A few days ago, mobile chipmaker Qualcomm (NASDAQ:QCOM) announced its first processor aimed at cloud computing applications. The new chip likely represents the first serious competition from an ARM architecture-based processor that Intel (NASDAQ:INTC), which dominates the market for data center processors, has ever faced.

Qualcomm's new chip, sold under the Centriq 2400-series brand, is manufactured using Samsung's (NASDAQOTH:SSNLF) 10nm LPE technology.

Intel datacenter marketing chief holding a wafer of Intel Xeon processors.

Image source: Intel.

One of the defining characteristics of a chip manufacturing technology is how densely packed the individual elements of the chip, known as transistors, can be. The higher the density, the more features, and functionality can be built into a given (tiny) physical footprint.

Intel has long claimed that its technologies give it a significant lead on density compared to competing chip manufacturers like Samsung. I've long challenged this assertion, particularly as Intel's main competitors are both currently building mobile processors on 10nm technologies that are denser than Intel's currently available 14nm technology.

If those contract chipmakers were only building mobile processors with their technologies, rather than products that directly competed with Intel's PC processors and data center chips, Intel could brush the situation off as trying to compare apples with oranges.

Intel can't hide behind that excuse anymore.

Density leadership lost in servers

According to Intel's own metric for measuring the density capabilities of various manufacturing technologies, Samsung's 10nm LPE technology can stuff about 50 million transistors into a square millimeter. Intel says that its currently in production 14nm technology can cram 37.5 million transistors into a square millimeter.

This means that Qualcomm is now shipping data center chips built using a technology that, by Intel's admission, produces a denser chip than what Intel currently uses to build its best data center chips.

To make matters worse, Intel doesn't have a chance of regaining the lead for at least another two generations. Intel's next-generation data center processors, known as Cascade Lake, will be manufactured using a performance-enhanced version of the 14nm technology that's used now for its Skylake processors.

Intel is likely to transition its data center processors to some variant of its 10nm technology (I believe it will be 10nm+ for the first 10nm Intel datacenter processor) in 2019, which should bring the company a large boost in density. Intel claims that its 10nm technology has an intrinsic density of around 100 million transistors per millimeter -- a near tripling of density.

An Intel manufacturing employee (left) and Intel's manufacturing chief Stacy Smith (right) holding a wafer of Intel 10nm chips.

Image source: Intel.

While Intel's 10nm technology can manufacture substantially denser chips than competing 10nm technologies, the reality is that by the time Intel brings its that 10nm technology into the data center, it will have to face off against chips built using foundry 7nm technologies.

The good news is that Intel's 10nm technology will likely be roughly on par with the various foundry 7nm technologies that it'll ultimately compete with. (In fact, Intel's 10nm technology may even be slightly denser.)

The bad news for Intel is that it'll still have gone from a clear leadership position on density at the beginning of its 14nm generation to essentially parity with its key competitors in 2019 and beyond.

Intel's weakened competitive positioning with respect to chip manufacturing is due largely to the fact that the company's 10nm technology has been delayed by a matter of years

There is, of course, more to chip manufacturing technology than just pure density (performance and power efficiency are big differentiating factors in the quality of chips), but considering how significantly Intel has played up its claimed density advantage over the competition, that it has fallen behind Qualcomm in this metric is nothing short of disappointing.

Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.