Intel (NASDAQ:INTC) CFO Stacy Smith recently participated in Pacific Crest's Global Technology Leadership Forum. The event was hosted in a question-and-answer format during which both analysts from Pacific Crest, as well as members of the audience, were able to ask the Intel executive questions.
Although there was far more said on the conference than I could possibly hope to cover here, I would like to highlight three items discussed on the call that stood out as particularly helpful to me as an Intel investor.
How can Intel stabilize PC-related revenue?
According to Smith, Intel is able to deliver revenue growth in an environment in which the PC market declines at a mid-single-digit percentage clip. But when those declines become greater, the declines from the PC market essentially cancel out the growth that the company sees from other business segments such as its data center group.
This dynamic, according to Smith, leads Intel to place a heavy emphasis on what the company needs to do in order to "stay innovative in the PC category."
So, what exactly does Intel do to "stay innovative" in this market?
"First and foremost, the process technology leadership we have, and the kinds of products we bring to the market enable new classes of devices," Smith said.
Examples of such devices, according to Smith, include 2-in-1 convertibles and "detachable" notebook/tablet hybrids. He also pointed to the fact that notebooks have become "very thin and light."
Looking ahead, Smith says that there will be a "very exciting selection of devices" based on the company's new Skylake processors coming to market during the second half of 2015.
Smith also highlighted the company's high-performance processors aimed at gamers, as well as low-cost processors that bring PC price points lower for "first-time buyers."
Taking a big picture view, Smith indicated that Intel's PC processor offerings are significantly more "segmented" today than they have been in prior years.
"What we're trying to do is play across these different segments and deliver the value proposition that is key in the different segments," he added.
Addressing Intel's Moore's Law position
On Intel's most recent earnings call, the company said that its first processors built on its next-generation 10-nanometer manufacturing technology wouldn't be released until the second half of 2017, which is roughly a year behind schedule.
During the Pacific Crest presentation, an analyst asked Smith to both elaborate as to what drove this delay and whether this means that Intel's traditional manufacturing lead over the industry will erode.
Smith began by saying that the transitions to the company's 22-nanometer and its 14-nanometer manufacturing technologies have taken about two-and-a-half years rather than the traditional two, and that the 10-nanometer transition is expected to take a similar amount of time.
To respond to this delay, Smith said that Intel will be bringing out a "third wave" of products (known as Kaby Lake) built on the company's 14-nanometer manufacturing technology. This, according to Smith, allows Intel to "bring a new set of features" and help its customers "refresh their product lines."
Smith notes that Intel's customers like this arrangement because the Kaby Lake products will be "socket compatible" with Skylake, allowing system vendors to plug these new chips into Skylake-based motherboards.
Finally, Smith said that the Kaby Lake chips should have an attractive cost structure given that Intel's 14-nanometer manufacturing technology should be quite mature (and thus cost effective) by the time they roll out in the second half of 2016.
With respect to Intel's traditional manufacturing lead over the competition, Smith believes that the company's position "hasn't changed." Further, Smith says that when all things are considered, including transistor performance, energy efficiency, and cost, Intel believes that it has the "same, multi-year lead" that it has traditionally had at both 14 nanometers as well as 10 nanometers.
Talking 3D XPoint
Intel and memory maker Micron (NASDAQ:MU) recently announced a new memory technology known as 3D XPoint, which promises to be much faster than traditional NAND flash while at the same time much more cost effective than DRAM.
It's not meant to replace either technology but, as Smith indicated on the call, it "sits in the middle" of those two technologies.
"We think that it can create a third tier of memory in systems," Smith said.
Smith also discussed the timing of the launch of 3D XPoint memory in the market and when it should start impacting Intel's financial results:
I don't think it takes several years before this starts to have a material impact on [Intel's] business. We'll be manufacturing this in the back-half of this year, and I think we'll see reasonable amounts of revenue for it next year -- we'll talk more about that in the November investor meeting.
So it's not something that we've announced that's five years out, it's something that we've announced that's kind of now. So I think it'll be quicker than what you just said.
Smith also offered some commentary with respect to the potential size of the opportunity:
In terms of how large it's going to be, it's just impossible -- we've looked at a lot of different industries -- to be able to call how fast something like this penetrates the market given how disruptive it is. It's just impossible to say, but I think if you take a long period of time, this is going to be very big.
It's big in terms of just stand-alone memory, but it's also really big when I think about it from the standpoint of the platform that we sell into the data center; being able to have a near-CPU memory that has the kinds of performance and cost characteristics as this has the potential to dramatically increase the performance of the data center products.
It'll be interesting to see just how "disruptive" this technology ultimately turns out to be and what impact it will have on Intel's business over the long term.