Because Intel’s thermal signature drops like a stone with 22nm and then plunges still further at 14nm, the mobile devices that can be built with them will be thinner, lighter, more powerful than anything the ARM camp can come up with the next five years. This time lag is because the foundries such as Taiwan’s TSMC or Samsung won’t have anything like Intel’s about-to-be-launched manufacturing wherewithal for years to come. With its last major innovation – metal gates and hi-K dielectrics five years ago – just coming into volume production elsewhere, the 3-D approach dovetails with acute Intel design activity in mobile for the first time.
For sure Intel was consumed fending off last decade’s AMD threat and getting its manufacturing house back in order, caught napping the past two years by what has turned into an iPad goldmine for Apple. Left to atrophy under its prior CEO, Intel’s current top brass initiated crash projects to get back on top in both chip architecture and manufacturing technique, resulting in massive pressure on PC rival AMD, and now graphics processing innovator nVidia. Already integrating graphics onto the processor itself at 32nm, Intel shifts to a whole new arena for the first time as these design skills are applied to tablets later this year and then shift to 22nm next year.
With Intel’s stock perking up from a long sideways stretch – with an already highly competitive 3%-plus dividend yield – management now commits to increase the share of free cash flow going to dividends from 33% to 40%. This is off the huge capital spending hike already announced for 2011, a pace that will necessarily abate in 2012-2013. Should Intel have any success whatsoever in tablets, much less far higher volume smartphones, then its stock has a betting chance to make the 2000 $75 high. Altera, already doubling this past year as consensus awakened to its prospects, is now within hailing distance of its all-time high, also made in mid-2000. Intel has far further to go, of course, but now the race is on.
Rick Whittington is affiliated with TechIndicators, a firm that provides semiconductor and technology insights to institutional investors.