What happened

Shares of Intel (NASDAQ:INTC) fell 16.8% last year, according to data from S&P Global Market Intelligence. The semiconductor giant faced the same difficult market conditions as everyone else, plus the additional burden of a lagging upgrade to next-generation manufacturing technologies.

So what

Intel owns and operates its manufacturing lines. That's usually a competitive advantage since Intel tends to run at the bleeding edge of advanced manufacturing processes. Having a better process than the competition lets the company produce more chips from a single silicon wafer, which reduces costs and increases the finished product's performance.

The upgrade to 7-nanometer manufacturing lines ran into technical difficulties last year, however, leaving Intel with the rare disadvantage of trailing behind the leading third-party chip foundries, where most of the semiconductor industry has its blueprints turned into physical products.

Disappointing updates on the slow upgrades triggered the worst single-day drops of the year, led by a 16% plunge on July 24 and an 11% crash on Oct. 23.

Photo of a so-called clean room where semiconductors are made.

The room where it happens: a "clean room" where chips are made. Image source: Getty Images.

Now what

I fully expect Intel to bounce back from this temporary setback because the company is armed with an industry-leading research & development department and some of the deepest pockets in Silicon Valley.

The market is shifting, and it's fair to say that smaller rivals are walking away with slices of Intel's market share in PC processors and maybe even server chips. At the same time, Intel is making up for lost ground by attacking new target markets such as automotive computing and custom chips for artificial intelligence systems.

You can grab an Intel share for the bargain-bin valuation of 10.2 times trailing earnings, 10.1 times free cash flows, and 2.6 times sales. I'm very comfortable with the idea of buying Intel at these ultra-cheap prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.