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.

Strengthen your portfolio 
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers