Has Intel Lost Its Manufacturing Lead?

Intel's biggest asset is its semiconductor manufacturing lead, but has the company lost it to hungry competitors?

May 12, 2014 at 11:31PM

The crown jewel of Intel's (NASDAQ:INTC) competitive advantage is, above all else, the company's leading-edge manufacturing technology. In today's world, any company can license great CPU and graphics IP and develop a processor for just about any market segment other than PCs. The only way Intel can truly differentiate is by having manufacturing technology that no other company can match. While Intel claims to have a manufacturing lead, it's worth peeling back these claims and understanding exactly what's going on here.

OK, what's everybody claiming?
Intel is claiming the following in terms of product rollouts:

  1. Cherry Trail (14-nanometer tablet product) launching in late 2014.
  2. Broadwell (14-nanometer PC products) launching in H2 2014.
  3. Broxton (14-nanometer smartphone/tablet converged product) launching in H2 2015.
  4. SoFIA 14-nanomater (14-nanometer low-cost smartphone/tablet product) launching in either Q4 2015 or Q1 2016.

On the other hand, Taiwan Semiconductor (NYSE:TSM) and Samsung, the two remaining leading-edge foundries, are claiming that their 14/16-nanometer process technologies will be in high volume production during 2015. If we look at what has been announced so far in the way of products and timelines, we can get a sense of Intel's competitive position:

  1. Qualcomm (NASDAQ:QCOM) has announced 20-nanometer Snapdragon parts for sampling in H2 2014 and in devices by H1 2015.
  2. Apple (NASDAQ:AAPL) is reputed to be TSMC's major 20-nanometer customer for an iPhone 6 launch in the August-September timeframe.
  3. AMD (NASDAQ:AMD) has indicated that it will be moving to 20-nanometer during 2015 and then it will roll out designs based on 14/16 FinFET at some point during 2016 (likely mid- to late 2016 if the current product release cadence holds).

Let's focus on Qualcomm
Intel's fiercest direct competitor in the chip space is Qualcomm, so it's worth taking a look at what the product release cadence for Qualcomm's products on new manufacturing technologies has been. (These are first device launches, so silicon is available a few months beforehand.)

  • April 2012 -- 28-nanometer polysilicon (Snapdragon S4).
  • July 2013 -- 28-nanometer high-K/metal gate (Snapdragon 800).
  • H1 2015 -- 20-nanometer high-K/metal gate (Snapdragon 808/810).

The gap between 28 polysilicon and 28 high-k/metal gate was 15 months, and the gap between 28-nanometer high-k/metal gate and 20-nanometer high-k/metal gate (assuming April 2015 product availability of Snapdragon 808/810) looks to be around 20 months. This has some interesting implications.

Case No. 1: 20 -> 16 transition is similar to 28 polysilicon to 28 HKMG
TSMC claims that the 16 FinFET process is simply introducing faster transistors onto a similar 20-nanometer back end of line, which should theoretically allow for a much shorter time to market for a 16 FinFET part than if the 16 FinFET node were all-new. If we assume, then, that the transition from 20-SoC to 16-FinFET is then similar to the 28-polysilicon to 28-high-K/metal gate transition, this would imply a 12- to 15-month gap, landing a Snapdragon 808/810 FinFET based successor in devices by Q2-Q3 2016.

Case No. 2: 20->16 transition is similar to 28 HKMG -> 20 SoC
Since a move to 16 FinFET is a move to a fundamentally new transistor structure, there may be complications on the design side in getting these products to yield enough for high volume. This, then, may make the 20 -> 16 transition look a lot more like the 28 HKMG -> 20 SoC transition in terms of time rather than the 28 polysilicon -> 28 HKMG. If that's the case, then the first 16 FinFET products from Qualcomm become a late 2016/early 2017 affair -- which is, not coincidentally, what International Business Times' Handel Jones appears to believe.

What does this mean for Intel?
Intel saw the first high-volume mobile SoCs based on its 22-nanometer FinFET manufacturing process appear in the September-October 2013 timeframe, with more aggressive volumes ramping throughout 2014. If Qualcomm gets 16 FinFET products out in devices by Q2 or Q3 2016, then Intel will have a lead of about a year and a half (Cherry Trail will probably appear in devices in Q1 2015) in tablets and about a three- to four-quarter lead in smartphones. This is a real lead, but it is not on the order of years as Intel has promoted.

Now, if Qualcomm and the foundry landscape slip to much later (something that seems doubtful), then Intel's lead in manufacturing becomes much more pronounced and the competitive environment becomes a lot easier for Intel. Further, if Intel truly has a density lead on the order of a 35% shrink relative to TSMC/Samsung 16/14-nanometer, then Intel's lead is quite obvious and -- assuming Intel's design groups don't fumble it -- should translate into a good competitive position for the company in late 2015 and beyond.

This chip stock could make you rich!
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now, for just a fraction of the price of Apple stock. Click here to get the full story in this eye-opening new report.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel and owns shares of Apple, Intel, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. 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.

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