Intel Corporation (NASDAQ:INTC) is holding its investor day today, and Stifel analysts said they will be examining the chip maker’s capital intensity levels. They expect them to remain high through next year, although they believe Intel has “mastered the ability to re-use” tools.
Intel builds out two fabrication facilities
Analyst Patrick J. Ho notes that Intel Corporation (NASDAQ:INTC) still has to build out two fabriciation facilities for its current 14 nm node production cycle. He thinks that the company is still “the clear cut process technology leader” since it has moved on to its second generation of FinFET technology through its 14 nm Broadwell processors. Those processors should improve power use significantly compared to the previous Haswell model.
Currently the top foundries, including Samsung, GlobalFoundries and TSMC, are racing to get their own first-generation FinFET technology out. In addition to leadership in technology, the analyst believes Intel also possesses leadership in manufacturing capacity.
Examining Intel’s CapEx spending
After looking at Intel Corporation (NASDAQ:INTC)’s capital expending plans, including the reduced plans this year, the chip maker has averaged about 20 to 21% in capital intensity since 2011. They’re expecting to see 21% this year. The company’s average capital intensity from 2007 to 2010 was just 13%, however. The Stifel analysts believe that this higher intensity level is driven by the FinFET technology as well as new build-outs for fabrication. They also suggest that the current level hasn’t accounted for if the company gets a new major client for its foundry business, like Apple Inc. (NASDAQ:AAPL).
The analysts believe Intel Corporation (NASDAQ:INTC)’s capital intensity will stay in the 20 to 21% level or maybe even edge higher in 2014 as the company continues to build out its 14 nm capabilities. They note there is some re-use going on from the company’s first-generation FinFET chips, but they don’t think this will benefit it until the company reaches the 10 nm node. High volume production of that chip is slated to begin in 2016. They said typically, it has been the third generation of a change in process technology in which Intel gains the most leverage through re-use.
Intel may bypass EUV
They also note that EUV technology continues to be delayed, so they think Intel Corporation (NASDAQ:INTC) will bypass that tech for the 10 nm node and use it for the following 7 nm node if it is ready to be used then.
