Intel said Thursday that it will add a third 14-nm microprocessor, Kaby Lake, to its roadmap, disrupting the steady tick-tock pace of the PC market as Moore's Law slows down.
For Intel and the PC industry, adding Kaby Lake to the roadmap is a bombshell. Every two years like clockwork, Intel has released two products: a version of an older chip on a more advanced manufacturing process, followed by a brand-new processor design on the same manufacturing node.
That cadence, which Intel refers to as its "tick tock" manufacturing strategy, was upended on Wednesday when Intel said that it would add the Kaby Lake chip to follow the Skylake chip that Intel will launch this fall. Intel's shift to the next-generation 10-nm process will now take place in the second half of 2017, roughly 2.5 years after Intel moved from the 14-nm node.
To recap, then, Intel's roadmap looks like this: Intel launched the 14-nm "Broadwell" fifth-generation Core chips earlier this year. Intel's sixth-generation Core chip, "Skylake", also a 14-nm product, has been qualified as a product and will roll out this fall. "Kaby Lake," another redesigned chip on the 14-nm node, will ship in the second half of 2016. And Intel expects the first 10-nm chip, "Cannon Lake," to ship in the second half of 2017.
As Moore's Law slows, so does the pace of PC demand: Intel reported lower revenue and profits as the market waits to buy Windows 10 PCs, including the Skylake processor, and the PC market continues to slow worldwide.
Why this matters: Intel is often viewed as the gold standard of manufacturing in the semiconductor industry, so any slowdown will send ripples through its competitors. Intel chief executive Brian Krzanich has enjoyed a manufacturing technology lead over his competitors that has measured in the months to years. Intel may have handed back some of that lead. It remains to be seen whether Intel's competitors will adjust their manufacturing timetables, too. Expect this question to be the first asked of AMD executives during its own conference call, tomorrow.
'Their own recipe of complexity'
Krzanich said that it was never his intention to slip from the two-year pace. But it happened, and it could happen again as Intel moves to the 10-nm node in 2017. "Remember that all of these technologies have their own recipe of complexity and difficulty," he said.
Intel's transition from the 22-nm manufacturing node to the current 14-nm "Broadwell" node was also delayed several months as Intel tried to solve its own manufacturing problems. With the 10-nm transition the lithography necessary to manufacture these devices continues to get more difficult, Krzanich said.
Intel is generally expected to be months if not years ahead of competitors like AMD and Samsung in terms of manufacturing technology. Krzanich said he believes Intel will hold that lead. By 2017 he said, he still expects "our lead in Moore's Law will not change dramatically."
"We said let's be very predictable and do the best thing for our shareholders, our customers, and our partners," Krzanich said of announcing the change.
PC market waits with bated breath for Windows 10
The problem, of course, is that the PC market needs a boost, not a bump. Intel executives noted that PC demand tends to scale with Gross Domestic Product (GDP) and that GDP growth has eroded in areas like China. Intel never "built in a boom" from the Windows 10 transition, Kraznich said. Intel expects PCs to grow in the single digits for the remainder of this year, which isn't bad at all; Intel's strategy is to hold PC growth at least flat, while growing its data center businesses, flash memory, and the Internet of Things. And Intel did just that, increasing its Data Center Group revenue 10 percent year over year, and growing its IoT business by 4 percent to boot.
With a healthy enterprise business and an emerging IoT business anchoring its financials, Intel's in no danger of going under. But the PC business is increasingly looking like a loss leader--great news for consumers, but a generally lousy business for PC makers.