Why Intel Shouldn't Fear This Chip Giant

When one company is down on its luck, and a competitor is thriving, it is natural for investors to focus on the positives of the winner and the negatives of the "loser." This makes perfect sense, right? If earnings, sales, and the stock price are headed on up, then obviously the winner is doing something right. Conversely, if a company's earnings, sales, and stock price have been flat to down, then clearly something's wrong, right?

TSMC and Intel -- let's not get carried away
This situation applies perfectly to two semiconductor giants -- Intel (NASDAQ: INTC  ) and TSMC (NYSE: TSM  ) . Intel, which designs and builds its own chips, owns the PC and server markets but has had difficulties getting the right products to market at the right time for smartphones and tablets (although it's getting much better). TSMC, on the other hand, as a pure-play foundry, has benefited from the fact that just about all leading-edge mobile silicon is baked at its factories.

Of course, it is well known within the industry that Intel's semiconductor technology is quite a bit ahead of TSMC's, and has been for generations. Intel, for example, introduced high-K metal gate into high-volume production in 2009 at its 32-nanometer node, while TSMC didn't really begin the high-volume ramp-up of this technology until 2012 for FPGAs/GPUs and 2013 for mobile SoCs at its 28-nanometer node. The FinFET story is similar -- with Intel having been in volume production since late 2011 while TSMC has yet to ship a single production FinFET.

Will TSMC close the gap? Not anytime soon
TSMC has been very vocal about its 20-nanometer manufacturing process (which is in high volume now) and has even gone so far as to talk up its 16-FinFET technology (and an enhanced version of this process known as 16-FinFET+). However, if you actually take the time to study the landscape, you'll observe the following:

  • Not a single one of TSMC's customers has demonstrated a 20-nanometer system-on-chip product. All we've seen is a 20-nanometer cellular baseband from Qualcomm and 20-nanometer FPGAs from Xilinx.
  • According to a report from SemiAccurate from Mobile World Congress, TSMC and ARM were showing off 16-nanometer "test chips" featuring a bunch of Cortex A57 cores. This is a strong hint that the process itself isn't finished, and it also means TSMC's customers are likely a long way from production.
  • Intel has been shipping 22-nanometer FinFET-based CPUs since 2012, and a 22-nanometer low-power mobile SoCs since mid/late 2013. Intel has also demonstrated numerous smartphone platforms (Merrifield/Moorefield) built on this process.
  • Intel demonstrated its 14-nanometer (2nd generation FinFET) Broadwell SoC back in Sept. 2013, and according to Zauba, Intel has had samples of its first 14-nanometer low-power SoC code-named Cherry Trail since at least February 2014.

Intel's first 14-nanometer SoC spotted in India. Source: Zauba.

So, Intel has already completed the designs of its Broadwell chip for PC/Ultrabook as well as Cherry Trail for tablets. It is likely Intel will have samples of its next-generation Broxton (for phones and tablets) built on the 14-nanometer SoC process by mid-year. Further, at the Nov. 2013 Investor Meeting, Intel's William Holt stated that the company already had 10-nanometer test chips. Intel appears to be at roughly the same stage on 10-nanometers as TSMC is at 16-FinFET.

Foolish bottom line
While the foundries/fabless customers want to project the image that Intel's manufacturing lead is going to evaporate, the fact of the matter is, Intel's manufacturing dominance is very real and likely to continue (or even grow) over time. Intel's problems in mobile haven't been due to the manufacturing process, but instead due to design/time to market issues. However, Intel has gotten much better with its mobile SoCs, and by mid to late 2015, Intel could finally prove its doubters wrong.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 01, 2014, at 11:48 AM, BailoutBlues wrote:

    Nice article Ashraf. I can't wait to get some more details about Broxton.

  • Report this Comment On April 01, 2014, at 11:52 AM, techy46 wrote:

    Maybe some TSMC investors should read this article?

  • Report this Comment On April 01, 2014, at 4:03 PM, Neo13 wrote:

    While "TSMC has been very vocal about its 20-nanometer manufacturing process (which is in high volume now)", could you please share with readers any link(s) that will confirm that is a fact? All I seen as of now statements form Xilinx and Qualcomm management that they will ship samples to its customers. No sign of shipment of 20 nm chips in production quantities as of yet.

  • Report this Comment On April 03, 2014, at 3:08 PM, raghu78 wrote:


    As usual you keep on underplaying TSMC's growth and their progress with leading edge processes. This JP Morgan report shows that Intel 14nm has a 1 year lead over TSMC 16FF / 16FF+ .

    TSMC 16FF+ matches Intel 14nm for transistor performance while being closely matched ( though slightly behind) in transistor density.

    Intel 14nm FINFET and TSMC 20nm are in volume production. TSMC's volume ramp in H2 2014 is steep with 10% of 2014 yearly revenue and 20% of Q4 2014 wafer revenue at 20nm. These volume projections were made at the Q4 2013 earnings call

    On the contrary Intel 14nm Broadwell looks like it will launch in Q4 2014 and 14nm Cherrytrail in Q1 2015.

    So whichever way you spin it TSMC is actually reducing the gap rather than Intel widening it. Intel's revenues and profits are shrinking while TSMC's revenues and profits are growing.

    Apple A8 made at TSMC 20nm and Apple A9 at TSMC 16FF will eat more into the x86 notebook market. No matter how much you like to argue to the contrary the availability of a native Office for iPad is going to hurt Intel in the enterprise notebook market.

    The A7 chip costs roughly USD 18 - 19 to manufacture and is in the same performance range as a ivybridge at similar clocks. this has been confimed by Geekbench 3 scores and the fact that the Cyclone destroys Silvermont by 50 - 60% in single thread integer performance. anandtech article confirms the same that Cyclone is comparable to intel's big cores like ivybridge.

    Apple's upcoming A8 is a nightmare situation for Intel. With the ability to pack 4 cores in 100 sq mm and some form of turbo mechanism Apple can get a 1 - 1.2 ghz quad core A8 with 1.6 - 1.8 Ghz single / dual core turbo. If Apple sticks to their aggressive performance slope, Cherrytrail is going to be crushed by A8.

    AMD's Mullins should present stiff competition to Intel in the Windows tablet, hybrid 2-in-1s, convertible space and Beema in the ultra low power / low cost notebook space. Since they are most likely made on a TSMC 28HPM process the volume should be very high and availability should be good. AMD spoke about Tier 1 notebook design wins in the commercial notebook market. Those are likely Kaveri based. So come Q2 2014 you will start seeing signs that Intel has a tough 2014 and 2015 ahead.

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Ashraf Eassa

Ashraf Eassa is a technology specialist with The Motley Fool. He writes mostly about technology stocks, but is especially interested in anything related to chips -- the semiconductor kind, that is. Follow him on Twitter:

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