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Did Intel Underestimate Competitors’ Technology Roadmap?

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Intel’s technology roadmap

In the previous part of the series, we saw that Intel (INTC) has a history of reporting overly optimistic revenue guidance. Similarly, the company has been underestimating its competitors’ technology innovations. Let’s look now at Intel’s technology roadmap against its competitors.

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14-nm technology

In its 2013 investor conference, Intel stated that it would launch its 14-nm (nanometer) technology before competitors released their first-generation 14-nm FinFET (fin-shaped field effect transistor) devices. While Intel started volume production of 14-nm technology in fiscal 3Q15, Samsung (SSNLF) started mass production of 14-nm FinFET devices in February 2015.

10-nm and beyond

Intel claimed that it would launch its 10-nm technology before foundries developed the 14-nm technology. Now it’s currently working on 10-nm technology and has delayed the launch to 2017. Taiwan Semiconductor Manufacturing (TSM) and Samsung claim that they are scheduled to launch their 10-nm technology in 2016. While Intel is still figuring out the technicalities of 10-nm technology, TSMC is progressing with the research and development of 7-nm and 5-nm. In July 2015, IBM (IBM) claimed that it has developed a 7-nm chip.

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Tick-tock model

Intel launches technology in a tick-tock cycle. “Tick” means the launch of manufacturing technology accompanied by “tock,” a new architecture using that manufacturing technology. The cycle is for two years, which means two architectures are launched. However, it has widened to two and a half years, and with 10-nm, it’s expected to be three years. The company unveiled details of the 14-nm SkyLake processor’s successor Kaby Lake, which is scheduled to be introduced in fiscal 2H16.

The first 10-nm architecture Cannonlake is planned for release in fiscal 2H17. We’ll dig more deeply into the 10-nm technology in the next part of the series. All this shows that Intel is probably becoming complacent by not launching new technologies on a timely basis, whereas its competitors are becoming aggressive.

You can gain exposure in the semiconductor industry through the VanEck Vectors Semiconductor ETF (SMH), which has holdings in 26 semiconductor stocks. It has 17.9% exposure in INTC and 14.3% in TSM.

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