It's no secret that chip giant Intel (INTC -3.67%) is facing immense difficulties in trying to get its 10-nanoneter chip manufacturing technology into mass production. The technology was originally slated to be ready for manufacturing by the end of 2015 for product launches in 2016, but the company has faced delay after delay in trying to get this technology into volume production.
As of Intel's July 26 earnings conference call, the company now expects computers based on chips built using its 10-nanometer technology to be "on shelves for the 2019 holiday season."
Image source: Intel.
Even if Intel actually achieves this target (you may recall that Intel was planning for system availability in the second half of 2018 not too long ago), that's still a big miss relative to the company's original schedule.
During Intel's most recent conference call, Intel chief engineering officer Murthy Renduchintala provided some insight into the lessons that the company learned from the 10-nanometer debacle. Let's take a closer look.
What went wrong with 10-nanometer
The problem that Intel claims it's having in trying to bring its 10-nanometer technology into mass production is simple: The yield rates of chips produced using the technology simply aren't high enough.
Yield rate refers to the percentage of the chips produced that can be sold. All else being equal, higher yield rates mean lower product costs structures, while lower yield rates mean higher product cost structures (and, ultimately, lower gross profit margins).
"Recall that 10-nanometers strive for a very aggressive density improvement target beyond 14-nanometers, almost 2.7X scaling," Renduchintala said.
Renduchintala explained that "[t]he challenges that we're facing on 10-nanometers is delivering on all the revolutionary modules that ultimately deliver on that program."
During the April conference call, former CEO Brian Krzanich explained it more succinctly: "We think we bit off a little too much in this case ."
"Judicious choices"
While Intel is still trying to get 10-nanometer ready for mass production, it's also working on the successor to that technology, called 7-nanometer.
Renduchintala refused to tell investors when to expect 7-nanometer to go into mass production, but he did say that the company is "making good progress on that development."
In what appears to be a bid to avoid the problems that Intel faced on 10-nanometer, Renduchintala claims that the company has "made some fairly judicious choices in defining 7-nanometer, learning from our 10-nanometer experiences."
He then added that the company is "focusing on an optimum balance point between density, power and performance, and schedule predictability" with that technology.
Another comment that I found particularly interesting is that Renduchintala explained that while the company is "still going to drive density," it'll be "balancing that with a continued focus on driving transistor performance at the same time, which is highly valued as [average selling price] drivers in both our client and server businesses."
Indeed, higher-performing transistors mean that chips can run at faster speeds, directly translating into better product performance. Since end customers ultimately pay for delivered performance, Intel's shift in focus seems like the appropriate one for the company's business ambitions.
Renduchintala then added that he "feel[s] those lessons are being well absorbed into our progress, and we're lining up to support our product plans as our roadmap dictates."
I'll be keeping close tabs on the progress updates that Intel provides with respect to its 10-nanometer technology as well as its 7-nanometer technology in the quarters ahead.
