Intel Has New Trick, Hot Stock

05/12/2011 3:00 pm EST

Focus: STOCKS

The chronically unpopular chip giant has warmed up since unveiling strong earnings and a big new innovation, writes Paul McWilliams of Next Inning Technology Research.

I've received several questions regarding Intel's (INTC) recent announcement that it will move its 3D Tri-Gate technology into production late this year.

Intel will launch this technology using 22-nanometer (nm) fabrication technology on chips it currently code names "Ivy Bridge." These chips will target both notebook and desktop computing.

Let's now bullet through a few questions I've received from readers. The first set boils down to whether this should be considered evolutionary or revolutionary.

In process technology, virtually everything is evolutionary by definition. However, a contact of mine—who I think is one of the best contacts in the world on this particular subject—told me this is about as close to revolutionary as it comes.

His analogy was that this advancement would be like going from biological cells that respond to the light to a fully-functioning human eye. In other words, it is in fact a very big deal.

Some other readers wondered why Intel didn't initiate this new technology, which radically reduces chip size and substantially lowers power consumption, with chips designed to address the mobile-device market.

The reason is that Intel uses what it calls a "tick-tock" strategy to introduce new fabrication and design technology. In the tick stage, Intel begins with a proven design that narrows the risk of design issues hurting yield.

Remember, with semiconductors the economic model is to deliver as much function as you can for a given area of silicon—if the chip doesn't yield, it wastes silicon area. When you consider that Intel will be printing roughly six million transistors in an area smaller than the head of a pin, you don't want to waste any silicon. In the tock phase, Intel moves a new chip to the proven process.

Intel uses this strategy so that there is only one variable at play during the tick and tock phases. In tick, they use a known architecture with a new process (the process is the primary risk), and in the tock stage they use a new architecture with what is now a proven process (the architecture is the primary risk).

Yet another set of readers are curious as to whether this (or the anticipation of this) technology is what has been driving the price of Intel upward. The short story here is I don't know, but I doubt it.

A riddle: How long does it take 43 analysts to say "I was wrong?" The answer: "so far, 23 days and counting."

Actually, I've been amazed we've not seen the shares take a break since Intel’s earnings report. However, so far the stock has closed higher on 13 of the 16 sessions since Intel reported its first quarter results on April 19.

Bottom line: Intel stated in its April conference call that it would accelerate its tick-tock strategy to drive new mobile chips to 14nm production in two years. If Intel manages to navigate this roadmap successfully, I think the pundits who are still predicting ARM Holdings (ARMH) will run roughshod over Intel will soon look even more foolish than the analysts who still can't admit they were wrong.

The mobile-computing market is in its infancy, and anyone who thinks its future is cast in stone simply doesn't understand the semiconductor industry.

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