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1 Way Qualcomm Inc. Is Leaving Intel Corporation in the Dust

By Ashraf Eassa – Nov 23, 2016 at 1:00PM

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Qualcomm is being ultra-aggressive about moving to next-generation chip-manufacturing technologies as Intel hangs back.

Wireless-chip specialist Qualcomm (QCOM 0.14%) recently announced its next-generation premium mobile processor, called the Snapdragon 835. The processor promises to provide more computing, graphics, and wireless performance than Qualcomm's prior-generation Snapdragon 820 and 821 chips. It is also, as Mashable points out, "the chip that will power every premium Android phone in 2017."

Image source: Qualcomm. 

Perhaps most interestingly, it will be manufactured using Samsung's (NASDAQOTH: SSNLF) 10-nanometer chip technology. This, Qualcomm apparently boasted, means that its mobile chips have now taken the lead in terms of chip manufacturing technology away from processors targeted at personal computers. 

Image source: Fudzilla

What Qualcomm seems to be implying is that it's now beating microprocessor giant Intel (INTC 1.81%), which supplies most of the world's personal-computer processors, at its own game. 

Let's take a closer look at what's going on here.

Is Qualcomm a full generation ahead of Intel?

To be clear, the contract chip manufacturers have been playing games with how they name their chip manufacturing technologies. Intel's 14-nanometer technology is widely believed to be significantly ahead of the 14/16-nanometer chip manufacturing technologies fielded by Samsung and Taiwan Semiconductor Manufacturing Company (TSM 0.59%) in terms of chip area and potentially performance.

In fact, Intel argues that the technologies that the contract chip manufacturers call "10-nanometer" is very similar, at least in terms of chip area, to what Intel's 14-nanometer technology can achieve -- though even Intel admits that those competing 10-nanometer technologies are denser than Intel's 14-nanometer technology.

Image source: Intel presentation.

So for Qualcomm to imply that it's a full generation ahead of Intel is an example of marketing at work. Further, Intel is planning to introduce the first products built on its own 10-nanometer technology in late 2017, which should allow it to pull decisively ahead again -- at least for a little while.

That's not the point, though. The point is that, as Qualcomm pointed out in a presentation, mobile processors have gone from being manufacturing-technology laggards relative to the personal-computer industry to being arguably in a leadership position in just five years.

That reflects positively on Qualcomm and its manufacturing partners and negatively on Intel and its chip-manufacturing division.

Does Intel plan to fix this?

The major contract chip manufacturers have made it clear that they plan to continue advancing chip-manufacturing technology at an unrelenting pace. TSMC, for example, is expected to start mass-producing chips on its 10-nanometer technology this year and intends to start building chips on a next-generation 7-nanometer technology in early 2018.

TSMC's 7-nanometer technology should be comparable in terms of chip area to Intel's 10-nanometer technology, though it's not clear whether one company's technology will have an advantage in this metric. Intel, on the other hand, has told investors that its 10-nanometer technology will go into production in the second half of 2017. Further, the company says it plans to use derivatives of that technology, performance enhanced, for three full product generations.

Performance enhancements over time are certainly welcome, as they allow Intel to build better products with each generation. However, the fact that Intel has backed off on shrinking chip areas at a two-year cadence while its competitors aim to stay on that pace is a red flag. 

I believe that Intel needs to increase its investments in chip-manufacturing technology and work tirelessly to try to regain an unequivocal and lasting technology leadership position. Otherwise it risks eventually being left in the dust by the top mobile-chip sellers and their contract chip manufacturers.

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