Intel dropped a bombshell during its Q2 2015 conference call today. The company’s sales were in line with reduced expectations, at $13.2 billion revenue, down 5% year-on-year. Revenue rose 3% compared to Q1, with slightly better gross margins compared to previous expectations (62.5%, above the expected 56%). PC sales revenue fell 14%, but Intel’s tablet business shipped 9.9 million devices, up 11% year-on-year. Profits in the data center group also rose significantly, to $3.9 billion (up 10% year-on-year).
What most are likely to notice, however, is the announcement that Intel’s 10nm hardware will be delayed. Intel CEO Brian Krzanich told investors the following: “The last two technology transitions have signaled that our cadence today is closer to 2.5 years than two.
To address this cadence, in the second half of 2016 we plan to introduce a third 14-nanometer product code named Kaby Lake, built on the foundations of the Skylake micro-architecture but with key performance enhancements. Then in the second half of 2017, we expect to launch our first 10-nanometer product, code named Cannonlake. We expect that this addition to the roadmap will deliver new features and improved performance and pave the way for a smooth transition to 10 nanometers.”
Investors obviously had a number of questions on this point, but Krzanich held his ground, noting that this 10nm delay was fundamentally similar to what Intel had done with 14nm. Krzanich put much of the blame on the intrinsic difficulty of the 14nm to 10nm transition, particularly the lack of EUV or a new lithography technology. Krzanich doesn’t want to label this a deviation from Intel’s vaunted Tick-Tock model (one analyst referred to it as Tick-Tock-Tock), but Intel continues to claim that it will deliver a 10nm process before any of its competition.
Krzanich, again: “We believe, even with this 2017, our lead in Moore’s Law will not change dramatically. We believe we’ll continue to lead with roughly the same leadership position that we have today. We base that on, one, what really counts when I talk about 2017, that’s not samples, that’s not small volume. That’s converting over Cannonlake and producing a large percentage of our CPUs in volume in the second half of 2017. So there’s a bit of definition. When we say second half of 2017 we’re talking about millions of units and large volumes.
“And then as you said, there’s this definitional difference,” Krzanich continued. “This will be now our third generation of FinFETs by then. It will have several other transistor enhancements. And we believe if you take a look at the scaling, it will be quite strong relative to the normal scaling parameters that occur with the Moore’s Law transition. I’m not going give you the exact numbers right now. But we think if you combine all those together, our leadership position doesn’t change, even with this date.”
Obviously as Intel’s CEO, Krzanich has good reason to spin the news this way, but chasing after which semiconductor firm has the “best” iteration of a process is prone to leave one stuck in the weeds. The fact is, Intel’s 14nm process is different from Samsung’s, which is different from TSMC‘s — and Intel isn’t lying when it says it leads on multiple metrics of semiconductor performance. The flip side to that, of course, is that Intel’s wafers and cost structure have traditionally been much higher than either of its foundry competitors. Whether its advantages are strengths or weaknesses depends on whether you think Intel will continue to derive the bulk of its revenue from the traditional PC business or will transition to a smartphone and tablet-centric business with a cost structure designed to compete with the likes of Samsung, TSMC, and GlobalFoundries.