Intel unveils expanded process roadmap beyond 5N4Y and new design wins
- Striving to gain lost ground; Intel 14A and specialised node evolutions added to strategic process roadmap
- Design win from Microsoft validates Intel Foundry Services, shows Intel’s big bets on chip manufacturing starting to pay off
- Intel continues to face margin headwinds associated with start-up costs of its 5N4Y strategy alongside capacity expansion for IFS commitments. Maintain HOLD with TP US$45.30
Striving to gain lost ground; Intel 14A and specialised node evolutions added to strategic process roadmap. Intel maintains that it remains on track to deliver on its 5N4Y plan and is set to regain process leadership by 2025 with Intel 18A. The latest foundry process roadmap features Intel 14A, and evolutions to Intel 3 and Intel 18A the likes of Intel 18A-P, Intel 3-E, and Intel 3-PT that are tailored to more specific needs of customers. Additionally, Intel announced Intel Foundry FCBGA (Flip Chip Ball Grid Array, a type of packaging solution) 2D+ to its set of advanced system assembly and test capabilities which already comprises packaging technologies FCBGA 3D, EMIB, Foveros, and Foveros Direct.
Design win from Microsoft validates Intel Foundry Services, shows Intel’s big bets on foundries starting to pay off. Microsoft plans to produce an upcoming chip using Intel’s 18A process technology. Customer commitments appears to be gaining traction as Intel has taped out (final phase chip design prior to manufacturing) more than 75 ecosystem and customer test chips, with more than 50 test chips in the pipeline through 2024 and 2025. Electronic design automation and IP (intellectual property) partners such as Cadence, Synopsys, and Siemens have also revealed the qualification of tools and readiness of intellectual property, enabling foundry customers to expedite advanced chip design on Intel 18A. We believe that IFS contributions are poised on an uptrend but will be relatively small compared to established client computing and data centre and AI businesses. From FY25 onwards, consensus is forecasting IFS topline growth at c.50% yoy through FY27, although it will only account for 2/3/4% of group revenue in FY25/FY26/FY27. Meanwhile, Intel continues to face margin headwinds associated with the start-up costs of its 5N4Y strategy alongside capacity expansion for IFS commitments. Consensus forecasts shows gross margin forecasts of 43%/45% for FY24/FY25, which is far off from Intel’s longer term gross margin target of 60%. Maintain HOLD with TP US$45.30