Intel, the world's largest maker of semi-conductors with operations in Ireland centred in Leixlip, said a design error in one of its chips will reduce sales and profit margins as it spends $700m to repair and replace affected products.
The flaw will cut first-quarter revenue by $300m and gross-profit margin by two percentage points, California-based Intel said in a statement yesterday.
The design fault is in a support chip, or chipset, for Intel's latest processor model called Sandy Bridge, unveiled in January as part of a bid to improve PC graphics and ward off challenges by rivals.
Intel said it has corrected the flaw and begun manufacturing a new version of the chip that will resolve the issue.
"Is it going to be a near-term distraction and something for investors and customers to gripe about? Absolutely," said Craig Berger, an analyst at FBR Capital Markets. "But the stuff is relatively new. There are probably not many of them out. That's helping them mitigate losses."
Chipsets support processors, the main semi-conductor component in personal computers, by linking them with other parts of the machine and performing secondary functions. A chip can take months to go through the manufacturing process.
Intel said it expects to begin delivering the updated version of the chipset to customers in late February and be at full production again in April.
The company didn't say how many shipped chipsets were affected.
Consumers who have bought machines since January 9, when products with the faulty chips first went on sale, should be able to continue to use "their systems with confidence," the company said. Intel will take returns of the chips through its computer-maker customers.