Chip giant Intel was ecstatic about the rollout of the Sandy Bridge Core family of chips for desktops and laptops and is prepping for single-socket servers and workstations next month based on the Xeon variants of these chips. But the discovery of a bug in the Intel 6 Cougar Point chipset announced this morning just threw a spanner in the rollout of these CPUs. It also very possibly may have given Advanced Micro Devices the lucky break it has been praying for.

In a statement put out this morning after Wall Street opened, Intel said that its quality assurance engineers found a "design issue" in the Cougar Point chipset related to its handling of Serial-ATA I/O ports that feed through the chipset back into the processors.

"In some cases, the Serial-ATA (SATA) ports within the chipsets may degrade over time, potentially impacting the performance or functionality of SATA-linked devices such as hard disk drives and DVD-drives," the Intel statement read.

Intel was very clear that there are no flaws in the Sandy Bridge chip designs themselves and that no other processors are affected by the Cougar Point flaw. The company has already implemented a fix in the Cougar Point chipset and has begun baking new versions of the chipset, which it expects to start shipping to OEM customers in late February. Intel is not expected to get to full volume productions of the modified Cougar Point chipset until April.

"Intel stands behind its products and is committed to product quality," the company continued in its statement. "For computer makers and other Intel customers that have bought potentially affected chipsets or systems, Intel will work with its OEM partners to accept the return of the affected chipsets, and plans to support modifications or replacements needed on motherboards or systems. The systems with the affected support chips have only been shipping since January 9th and the company believes that relatively few consumers are impacted by this issue. The only systems sold to an end customer potentially impacted are Second Generation Core i5 and Core i7 quad core based systems. Intel believes that consumers can continue to use their systems with confidence, while working with their computer manufacturer for a permanent solution."

Intel estimates that it will take about $700m to repair and replace the Cougar Point chipsets, and that revenues in the first quarter will be hit to the tune of $300m in the first quarter of 2011 because it has stopped making and selling the current version of the chipset. Intel is going to take a charge against its fourth quarter 2010 books to cover these costs since the defective chips were manufactured then. This will reduce its gross margins by around four points; margins were 67.5 per cent in the final quarter of last year. The company will also take a two-point gross margin hit in the first quarter to cover the costs of the repair.

Intel has completed the acquisition of the wireless chip biz of Infineon Technologies, and with that unit and the chip flaw cooked into its books, the company now says its revenue for the first quarter of 2011 will be $11.7bn, plus or minus $400m, which is higher than the previous guidance of $11.5bn, plus or minus $400m. Intel is now projecting that R&D spending will be $3.6bn in the quarter, up from $3.4bn, and gross margins will take a three-point hit overall (including the effects of Infineon and the flaw), dropping to 64 per cent. ®