One of the early signs that I noticed that pointed to Intel (NASDAQ:INTC) facing manufacturing yield challenges with its 14-nanometer chip technology was the scarce availability of fairly high-end desktop processors built on this technology.
Indeed, until recently, it has been very difficult to acquire the Core i5-6600K and Core i7-6700K desktop processors and nigh impossible to grab ahold of the Core i5-5675c and Core i7-5775c desktop chips. Although I have seen some very "creative" explanations for the shortages of these products, I believe the evidence supports that Intel simply had trouble making them.
Fortunately, as I check various online retailers, it's looking clear to me that Intel is able to produce as many of these chips as customers are willing to buy, further suggesting that Intel has been able to improve its chip yields rather substantially.
Here are three reasons that I believe investors should breathe something of a "sigh of relief" as a result of this fact.
No. 1: Good sign for Broadwell-EP/EX ramp later this year
Intel CEO Brian Krzanich confirmed on the company's most recent earnings call that the company will be rolling out its first Xeon E5/E7 server CPUs built on its 14-nanometer technology.
These chips are likely to be quite large and customer demand for these latest chips is sure to be robust, given the performance and power improvements that they should deliver to customers. This means that Intel needs to be able to crank out a lot of these relatively hard-to-build chips (larger chips are harder to build all else equal) in support of this launch, and do so while maintaining a good cost structure.
Intel had told investors that as it transitions its server product line from 22-nanometer to 14-nanometer, its Data Center Group will see a bit of a slowdown in operating profit relative to revenue growth, implying a margin hit. I still expect the margin hit, although at this point I am comfortable that Intel has yields and the ability to manufacture these chips now solidly under control.
No. 2: Good sign for Iris Pro chips set to ramp shortly
Thanks to a very solid find from AnandTech forum member who goes by the handle Sweepr (via AnandTech), it would appear that the very highest end of Intel's laptop-oriented Skylake processors has now shown up on the company's official price lists.
These chips, which pack the company's highest-end Iris Pro graphics, should be quite large. I strongly suspect this part will be used in a soon-to-be-released 15-inch MacBook Pro, and Intel is also planning to start selling versions of its small NUC form factor PC using this chip. Intel has also talked about increased design win traction of its Skylake Iris/Iris Pro chips over previous generation Haswell/Broadwell models, so this should be good for other system vendors looking to ramp systems using it as well.
All told, a richer mix of chips powered by Iris Pro graphics should help boost Intel's platform average selling prices and ultimately help to stabilize revenue in what continues to be a challenging PC market.
No. 3: Good for Intel's gaming segment
Intel has increasingly cited gaming-oriented PCs as a growth driver for the company, and it's not hard to see why. The performance requirements of gaming PCs continue to go up as games become more demanding, which means that gamers upgrade at a much faster pace than the Average Joe who uses his computer to check email and go on social media.
With ample supply of its latest 14-nanometer gaming-oriented processors, Intel can serve demand with its latest processors and platforms. Although Intel did seem to lower prices of its older generation 22-nanometer chips to try to satisfy demand during the holiday season, Intel is now in a good position to capture the demand from gaming customers who want the absolute latest Intel chips.
Late, but it's good to see the availability situation improve
Intel is quite late to ramping 14-nanometer in significant volumes, but it's here now and it seems to be in good enough shape so that anybody who wants to buy a 14-nanometer Intel processor should be able to do so. I look forward to Intel's upcoming 14-nanometer product launches to see what this manufacturing technology is ultimately capable of across various market segments.
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.