Intel Cuts 18A Costs by About 40% as Yields Improve and Output Exceeds Expectations
Key Facts
Intel has cut the cost of manufacturing chips on its 18A node by about 40% since the first quarter, while the cost of Intel 3 has fallen about 15% from levels in that quarter, Chief Financial Officer Dave Zinsner said on the third-quarter earnings call. The company said manufacturing yields on both nodes rose again during the quarter and chip output exceeded its expectations. That puts cost and yield improvements at the heart of the company's efforts to advance its manufacturing processes. Intel said the decline in 18A costs reflects continued improvements in yields and manufacturing cycle time. But that progress does not remove the constraints the company faces in meeting demand for some products.
Yields on 18A improved at a double-digit rate in the third quarter, Intel said, while yields on Intel 3 also rose. The company said chip output on both nodes exceeded expectations, signaling production gains from previous levels. On its first-quarter earnings call, Intel said 18A yields were above its internal expectations and that Core Series 3 products built on 18A and Xeon 6 chips built on Intel 3 had entered volume production. This provides a timeline for the improvement indicators the company presented in the third quarter. Production and yield results remain tied to the two nodes cited and do not indicate a broad improvement across all of the company's factories.
The share of client processors built on 18A rose from less than 5% of client CPU revenue in the first quarter to nearly a third in the third quarter, Intel said. The shift shows the node's products accounting for a larger share of revenue in that business during the period. Chief Executive Lip-Bu Tan said Nova Lake, the company's first client products built on Intel 18A-P, is ahead of schedule. He added that the company expects twice as many designs at launch as it achieved with Panther Lake. Intel is scheduled to share more details about Nova Lake at CES in January 2027.
Intel said demand for Wildcat Lake exceeds supply, while a shortage of advanced organic packaging substrates is limiting its ability to increase production of EMIB solutions. These constraints reveal a gap between demand for some products and available supply, even as output of 18A and Intel 3 chips exceeded the company's expectations. In its third-quarter results, Intel reported revenue of $16.5 billion and a non-GAAP gross margin of 44.1%. The margin was about 200 basis points above the second quarter and the company's guidance. The figures provided financial context for manufacturing results during the quarter, amid continued supply challenges and a weak PC market.
Intel forecast that the PC market would shrink about 12% in 2026, with unit volumes falling more than 20% in the second half. The company linked the continued weakness to improved memory availability and prices returning to more normal levels. The outlook came as the stock plunged on October 30, ending the session down about 29% in its worst daily performance since 1974, according to the Associated Press. Reuters reported that the stock fell about 30% during trading after Intel forecast fourth-quarter revenue more than $1 billion below market estimates. The Nasdaq Composite fell 2.9% in the same session, as technology shares declined amid concerns about elevated valuations tied to AI enthusiasm. EL7 data showed Intel shares closing at $65.76 that day.