Intel Corporation has discovered a flaw with the Sandy Bridge processor after more than 100,000 of the chips had already been distributed to manufacturers.
The disclosure represents a major setback for the company amidst lackluster market conditions for PCs and shifting consumer preferences for mobile devices, a sector dominated by Intel competitors.
Intel realized there was flaw in the chip after manufacturers conducted high voltage and temperature stress tests.
"Does it change the perception of Intel's quality? Yes, probably. 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," Wedbush analyst Patrick Wang told Reuters.
As many as five percent of the chipsets would have failed within a three year period had the processors gone to market. It is estimated that very few of the problem processors have actually made it into the hands of consumers.
"It's obviously a negative and a surprise. We think they can recover from this very quickly. This product was just being introduced and there's not many in the field," said Kevin Cassidy, an analyst at Stifel Nicolaus.
Intel, which has long been a dominant force in the production of PC processors, suffered a similar setback in the 1990's with an undisclosed flaw in a Pentium chip line.
The company has recalled the Sandy Bridge chips from manufactures, and expects the cost of the reissue to run near $700 million dollars.