raised its revenue outlook for the quarter to $11.7bn, from $11.4bn.
The discovery of the flaw is the most embarrassing for the chip company since October 1994, when a scientist discovered a rare, but repeatable, error in the Pentium processor's calculation system after millions had been shipped in PCs. Replacing the chips then cost Intel $475m.
The new problem is in the silicon design of the chips themselves, which means Intel has to redesign the silicon and produce an entirely fresh set of chips. That typically takes 12 weeks.
For PC makers that had begun building computers with the chips, it will be an expensive reversal. Assuming that the revised chips work correctly, they will not be with manufacturers before April. All the major PC manufacturers rely on Intel for central processing units.
Brendan Furlong, an analyst at Miller Tabak, said: "This is a minor negative and not as big an issue as it seems. It's obviously an embarrassment, rather than a major problem for the company."