Margin expansion is slim in the near future
As we saw earlier in this series, Intel (INTC) plans to launch many of its products based on 14nm technology. It’s important to note that 14nm yields refer to the percentage of good chips that comes from a given wafer. The 14nm yields still aren’t as robust as the yields Intel achieved with its 22nm process at the same point in its development.
As a result, the transition to the 14nm process will have a critical impact on the company’s product cost structure. Unconfirmed rumors said that Google (GOOG) (GOOGL) Chrome OS devices with Intel’s Broadwell are in the way.
You can consider investing in the VanEck Vectors Semiconductor ETF (SMH), the Powershares QQQ Trust (QQQ), or the Technology Select Sector SPDR Fund (XLK) to gain exposure to Intel. Intel makes up about 19%, 3.41%, and 3.55% of these ETFs, respectively.
14nm has lower yield than the previous 22nm process
The above chart shows Intel’s expectations for its Broadwell product to trend over several quarters. It also shows the costs relative to its two major 22nm PC products—Ivy Bridge and Haswell.
It’s rumored that Broadwell will be in bad shape compared to the first 22nm product—Ivy Bridge—at the same point in its development phase.
However, Intel stated that by 3Q15, it expects the 14nm Broadwell to be its lowest cost PC platform. This has to kept in context because it depends on 14nm yields improving as expected.