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Intel announced today in its Q2 2020 earnings report that it has now pushed back the launch of its 7nm CPUs by six months relative to its previously planned release date, undoubtedly causing yet another delay in the company’s roadmap. Intel’s press release also stated that the yield of its 7nm process is now twelve months below the company’s internal target, which means that the company is not currently able to produce its 7nm process in an economically viable manner. The company now says that its 7nm process will not debut on the market until the second half of 2022 or early 2023.
Here is an excerpt from Intel's press release:
“The company’s 7nm-based CPU product timing has shifted approximately six months relative to prior expectations. The primary driver is Intel’s 7nm process yield, which is now trending approximately twelve months below the company’s internal target based on recent data.”
During an earnings call, Intel CEO Bob Swan said the company had identified a "defect mode" in its 7nm process that was causing yield issues. As a result, Intel invested in "contingency plans," which Swan later defined as using third-party foundries. The company will also use external third-party foundries as a contingency plan for its upcoming first graphics chip, the 7nm Ponte Vecchio GPU. Swan noted that the GPU will be available in late 2021 or early 2022, suggesting a delay in its planned 2021 launch in the $10 billion Aurora supercomputer. Ponte Vecchio is a chiplet-based design, and Swan clarified that some of the production of the chiplets (tiles) will be outsourced to third parties.
Intel also said that its first 10nm desktop CPUs, Alder Lake, will arrive in the second half of 2021, and its first 7nm server CPUs (Granite Rapids) will arrive in 2023, which is a delay from the previous roadmap that planned for a launch in 2022.
For perspective, rival foundry TSMC plans to move to the 3nm node in the same time frame as Intel's new 7nm plans. The company was apparently unhappy with its execution on the 7nm node, as Swan said at the end of the call: "I am not satisfied with our 7nm performance, I am not satisfied." Swan also said: "We have understood the root causes of our 7nm problems and believe there are no fundamental obstacles." The company will provide further updates at its upcoming Architecture Day.
It’s unclear how Intel will reconcile the six-month delay in its 7nm processors, and the one-year delay in its internal 7nm production forecasts, but Swan said the company has built-in buffers in its roadmap to account for process node delays. The 7nm delay reflects yet another setback as Intel is still struggling to overcome years of yield issues it has encountered with its 10nm process. The delays have allowed its competitors, such as AMD, to seize the opportunity to take back process node leadership from Intel for the first time in the company’s history. This has sparked a price war in the market as AMD competes with competitors with better nodes, not to mention Amazon’s new Graviton 2 ARM chip based on TSMC’s 7nm node. Apple also recently announced that it is transitioning from Intel’s chips to its own ARM-based 7nm chips. There is also bad news in the announcement, rock star chip designer Jim Keller was a key part of the team that revitalized the company’s roadmap, but he has recently left the company.
Intel CFO George Davis has previously said that the company's process technology will lag behind its competitors until 2021, as the company's 7nm will emerge by then, and the company will regain its lead in its 5nm process at an uncertain time:
"So we're bringing a lot of capabilities to our customers beyond just the CPU, and we feel like we're starting to see acceleration on the process side, which we've been talking about getting back to parity on the 7-nanometer process and regaining leadership on the 5-nanometer process."
“As we said at our Analyst Day on May 19: Look, this is not only going to be the best node Intel has ever made. It’s going to have lower productivity than 14nm, it’s going to have lower productivity than 22nm, but we’re very excited about the improvements that we’re seeing, and we expect to have much better performance at the start of the 7nm cycle, starting in late 2021.”
Intel’s plans to regain competitive advantage have now clearly shifted due to the 7nm delay. They had planned to accelerate the delivery of their 7nm node to make up for the underperforming 10nm, which was not performing as well as other nodes. At the time, Davis noted that the company was trying to clarify with investors the impact of 10nm on the company’s gross margins: “…but the fact is I’m trying to figure out what’s happening with the 10nm generation. The fact is, it’s not going to be as strong as what people are seeing from 14nm or 7nm.”
“Also, in order to regain process leadership, we’ve had to accelerate 10nm, 7nm, and then the overlap between 7nm and 5nm, so the costs you’re incurring, especially starting in 2021, are the intersection of having gotten the performance in 10nm, the investments in 7nm, and also starting 5nm very early: all of those elements combined will impact gross margin.”
In terms of revenue, Intel said that the company's second-quarter revenue was US$19.728 billion, a 20% increase from US$16.505 billion in the same period last year; net profit was US$5.105 billion, a 22% increase from US$4.179 billion in the same period last year.
In the quarter ending June 30, Intel's net profit was $5.105 billion, up 22% from $4.179 billion in the same period last year; earnings per share were $1.19, up 29% from $0.92 in the same period last year. By department:
Intel's Client Computing Group's net revenue in the second quarter was $9.496 billion, compared with $8.841 billion in the same period last year. The Data Center Group's revenue in the second quarter was $7.117 billion, compared with $4.983 billion in the same period last year. The Internet of Things Group's revenue in the second quarter was $816 million, compared with $1.187 billion in the same period last year. The Non-Volatile Storage Solutions Group's revenue was $1.659 billion, compared with $940 million in the same period last year. The Programmable Solutions Group's revenue was $501 million, compared with $489 million in the same period last year.
The company expects third quarter fiscal 2020 revenue to be approximately $18.2 billion, exceeding expectations; operating profit margin is approximately 28%, and fiscal 2020 revenue is expected to be approximately $75 billion.
It is worth mentioning that Intel expects adjusted earnings per share in the third quarter to be approximately US$1.1, while the market estimate is US$1.14; revenue is approximately US$18.2 billion, while the market estimate is US$17.9 billion; full-year adjusted earnings per share are expected to be US$4.85, while the market expects US$4.78; full-year revenue is expected to be US$75 billion, while the market expects US$73.74 billion.
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