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Intel Corporation's Xeon Phi Is Growing Quickly

By Ashraf Eassa – Jul 26, 2016 at 9:30AM

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This microprocessor giant's most recently announced Xeon Phi product seems to be doing very well in the marketplace.

Image source: Intel. 

In a previous article, I noted that microprocessor giant Intel (INTC -0.82%) might be seeing robust demand for its recently released Xeon Phi processor family aimed at high-performance computing applications. The clue came from supercomputer specialist Cray (CRAY).

Based on commentary from Intel CEO Brian Krzanich on the company's most recent earnings call, it would seem that Knights Landing is proving far more competitive in the marketplace than its prior-generation Xeon Phi product, known as Knights Corner, ever was.

Massive growth in Xeon Phi shipments

Krzanich told investors on the call that shipments of Knights Landing in the first six months of 2016 were 8 times the shipments of prior-generation Xeon Phi processors during the entirety of 2015.

Granted, the earlier Knights Corner part first debuted back in 2012 and had only seen minor refreshes since then, so part of this huge growth is likely due to customers waiting on next-generation product. However, Krzanich also indicated that the company saw share gains in both "supercomputing and machine learning segments."

Xeon Phi remains a relatively small portion of Intel's data center revenue

Although the news around Xeon Phi is certainly good for the company, it's worth noting that revenue from this segment is still a very small part of the company's overall data center group (DCG).

Note that even with eightfold growth year over year during the first half of 2016 in this product segment, DCG only grew 9% year over year in the first quarter and 5% year over year in the second quarter.

Over time, Xeon Phi should become a larger part of DCG's revenue base and, perhaps, one day the revenue from these products will be large enough to move the needle. For now, though, it's just a small, but interesting, part of the DCG growth story.

What comes after Knights Landing?

It took a very long time for Intel to transition from Knights Corner to Knights Landing, and I believe that this large gap served to hurt the company's efforts here. Intel is going to need to work hard to make sure that the follow-on part to Knights Landing, known as Knights Hill, will arrive in a timely fashion.

The company previously disclosed that the Aurora supercomputer for the US Department of Energy, built in collaboration with Cray, "will be delivered in 2018." If there are no slips, then this means that Knights Hill should be in production during 2018 on the company's upcoming 10-nanometer manufacturing process.

The key thing to keep in mind is that, at least with the Xeon Phi family of products, Intel doesn't do multiple generations of products on a given manufacturing technology. Instead, the company tries to max out the capabilities of a given manufacturing technology and deliver new designs on new manufacturing technologies as soon as practicable.

Given that Intel has signaled that it plans to spend about three years with its 10-nanometer technology on the leading edge (first 10-nanometer product should arrive in late 2017), we should expect the fllow-on to Knights Hill on the company's 7-nanometer process in the 2020 time frame.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. 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.

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