Intel's Ivy Bridge: Aggressive launch, but a lot of wild cards

Intel has a lot riding on the Ivy Bridge ramp. Are its targets too aggressive given the great wait ahead of Windows 8?
Written by Larry Dignan, Contributor

Intel's Ivy Bridge processor---a 22nm leap---is set to hit laptops and perhaps the most aggressive thing about the launch is how aggressive the chip maker sees the ramp.

The company is expecting Ivy Bridge processors---a code name for what will be next-gen i3, i5 and i7 chips---to be 25 percent of the product mix in the second quarter and represent 50 percent in the third quarter. When Windows 8 gets rolling Ivy Bridge will dominate the product mix.

In other words, Intel's 22nm technology will ramp much faster than when the company rolled out 32nm chips. Intel is ramping 22nm fabrication plants (fabs) with three now and another on deck.

These targets are notable given that Ivy Bridge laptops are just getting rolling. CNET estimates the first laptops will hit the market April 29 and then it'll be high-end systems. Reviews are just landing, but the big question is whether consumers will bite.

As CNET's Dan Ackerman noted:

Besides Intel's new chips, it may also be worth waiting for Windows 8, or at least the free upgrade coupons we expect to see bundled with new laptops starting in late summer.

More from CNET: Ivy Bridge: The FAQ | Ivy Bridge PCs: The first wave | At long last, a credible 3D gaming chip from Intel| Our first Ivy Bridge laptops: how do they perform? | Intel's Ivy Bridge waits on Windows 8 | Asus Essentio CM6870 review | Origin Eon 17-S review | Origin Genesis review

Add it up and Intel's Ivy Bridge rollout will largely ride along with PC sales. The arguments are pretty strong for waiting until Windows 8 systems surface. New Mac systems will arrive with Ivy Bridge too.

Among the key wild cards for Intel's Ivy Bridge launch:

The great wait. Will consumers hold off on Ivy Bridge systems ahead of Windows 8? Probably.

Ultrabook malaise. Ultrabooks will drive Ivy Bridge units, but that category has underwhelmed. Piper Jaffray analyst Auguste Gus Richard said in a research note:

Ultrabooks are likely an ultrabust in our view. While Intel is enthusiastic about PC demand in 2H we are not. First, our contacts indicate OEMs are ordering early for back-to-school, pulling in demand from 2H. Second, while Ultrabooks and PC/ tablet convertibles sound like a great concept, iPad momentum does not seem to be slowing. Moreover, we believe Apple is working on an ARM-based PC. Ultrabooks and PC/tablet convertibles have a lot riding on Windows 8 that we expect it to be buggy and late.

The 22nm cycle won't be as lucrative for Intel. Gross margins for Ivy Bridge will be lower than the previous generation chips. Richard sees peak gross margins of 63.8 percent compared to 65 percent for the peak 32nm chips. Richard added:

It is likely Intel’s cost per acre of silicon is going up faster than revenue per acre silicon. Revenue per acre is not likely to go up as demand shift to tablets, smartphones and bandwidth speeds and away from PC and processor performance.

Evercore Group also cited worries about Intel's Ivy Bridge launch costs. Here's the money chart:

What happens if ARM-based notebooks gain momentum? If a Windows 8 ARM laptop becomes a hit that could lead to more. That reality would ding Intel's aggressive product mix targets.


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