Samsung to Reimburse for Faulty Intel Chipset

By Carrie Schmelkin February 01, 2011

It’s been a bad end of the month for Intel Corp.

On January 31, the Santa Clara, California, company announced that it had discovered a “design issue” in a recently released support chip, the Intel 6 Series, code-named Cougar Point. The faulty chip has been shipped since January 9.

While Intel does not think many customers will be affected, for those who did receive the flawed chip, full refunds will be dispensed.

“The company expects to begin delivering the updated version of the chipset to customers in late February and expects full volume recovery in April,” Intel said in a statement. “Intel stands behind its products and is committed to product quality.”

Samsung Electronics CO. announced Tuesday, February 1, that the company, along with Intel, will offer full refunds to customers who have bought its personal computers built with Intel Corp.’s defective new chipset.

"There are six PC line-ups released in Korea and one in the United States, and we plan to fully refund or exchange the product in question," James Chung, Samsung's spokesman said in a Wall Street Journal article.

"No financial impact on our business is likely as the total payment will be funded by Intel."

Shipment of the chip – which is used in PCs with Intel's latest Second Generation Intel Core processors, code-named Sandy Bridge – has been stopped. Those who did receive faulty disks are at risk that the Serial-ATA (SATA) ports within the chipsets may degrade over time, potentially affecting the performance or functionality of SATA-linked devices such as hard disk drives and DVD-drives, according to Intel.

The flawed product is expected to cost the Intel $1 billion in repairs and lost revenue. For Intel, the design flaw is the latest in a bad spell of luck for the company which as been plagued by sluggish personal computer sales and challenges from the burgeoning popularity of mobile devices, a market of which Intel is not at the forefront.

"Does it change the perception of Intel's quality? Yes, probablym” said Wedbush analyst Patrick Wang. “You've got real product out there that's been qualified and tested and green-lighted, and then you come back to say there's a problem and you have to recall."

Intel first discovered the defect after it shipped more than 100,000 of the chips to computer manufacturers who were getting prepared to sell the Sandy Bridge processor. If the problem had gone unnoticed, about five percent of PCs using the new chipsets could have failed over a three-year period, Stephen Smith, vice president and director of PC Client Operations at Intel, said on a conference call.

Despite the setback, Intel has predicted a rise in overall revenue outlook

Intel projects taking in $11.7 billion, plus or minus $400 million. Its previous forecast was for $11.5 billion, plus or minus $400 million.

“This is a minor negative and not as big an issue as it seems,” said Brendan Furlong, an analyst at Miller Tabak. “It’s obviously an embarrassment, rather than a major problem for the company."

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Carrie Schmelkin is a Web Editor for TechZone360. Previously, she worked as Assistant Editor at the New Canaan Advertiser, a 102-year-old weekly newspaper, covering news and enhancing the publication�s social media initiaitives. Carrie holds a bachelor�s degree in journalism and a bachelor�s degree in English from the S.I. Newhouse School of Public Communications at Syracuse University. To read more of her articles, please visit her columnist page.

Edited by Carrie Schmelkin

TechZone360 Web Editor

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