Intel Uncovers Hardware Fault, Forces $700 Million Recall

Microprocessor giant Intel has uncovered a hardware fault in a supporting chipset for its new CPU lineup and will take a $300 million revenue hit this quarter to fix the problem. The issue involves a design problem that causes its support chipset—the Intel i6 Series (code-named Cougar Point)—to potentially "degrade over time," affecting the performance of hard drives and other devices connected to the chipset's SATA connector.

Fortunately for Intel, it had been shipping the part only since January 9. The company says it will deliver an updated version of the chipset, which supports the second-generation Core processors (code-named Sandy Bridge), later this month, with "full volume recovery" expected by April. For those customers who have already acquired PCs and servers with the problematic chipset, Intel says it's working with its hardware-maker partners to accept returns. Total cost of the recall is expected to be approximately $700 million, Intel says.

The recall is going to cause problems for customers hoping to upgrade to Sandy Bridge-based systems, which promise dramatic performance improvements over the previous-generation Core processors. But it's nowhere near as dramatic as the 1994 Pentium flaw, when Intel found that its then-new Pentium chip had a serious floating-point flaw. Recalls associated with that flaw caused a $500 million charge against the company's 1994 earnings, but it ultimately helped market the Intel brand to consumers for the first time, thanks to news coverage of the event.