Tuesday, November 13, 2007

Word of the Day: Hafnium

Add a new word to your investment vocabulary: hafnium. It has been there all the time at least since 1923 when two very smart Danes named Dirk Coster and Georg von Hevesy discovered it as an element and made it a permanent part of the Table of Elements with the symbol Hf.

It is getting new attention as the “secret sauce” in
Intel’s (INTC: Nasdaq) new desktop computer chip family, Penryn. Just released this week, Intel claims the chips are better, faster and greener. Yes, greener! This is why I am looking closely at the Penryn chip family and at what makes hafnium so different from silicon dioxide or gallium arsenide.

Well, hafnium is quite a bit different. It is a corrosion resistant and ductile metal. More importantly, Hafnium apparently makes a great insulator. The downside is that hafnium is estimated to make up only 0.00058% of the Earth, at least the upper crust part that humans can get their hands on.

This kind of rarity hints at expense but fortunately hafnium’s closest cousin is zirconium. About half of hafnium metals are produced as a by-product of zirconium refinement. Major sources of zircon ores are the heavy mineral sands ore deposits are in Brazil, Malawi and Western Australia.

Using hafnium allows Intel to reduce electricity leakage at size metrics below 100 nanometers. Intel has been able to skinny down to 45 nanometers from 65 nanometers, which is a big leap in efficiency - more computer power for the same footprint. Intel is claiming a 20% increase in switching speeds and a 30% reduction in power consumption with the hafnium chips.

Power saving is apparently not the only green streak running through the Penryn line. The new chips are lead-free from the get-go and will be halogen-free by next year.

This is all good. The question is whether the move to hafnium and producing a greener chip generates value for investors. Probably the key to calibrating added-value is the move to the 45 nanometer metric. Intel has made a leap ahead of
Advanced Micro Devices (AMD: NYSE), which has yet to bring out anything below 65 nanometers.

As anyone can see looking at AMD’s bottom line, the price of aggressive competition has been significant for AMD. Intel on the other hand has been moving steadily forward, protecting cash flows and profits and building a smart technology. INTC shares are not cheap at 21.9 times forward earnings. Watch consensus estimates closely for upward adjustments following the Penryn release.

The author of the Small Cap Copy web log has a beneficial interest in INTC shares.

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