Intel Indicates Speedy 45nm Production Ramp, Shipments Crossover in Q3.

Over 8 Million 45nm Microprocessors Shipped – Intel’s Chief Executive



Despite of delays of quad-core microprocessors produced using 45nm process technology [1], Intel Corp. is on track with the 45nm production ramp up plan[2] and expects shipments volumes of products made using 45nm and 65nm fabrication technologies to crossover in the third quarter of the year.


“I did show that slide at the investor meeting and it shows a crossover [between 45nm and 65nm chips] in the third quarter and we are still on track to that and we are ramping as fast as we can. […] At this point in time, we’ve shipped in excess of 8 million units, so we are moving very quickly up the ramp curve,” said Paul Otellini, president and chief executive officer at Intel.


At present Intel has two 300mm fabs that produce chips using 45nm process technology – D1D in Hillsboro, Oregon, and Fab 32 in Chandler, Arizona. Two additional 45nm, 300mm manufacturing factories are scheduled to open this year in Kiryat Gat, Israel (Fab 28) and Rio Rancho, New Mexico (Fab 11x). [3]

The transition to 45nm process technology is important for Intel as it allows manufacturing higher performance Intel Core 2 Duo and Quad processors at relatively low price. [4] Moreover, successful ramp of 45nm fabrication process also ensures that Intel will be on track to ramp up manufacturing of microprocessors based on the next-generation micro-architecture code-named Nehalem. [5]


With more than 50% of Intel processors being based on the latest Penryn micro-architecture in the third quarter, the largest maker of microprocessors in the world will have even more competitive chips, which is a serious threat for Advanced Micro Devices, who only plans to add one more AMD Phenom processor into lineup (model 9950, 2.60GHz) in Q3 before starting its transition to 45nm later during the year.


Intel on Tuesday announced record first-quarter revenue of $9.7 billion, operating income of $2.1 billion, net income of $1.4 billion and earnings per share (EPS) of 25 cents. [6]


“Our first quarter results demonstrate a strengthening core business and a solid global market environment. We saw healthy demand for our leading-edge processors and chipsets across all segments. Looking forward, we remain optimistic about our growth opportunities as we continue to reap the benefits of our 45nm technology leadership [7] ,” said Mr. Otellini.


[1] It is widely believed that Intel purposely delay the shipment, as its rival AMD is not able to come up with processors that can compete with Intel’s lineup (performance and power consumption).
[2] As demand for the new processor surged, Intel has no choice but to increase its production and in turn increase the supply of processors to the market.
[3] Increase in the factor of production (fab plants), thus there will be technical economies of scale, as there will be a reduction in unit costs when the firm expands its plant size.
[4] As more processors can be manufactured from a single wafer, the cost price of a processor will be reduced. Intel will experience IEOS of Indivisibilities as they are able to utilize large machines efficiently. They are also able to spread the fixed costs over larger output levels, thereby lowering unit costs.
[5] As Intel continue their R&D, they will set up a high barrier of entry, preventing new firms from entering the processor war, and eliminate any chances of AMD catching up.
[6] As Intel has earned large supernormal profits, it can transfer its earning to R&D and advertising, to strengthen its leadership position in the market.
[7] As a large and dominant firm in the market, Intel will experience risk-bearing economies of scale, as it is able to predict future demands in the market. This means that they will bear lower risks and potential losses and thus lead to cost savings.

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