According to a report from Semiconductor Engineering, Intel (NASDAQ:INTC) was originally supposed to start installing equipment into its first 10-nanometer manufacturing plant this summer. However, that same report -- citing "industry sources" -- says Intel won't start moving equipment into this plant until the second quarter of 2016.
That suggests volume production on 10-nanometers won't begin until sometime after the second quarter of 2016, and 10-nanometer product launches will be even further out. That's a pretty significant delay that, if true, should worry investors.
Where's Intel's lead going?
Intel has often bragged that it is first to develop next-generation manufacturing technologies, giving it an edge over the competition. However, thanks to Intel's delayed roll-out of its 14-nanometer technology, the delta between when Intel went into production on its 14-nanometer technology and when Samsung (NASDAQOTH:SSNLF) went into production on its own 14-nanometer technology was well under a year.
Now, I would argue that Intel's 14-nanometer technology is more advanced in a number of ways than competing 14/16-nanometer technologies, so I believe the lead is longer than what the production start timing would imply. However, if you look at what Intel's competitors are saying about their respective 10-nanometer technologies, both Samsung and TSMC (NYSE:TSM) are targeting volume production of their 10-nanometer technologies in late 2016.
If Intel is installing equipment for its 10-nanometer factories in the second quarter of 2016, then Intel probably doesn't have too much of an advantage on TSMC/Samsung in terms of the timing of volume production start at 10-nanometers.
Intel will need breakthrough technology to secure its lead
If Intel is going to keep its lead at the 10-nanometer generation -- at least if Samsung/TSMC hit their own production targets -- then it's going to have to do it by having superior technology in terms of performance and/or density.
TSMC's Mark Liu claims TSMC's 10-nanometer technology will "achieve industry-leading speed, power, and gate density." It's not clear how much TSMC knows about Intel's 10-nanometer technology, but it looks like the bar Intel will have to clear in order to maintain a material lead might be quite high.
Intel's silence isn't helping
At Intel's investor meeting last year, company executives said they didn't want to talk about 10-nanometer production timing until the 2015 investor meeting essentially for competitive reasons. Given that TSMC and Samsung have now publicly committed to going into production on their 10-nanometer technologies in late 2016, and given the report that Intel is delaying 10-nanometer equipment move-in, it seems to me that this explanation was simply smoke and mirrors.
What is actually going on?
If Intel is delaying equipment move-in, it means the company isn't confident enough in the technology to be preparing for a volume ramp. In fact, remember how Intel said it had experienced yield difficulties in ramping its 14-nanometer technology, leading to delays? Well, I wouldn't be surprised if -- assuming the report from Semiconductor Engineering is true (and it is a reputable publication, so I believe it to be true) -- Intel is seeing similar yield problems at the 10-nanometer generation, leading to these reported delays.
I don't think we'll get a formal update on the status of the company's 10-nanometer manufacturing technology and volume ramp plans until November of this year, so until then, the best investors will have are various reports that trickle out from time to time.
Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. 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.