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Which Factors Could Drive Growth in Intel’s Foundry Business?

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Intel’s foundry business

In the previous part of this series, we saw that Intel (INTC) reported strong profits as it realized the cost benefits arising from the 14nm (nanometer) node. The company is now looking to transition to the 10nm node with the launch of Cannon Lake in late 2017.

However, the delay in the launch of Intel’s 10nm node has enabled rivals Samsung (SSNLF) and TSMC (TSM) to move ahead. Samsung has already started production of its 10nm node and is building Qualcomm’s (QCOM) Snapdragon 830 on it. TSMC is also ramping up its 10nm node and plans to launch it in 1H17.

Intel’s foundry business has partnered with ARM Holdings (ARMH) to build the latter’s mobile chips that would be used by Lenovo. This is the first big third-party business Intel’s foundry has received so far.

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How would Trump’s policies impact Intel’s foundry business?

Even though Intel is falling behind TSMC and Samsung in the node segment, there is a possibility that Intel could benefit from the political conditions in the United States. During his campaign, President-elect Donald Trump promised that he would bring production back in the country and charge a tax to those companies who manufacture their goods overseas.

Many fabless companies such as Nvidia and Qualcomm manufacture their chips at Taiwan’s TSMC and South Korea’s Samsung. If Trump fulfills his promise, many of these fabless companies would look for foundry services within the United States. Moreover, Intel offers state-of-the-art manufacturing technology. This would significantly improve Intel’s foundry business, thereby improving its factory utilization.

Intel’s technology roadmap

On the technology front, Intel has lengthened its model from a new node every two years to a new node every three years. Earlier, the company had launched two processors per node. Now it would launch three processors per node, starting with KabyLake, the third processor built on the 14nm node.

However, there are rumors that Intel is likely to launch another 14nm processor, Coffee Lake, in early 2018 after launching the first 10nm processor in late 2017. If this is true, it would be the first time two different nodes would be made available simultaneously.

Next, we’ll look at the company’s Computing segment.

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