Intel (INTC 0.64%) is in the process of regaining the manufacturing lead that it lost to rivals like Taiwan Semiconductor Manufacturing, popularly known as TSMC, and Samsung four years ago, and its turnaround looks to be on track based on the latest market share numbers from Mercury Research.
Let's take a closer look at Intel's progress and check why the chip giant is now in a solid position to make a comeback.
Intel employees wearing clean room "bunny suits" work at Intel's D1X factory in Hillsboro, Oregon. Image source: Intel.
Intel ended 2021 with solid tailwinds
According to Mercury Research, Intel controlled 74.4% of the x86 processor market at the end of 2021, with Advanced Micro Devices (AMD -0.35%) holding the rest. This doesn't paint a good picture for Intel, as it was sitting on 78.3% of the x86 CPU (central processing unit) market in the fourth quarter of 2020.
AMD's market share growth last year was driven by the company's gains in the server CPU space, where major tech players are deploying its chips. The chipmaker ended the fourth quarter of 2021 with a 10.7% share in server CPUs, up from 7.1% in the prior-year period. However, Intel turned the tables in the desktop CPU market, exiting the fourth quarter with an 83.8% share of the space, compared to 80.7% at the end of the fourth quarter of 2020.
There was progress in the notebook CPU market as well, where Intel controlled 78.4% of the space in the fourth quarter of 2021, compared to 78% in the third quarter. This indicates that Chipzilla was able to stymie AMD's rise in the notebook CPU market.
The reason that Intel is gaining share in the desktop and notebook CPU market is because of its Alder Lake chips, which have helped it close the technology gap with AMD. Intel has also reclaimed its crown in the video gaming space thanks to the Alder Lake processors. What's more, third-party benchmarks indicate that Chipzilla's new processors are not just more powerful than their AMD counterparts, but also aggressively priced.
Not surprisingly, the Alder Lake processors rank among the best CPUs for gaming. This seems to be turning the tide in Intel's favor in the client CPU market, where the Alder Lake processors are being adopted at a terrific pace. Chipzilla says that the Alder Lake processors are powering more than 140 models in 30 countries.
Intel CEO Pat Gelsinger said on the company's January earnings conference call that the company plans to keep up its momentum with the launch of its Raptor Lake client CPUs later this year. This indicates that the chipmaker is setting itself up to take away more market share from AMD, as the Raptor Lake processors are expected to pack a series of improvements such as a bigger memory cache, more energy-efficient cores, and record boost frequency.
The Raptor Lake processors will be followed by Intel's Meteor Lake products, which will be based on the Intel 4 process, which uses a 7-nanometer (nm) manufacturing node. This should help the chipmaker maintain its dominance over AMD, which is expected to launch its 5nm Zen 4 processors by the end of 2022.
Intel enjoys an advantage over AMD in terms of processor density, which means that Chipzilla's processors ideally pack more transistors than their AMD counterparts. As a result, they are more powerful and efficient. All this indicates that Intel could keep crushing AMD's resurgence in the client CPU market and take more share away from its smaller rival and help the semiconductor giant inject life into its largest business segment -- the client computing group (CCG).
Stronger financial performance could be in the cards
Intel's CCG generated $40.5 billion in revenue last year, up just 1% from the prior year. The segment accounted for 54% of Intel's annual 2021 revenue of $74.7 billion. So an uptick in this segment could move the needle in a big way for the chipmaker.
It is worth noting that Intel's CCG had a couple of positive takeaways last year despite a flat revenue performance. First, the company's desktop processor volume sales increased 8% last year, and average selling prices (ASPs) increased 3%. It is worth noting that ASPs increased 11% year over year in the final quarter of the year thanks to the Alder Lake launch.
Second, Intel's notebook processor volumes were up 8% for the year, while ASP for the full year dropped 6%. But there was significant year-over-year growth of 14% in notebook processor ASPs in the fourth quarter of 2021. The notebook processor business could also step on the gas even more in the future, as Intel has launched Alder Lake-powered gaming laptops of late.
As such, it wouldn't be surprising to see Intel finish 2022 with a stronger pace of growth than the flat top-line performance that analysts are anticipating. The possibility of Intel gaining more market share against AMD should not be ruled out, so investors looking to invest in a potential turnaround play should take a closer look at Chipzilla, as it is trading at just 10 times trailing earnings.
