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Intel Corporation’s Server Processors to Get Large Boost in 2017

By Ashraf Eassa – Sep 9, 2016 at 8:15AM

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This Fool expects great things from Intel's server chip biz during the second half of 2017.

An Intel server processor. Image source: Intel.

Earlier this year, microprocessor giant Intel (INTC -1.11%) launched Xeon E5 and Xeon E7 processors based on its Broadwell architecture, and built using the company's 14-nanometer manufacturing technology. These processors offered improved performance and power efficiency, and according to Intel CFO Stacy Smith, are expected to help drive up the company's server processor average selling prices during the second half of 2016.

Although there's obviously reason to be enthusiastic about the ramp of the Broadwell server parts, I believe that next year's product line should be even more exciting. Here's why.

New platforms, new cores, and enhanced manufacturing technology

The Broadwell-based server chips that Intel recently launched don't bring with them a new platform. The chips themselves get faster, but they plug into the same motherboards as the prior-generation Haswell-EP parts.

The next-generation server chips are expected to use an all-new platform, known as the Purley platform. By virtue of the new platform/motherboards, Intel will be able to offer up a wide range of enhancements, which you can read about here. However, while the new platform is nice, the enhanced performance that will come as a result of the combination of a new processor architecture, as well as an improved manufacturing technology, should prove quite attractive.

The first processor that the Purley platform will support is known as Skylake-EP. Skylake-EP is expected to use a new processor core known as Skylake Xeon, which is a beefed-up version of the Skylake processor core found in the company's current personal-computer processors. The new architecture alone should bring performance and power efficiency benefits.

However, there's another thing that should further bolster the value proposition of Skylake-EP: an improved manufacturing technology. At its developer conference last month, Intel disclosed that it had developed a new version of its 14-nanometer technology, which it markets as 14-nanometer+, that performs 12% better than the original 14-nanometer technology.

It's a virtual certainty that the new Skylake server chips will be manufactured using 14-nanometer+, which should allow the chipmaker to wring out additional performance beyond what the new architectures alone can provide.

New chips could drive volume, average selling-price growth

The introduction of the new platform could drive, perhaps, more exciting unit growth than this year's new processor-on-an-existing platform will be able to. Additionally, I expect that Intel will continue its practice of introducing additional higher-end processor models in order to try to continue the trend of its customers buying an increasingly rich product mix -- which you can read about here.

So, for 2017, I'm optimistic that Intel's data-center group will benefit from fairly robust unit demand for a new platform. I also think that the company's average selling-price growth should continue.

When will these sales kick in?

The most recent leaks suggest that Intel is planning to launch the Purley platform in the first half of 2017. An optimistic release date for these new processors would be exactly a year after the Broadwell-based server parts launched -- late March/early April of 2017 -- but I wouldn't be surprised if it took Intel a little longer to roll the platform out.

From a timing perspective, I believe that investors will have to wait until the second half of 2017 for the revenue impact to be felt from the new product cycle. However, once it kicks in, I think Intel could be looking at a nice acceleration in revenue and unit growth.

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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