UPDATE 1-Intel says focusing on PC chips; to meet revenue targets

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Sept 28 (Reuters) - Intel Corp is prioritizing the production of chips used in personal computers and has enough supplies required to meet its full-year revenue targets, the world's second-biggest chipmaker said on Friday.

The company's shares reversed course and were up 3.5 percent at $47.46 following the announcement, while rival Advanced Micro Devices Inc fell 7 percent.

"We're prioritizing the production of Intel Xeon and Intel Core processors," said Chief Financial Officer and interim Chief Executive Officer Bob Swan. "Supply is undoubtedly tight, particularly at the entry-level of the PC market," he said.

Intel, which is the dominant supplier of PC chips, has been increasingly catering to data centers as revenue from PCs has flattened since shipments peaked in 2011.

"We now expect modest growth in the PC total addressable market (TAM) this year for the first time since 2011, driven by strong demand for gaming as well as commercial systems," Swan said.

With Intel saying that the return to growth in the PC market was putting pressure on its factories, companies selling chip manufacturing gear rose.

Applied Materials gained 1.2 percent. Lam Research added 0.6 percent, erasing a loss from earlier.

Other technology companies including Micron Technology have also pointed to the PC chips shortage weighing on their revenue forecasts.

Intel also said https://newsroom.intel.com/news-releases/supply-update it was making progress with its 10nm chips and that yields are improving and continue to expect volume production in 2019.

In July, the company said the 10nm chips launch was being pushed from 2018 to 2019. Intel originally predicted the chips could be ready by 2015.

Intel reiterated its plan to increase its capital spending in 2018 by $1 billion to about $15 billion.

(Reporting by Vibhuti Sharma and Sonam Rai in Bengaluru and Noel Randewich in San Francisco; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila)