Intel’s manufacturing technology advantage
Intel (INTC) has been unbeatable in manufacturing node technology, which gave it an edge over its peers. The company was able to charge a higher price for its products. The technology advantage also helped Intel become a leader in the PC and server CPU (central processing unit) markets.
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However, Intel’s three-year delay in the 10nm process node, which was originally planned to launch in 2016, allowed TSMC (TSM) to catch up and pass Intel in the process node. TSMC started volume production on the 7nm node in 2018, while Intel is still struggling with its 10nm node. Intel’s 10nm node is expected to start production by the end of 2019. TSMC’s two-year technology leap allowed Advanced Micro Devices (AMD) to overtake Intel in the PC and server CPU space and gain market share. The technology lag cost Intel its market share and pricing power.
Intel expects PC-centric revenues to remain flat or decline in the next three years. The company’s PC business will likely be impacted by falling end demand and increasing competition from Advanced Micro Devices. Advanced Micro Devices increased its unit share in the PC CPU market from 20.2% in the first quarter of 2018 to 30.2% in the first quarter, according to Mercury Research data. Advanced Micro Devices is set to gain more market share by overtaking Intel in the manufacturing technology space with the launch of the 7nm Ryzen CPU in mid-2019.
Data center revenues
Intel expects data center revenues to have double-digit growth in the next three years as the overall data center demand picks up. Intel will likely face competition from Advanced Micro Devices, which is launching its 7nm Rome server CPU this quarter. Intel’s 10nm server CPU probably won’t be launched before 2020.
Intel’s CEO, Bob Swan, aims to get Intel back in the technology lead. The company is undertaking a costly technology transition, which could put pressure on its gross margin in the next three years.