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Intel Corporation May Have a "Gap" in Its Desktop Processor Lineup in 2018

Former Intel (NASDAQ: INTC) executive Kirk Skaugen, who used to lead the company's client computing group, admitted to making a serious mistake with respect to its roughly $10 billion desktop personal-computer chip business.

The then-Intel exec explained at the time that Intel didn't bother to produce a fifth-generation Core processor for the desktop personal-computer market. The reasoning behind that -- if you can believe it -- was the following.

Image source: Intel.

"We made an experiment and we said, 'Maybe we're putting technology into the market too fast; let's not build a chip for the mainstream tower [desktop] business'," Skaugen explained.

When a component vendor that sells components into a market characterized by annual product refreshes, bad things happen -- like a 16% year-over-year decline in desktop processor unit volumes in one quarter, followed by a 22% year-over-year drop in the following quarter.

After learning this painful lesson, Skaugen told investors the company now plans to refresh its products in this space at an annual cadence.

Still, Intel may face a "gap" in its desktop processor lineup next year.

The story so far

Intel launched its sixth-generation Core processors for the desktop personal-computer market in the second half of 2015 -- specifically, August 2015 for the gaming and enthusiast parts. Intel then rolled out its seventh-generation Core processors for desktops in early January 2017, roughly a year and a half after it launched the first sixth-generation Core processors.

Later this year, probably late in the third quarter or early in the fourth quarter, Intel is expected to launch its first eighth-generation Core processors for the desktop market. Just as with the sixth-generation Core parts, Intel is reportedly planning to launch the enthusiast- and gaming-oriented parts first, with a broader roll-out in the first quarter of 2018.

With this background established, we can now understand Intel's potential dilemma.

What does Intel release in the second half of 2018 or the first half of 2019?

Based on numerous credible leaks, Intel isn't planning to launch a desktop personal-computer version of its Cannon Lake architecture, which is the first processor family that'll be built using the company's new 10-nanometer technology.

The company's next mass-market desktop personal-computer processor family, then, is expected to be its Ice Lake processor family, Intel's second-generation 10-nanometer processor architecture.

Based on what Intel disclosed at its Technology and Manufacturing Day back in March, the company intends to transition in a year from its 10-nanometer manufacturing technology to its 10-nanometer+ technology, a performance-enhanced version of the original technology.

So if the numerous credible reports that Cannon Lake for low-power notebooks, Intel's first 10-nanometer product, won't launch until the middle of 2018, then it follows that Ice Lake, the company's second 10-nanometer processor family, won't begin to roll out until the middle of 2019. That's assuming, of course, that the Ice Lake chips are built using Intel's 10-nanometer+ tech and not its first-generation 10-nanometer technology.

Intel could conceivably build Ice Lake using its first-generation 10-nanometer technology, launch it in early 2019, and then replace it in the second half of 2019 with Tiger Lake, manufactured in the company's 10-nanometer+ technology.

However, given how little guidance Intel has provided with respect to its future product plans, investors for now remain in the dark about how Intel can stick to an annual product cadence in the desktop personal-computer market.

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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.