Intel Corporation Reportedly Plans to Mass Produce 7-Nano Chips in 2020

By Ashraf Eassa Markets Fool.com

Respected website Semiconductor Engineering recently published some details about microprocessor giant Intel's (NASDAQ: INTC) next-generation 7-nanometer chip-manufacturing technology.

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Citing sources familiar with Intel's plans, the report says that the company intends to equip its Fab 42 manufacturing plant with equipment used to manufacture 7-nanometer chips in the second quarter of 2019, with production shipments beginning "a year later."

Intel's Xeon D processors are manufactured in the company's 14-nanometer tech. Image source: Intel.

It also says that the company's 7-nanometer technology will be based on the FinFET transistor structure (something that I reported last year), which Intel first commercialized in early 2012 with its 22-nanometer manufacturing technology.

Let's take a closer look at what this means for Intel's products and business.

Moving quickly in the data center

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At Intel's Feb. 9 investor meeting, the company disclosed that its high-performance server/data-center processors would be the first products to utilize the chip company's latest technologies, beginning with its 7-nanometer technology.

This is in stark contrast to Intel's previous strategy, under which the company would utilize its latest manufacturing technologies to build personal computer chips first, moving its data-center chips to a given technology later.

If Intel plans to begin shipping its first 7-nanometer chips in the second or third quarter of 2020, then based on the company's public statements, it should introduce its first 7-nanometer server processors in the second half of 2020.

It's not clear when Intel's first 7-nanometer personal computer processors will arrive, but the earliest I would expect such chips would be in early 2021. I wouldn't be surprised, though, to see the company build a fourth wave of 10-nanometer personal computer chips for late 2020/early 2021, meaning that its first 7-nanometer personal computer could come in late 2021/early 2022.

How this stacks up competitively

Intel's most potent competitor in the chip-manufacturing world is Taiwan Semiconductor Manufacturing Company (NYSE: TSM). TSMC recently disclosed that it would begin "risk production" of its 5-nanometer technology in the first half of 2019, with mass production presumably happening in the first half of 2020.

TSMC's 5-nanometer technology is likely to be similar in terms of transistor density (that is, how many transistors a chip designer can fit in a certain amount of area using the technology) to Intel's 7-nanometer technology.

Intel recently told investors that it believes that it has a "three-year lead" over its competitors with regard to the areal density of its chip-manufacturing technology. Given Intel's reported 7-nanometer chip-manufacturing plans -- and given what TSMC has said publicly about its plans -- this claim seems tenuous.

Will Intel hit its timeline?

If Intel hits the schedule that Semiconductor Engineering published, then that would be good for the company's data-center chips, as the newer manufacturing technology should help Intel build even more compelling products.

The big risk that I see here is one of execution: Intel saw delays in its 14-nanometer technology, and it's seeing delays with its 10-nanometer technology, so it's reasonable to expect that there is risk to the reported 7-nanometer schedule.

In order to shore up investor confidence in its manufacturing technology, Intel should provide regular progress updates on the development of upcoming manufacturing technologies on its quarterly earnings call.

That's what TSMC does. Intel would do well by its stockholders to follow suit.

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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.