Why Intel’s 14-Nanometer Products Could Change the Game

Intel's next generation 14-nanometer technology could enable some pretty amazing mobile chip designs.

Jan 27, 2014 at 4:00PM

In the semiconductor industry, the mantra has always been, "cheaper, faster, and smaller." This principle has been the steam engine that evolved the gigantic, room-sized supercomputers in 1998 into today's thin and light laptops. The fundamental building block of all semiconductor products is the transistor, and those with the cheapest and fastest transistors are ultimately poised to win the race.

Let's talk about Intel
It is no secret that Intel (NASDAQ:INTC) has the world's best transistors when performance, power, and area are taken into account. The company routinely moves to smaller geometries years ahead of its nearest competitors and, at the same time, has made countless innovations at the actual transistor level that have kept manufacturing technology at least a generation ahead on power and performance.

Now, the natural inclination here is to raise the red flag on these claims, particularly given that Intel's product offerings in the mobile world often lag those from competitors in a number of meaningful ways. For example, Intel's 22-nanometer FinFET-based Bay Trail system-on-chip, while offering leadership CPU performance, tends to lag the latest from Qualcomm (NASDAQ:QCOM) in a number of key areas (feature integration, graphics performance, etc.). How does one reconcile the claims made above with these truths?

It's not just about manufacturing
There is no doubt that Intel has the world's best semiconductor technology, but the actual design of the products (known as the "micro-architecture") is just as important, if not more so, to the performance, power, and cost of a particular chip. Intel's 22-nanometer designs weren't created with density in mind, nor were they intended to have the level of integration demanded by todays' tablet and smartphone markets.

Intel gets it
Well, that's the bad news. The good news is that Intel looks to remedy these deficiencies with two of its upcoming products. The first, a high-end platform known as "Broxton," will be built on the company's next-generation 14-nanometer process, designed with density in mind, and integrate the correct features into the chip commensurate with a leadership tablet/smartphone part in mid-to-late 2015.

At the low end, the company realizes that most mass-market phones (and, increasingly, tablets) will require integration of connectivity (Wi-Fi, Bluetooth, GPS, NFC, etc.) and cellular (either 3G or LTE/LTE-Advanced), as well as the other blocks that typically come with a mobile SOC. Intel will bring its first-generation part, known as SoFIA, to market in late 2014, built on TSMC's (NYSE:TSM) 28-nanometer process. A follow-on part in early 2015 will be similar, but with integrated LTE-Advanced (rather than 3G).

Moving away from TSMC in 2015
In late 2015, Intel will, as it stated at its most recent investor meeting, move SoFIA to its internal 14-nanometer process. Not only does this give Intel a cost-per-transistor savings, but it enables some pretty significant performance and power improvements. Intel will also see higher utilization of its factories (which could improve gross margins), and by the time the 14-nanometer product rolls around, Intel will already be building off of a decent-sized market share base, contra-revenue free.

How do Qualcomm and MediaTek compete?
With Intel currently offering sub-optimal products, Qualcomm and MediaTek essentially "own" the smartphone and tablet apps processor markets, even without in-house manufacturing (or even a manufacturing technology advantage). However, if Intel is out in late 2015 with a fleet of top-to-bottom 14-nanometer, density-optimized processors, then it will be able to take some rather significant share from these competitors.

Qualcomm will be harder to take down than MediaTek, given its gigantic cash hoard and enormous patent licensing stream. Further, Qualcomm drives TSMC exceptionally hard in a bid to get access to next-generation transistor technology. Transistor technology is a critical enabler.

Foolish bottom line
At the 14-nanometer generation, Intel has a chance to take the lead with a significant chunk of the mobile market and defend its server share rather aggressively. The design teams need to deliver, though, using this amazing transistor technology provided by the process teams. If they can, Intel will become like a force of nature in the mobile market -- one that cannot be ignored.

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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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