On chip giant Intel's (NASDAQ:INTC) April 26 earnings conference call, CEO Brian Krzanich admitted that the company's upcoming 10nm chip manufacturing technology wouldn't go into mass production during the second half of 2018 as originally planned. It will now go into volume production on the technology sometime in 2019, though Intel wouldn't pin down exactly when in 2019 production would start

In light of that delay, one analyst asked Krzanich the following question on the subject of the 10nm push-out: 

... [D]o you believe that the competitive lead you have versus your competition is shrinking, or is this a challenge everybody is going to have?

Krzanich began his reply with the following: 

So let me start with we absolutely have product and process leadership. We're shipping 10nm products today. So I did want to make sure that that was very clear to you, and those are the densest, highest-performing products out there.

The executive then added the following comment near the end of his answer: 

Now as we look out in time, we do see the density. If you just take that component, the density gap is narrowing a bit, but that's out in time.

Here's why these answers seem questionable.

Shipping products?

Krzanich said that the company is "shipping 10nm products today" and that they're the "densest, highest-performing products out there."

The problem with this answer is simple: Intel has yet to announce a single product that's manufactured using its 10nm technology while its competition has been mass-producing chips based on their own 10nm technologies for over a year now.

A wafer of Intel processors.

Image source: Intel.

Those competing 10nm technologies, according to Intel, are worse than Intel's own 10nm technology but superior to its currently shipping 14nm technology. 

Now, Intel says that it has begun "shipping" products built using its 10nm technology, known as Cannon Lake, in "low volume." However, I believe that these product shipments are largely for public relations purposes rather than for any significant revenue. Indeed, while Intel claims to have been shipping these "low volume" parts since the end of 2017, the company hasn't yet announced these chips and consumers still can't buy computers with those chips in them. 

Moreover, I believe that once these products actually do ship to customers, they won't be competitive with the company's current 14nm-based products and won't be widely adopted by computer makers. It won't be until the company introduces its follow-on to Cannon Lake, known as Ice Lake, that Intel will have products built using 10nm that are actually superior than their predecessors. 

In fact, Intel admitted on the conference call that it wouldn't begin mass production of chips using its 10nm technology until sometime in 2019, which further reinforces the point that Intel doesn't actually expect the 10nm products that it's shipping now to be material to its business anytime soon.

The narrowing density gap?

What I thought was particularly astonishing was that Krzanich says that he believes the density gap between Intel's best shipping technology and the best competing technologies is narrowing "a bit" and that narrowing will only happen over time. Krzanich wasn't clear on what time-frame he was talking about, though I suspect that in this case he was talking about a matter of years rather than, say, weeks or months.

With that context in mind, Krzanich's statement is flat-out ridiculous. 

If we look at what Intel is shipping in high volumes today (not at what it's shipping in ultra-small quantities just to win an arbitrary contest), its 14nm technology is behind in terms of how tightly packed a chip can be compared to the currently shipping 10nm parts by competitors.

Moreover, Intel's main competitor, Taiwan Semiconductor Manufacturing Company (NYSE:TSM), began mass-producing chips using its 7nm technology, which further widens the gap between Intel's best technology in mass production and TSMC's. 

In terms of technologies that are in high-volume production right now, Intel is a solid generation behind. The idea that Intel has a lead that will diminish "a bit" out in time is indefensible and I'm simply stunned that Krzanich actually said this on the conference call.

Foolish takeaway

The bottom line is this: Intel is now solidly behind its main competitor in chip manufacturing. This means that its competitors, which will have access to TSMC's 7nm manufacturing technology, could gain an advantage over Intel in the marketplace. This could lead to erosion in both market share and gross profit margin in the coming years. 

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