How 18A Fab Process Can Help Intel Stock In 2025

Intel stock’s (NASDAQ:INTC) foundry business faces a moment of truth in 2025, as it looks to commercialize its cutting-edge 18A process – widely seen as a make-or-break semiconductor fabrication process. Intel has invested considerable sums into its foundry operations in recent years to mixed returns. Intel’s capex stood at about $25 billion each year over 2022 and 2023, up from about $16 billion levels in 2019.  While Intel’s Foundry has commercialized the Intel 7, Intel 4, and Intel 3 process nodes in recent years, they have seen a tepid response so far. In 2023, Intel’s foundry reported an operating loss of $7 billion on sales of $18.9 billion, and the business is expected to see revenues contract for 2024 while remaining loss-making. However, Intel has indicated over the last few years that the new 18A process would help the company reclaim “process leadership,” which essentially means having the most advanced semiconductor manufacturing technology in the industry, after years of falling behind foundry behemoths TSMC and Samsung Electronics. So what should investors expect from Intel’s foundry business this year? See our Intel upside analysis on How Intel Stock Can Surge 3x To $60.  On the other hand, see our counter scenario which explores how Intel Stock Could Dive To $10.

18A Process Node, How It Compares

Intel’s 18A process is considered the company’s most advanced manufacturing technology yet, with a 1.8 nanometers process node, to turn around its foundry business. The process produces chips with technologies including RibbonFET gate-all-around transistors and PowerVia backside power delivery,  allowing for smaller transistors that boost performance and power efficiency. The 1.8-nanometer node size, would put Intel slightly ahead of TSMC’s N2 process which operates at a 2 nm node and is expected to arrive in the second half of 2025.  While TSMC has claimed that its N2 process will outperform Intel’s 18A in some crucial areas, such as SRAM density (enabling it to store more data in a smaller physical area), Intel’s 18A’s backside power delivery could gives it a competitive edge​ with reduced power loss and better thermal performance. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Where Does The Development Stand?

Intel announced in early August that it had reached critical milestones with chips made using the 18A process, noting that the chip had powered on, booted operating systems, and was operational within Intel. The company expects external customers to tape out (move from design to foundry for manufacturing) their first 18A designs in 2025, with enterprise-scale production to begin thereafter. The company also expects its own 18A product to enter volume production in the second half of the year with the company already sampling these products with customers. While Intel hasn’t disclosed which product this is, it is quite likely the next generation of Intel’s Core Ultra processor family, code-named Panther Lake.

There have been rumors suggesting that chipmaker Broadcom, which has been testing out Intel’s 18A process, was disappointed with the yields of the new process. However, this was refuted by Intel’s ex-CEO Pat Gelsinger. Intel says that its process shows defect density figures of 0.4 defects per square centimeter for now, which is only slightly worse than TSMC’s benchmarks of 0.33 defects on its legacy N7 and N5 nodes at comparable stages of development – roughly a year before entering high volume production. Given that the standard for this stage of development is typically below 0.5 defects per square centimeter, it means that Intel could be well within industry standards for advanced nodes and should be adequate for generating usable yields.

Will Intel Win Over More Customers? 

Intel has secured big contracts with this technology, including with the U.S. Department of Defense for the RAMP-C program, which seeks to bring leading-edge semiconductor technology domestically. Other high-profile customers include Amazon and Microsoft, which intend to design custom chips, including AI accelerators. Separately, Donald Trump’s re-election to the U.S. presidency could also indirectly help Intel boost utilization of its 18A process. Trump has been a major advocate of boosting U.S. manufacturing and this could play in Intel’s favor, considering its sizable fabrication footprint in the United States. In contrast, rivals such as AMD and Nvidia are fabless and largely rely on foundries such as Taiwan’s TSMC for their production. There’s a possibility that Trump could nudge more U.S. based companies to use Intel’s process, and Intel could also see considerable regulatory support aimed at boosting domestic chip production. For example, the government could look at imposing tariffs that make it more expensive for foreign fabrication companies to produce and export chips to the U.S. A stronger emphasis on domestic production, either through tariffs or via other policies, could drive more business to Intel.

The decrease in INTC stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. While INTC stock has seen lackluster growth over recent years, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four year period; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.  So is Intel stock attractive at current levels?

Intel stock trades at about $20 per share currently or just over 20x consensus 2025 earnings, which is very reasonable in our view. If Intel executes on its 18A transition effectively, it could shift the narrative around the company, and drive the stock higher after a roughly 60% decline over the last 12 months. We value Intel stock at about $27 per share, slightly ahead of the current market price. See our analysis of Intel valuation for a closer look at what to expect from Intel.

[1] Returns as of 1/8/2025
[2] Cumulative total returns since the end of 2016

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