IBM's Chip Breakthrough

Big Blue's new chipmaking process allows for a major speed increase, as well as significant power savings

In an announcement that could shake up the global chip industry, IBM (IBM) is scheduled to announce on May 3 two technology breakthroughs that analysts say could fundamentally change the way chips are made and dramatically improve their efficiency.

The timing seemed to be designed to undercut rival Intel (INTC), whose executives are giving their annual briefing to analysts in New York the same day.

IBM's announcement turns the page on traditional chip manufacturing techniques and materials. In an advance in nanotechnology, Big Blue has invented a polymer that assembles itself in sheets covered with precisely spaced slots—similar to the natural self-assembling process by which snowflakes form. That material is then used in the chipmaking process to create trillions of tiny air pockets, which replace less-effective silicon as the primary insulator. "These are a couple of major firsts," says IBM Senior Vice-President John Kelly.

The company claims these advances will allow electrical signals on chips to flow 35% faster, or for the chips to consume 15% less energy. Chipmakers can also fine tune a chip to any combination of the two factors—say, a 17% speed boost and a 7% power savings.

A Major Innovation

Computer scientists are constantly bumping up against the laws of physics when they design chips. For years, their ability to consistently shrink the size of transistors and other components has made electronic devices ever faster and cheaper and smaller. Moore's Law, named for Intel co-founder Gordon Moore, posits that the chip industry will double the performance of chips every 18 to 24 months. But the industry depends on advances like these from IBM, Intel, and others to maintain that pace.

Analysts agree that this is a big deal. "It's the most significant semiconductor technology innovation in a decade," says Richard Doherty, research director for the Envisioneering Group, a market researcher in Seaford, N.Y. In early January, both IBM and Intel announced that they will begin using new kinds of materials in their chips called high-K, but these latest advances are more significant, Doherty says.

IBM has already made chips using the new processes in its East Fishkill (N.Y.) fabrication plant, and it plans on starting up volume production in 2009. However, IBM's Kelly hinted that the technology might be used even sooner. Analysts say other chip manufacturers, including Intel, are experimenting with using air spaces as an insulator, but Kelly says: "We believe we're way ahead of our competition with these technologies."

Cost Advantage

IBM and Intel are longtime rivals that have battled over chip-technology advances and getting their semiconductors into everything from Apple (AAPL) computers to Sony's (SNE) PlayStation. An Intel spokesperson says the chip giant is evaluating both air-gap insulation and self-assembling materials. It's also considering other nanotechnology approaches to chip making. "We're not publicly committing to any approach," says spokeswoman Kari Aakre.

The advances will provide IBM with cost and performance advantages in the chips it makes for its own server computers and in chips it manufacturers for others in the video-game, networking-equipment, and automotive markets. In addition, it will share the technology with strategic partners AMD (AMD), Toshiba, Sony, and Freescale Semiconductor (FSL).

For AMD, this could provide a much-needed boost. The company plays second-fiddle to Intel in the PC-microprocessor industry, and has been hammered for months by bad news. In the first quarter, it lost $611 million on declining revenues, as Intel notched up the pressure with a price war (see, 4/9/07, "AMD's Pain, Investors' Gain"). The chip manufacturing advance won't help AMD immediately, but it hopes to be able to offer PC and server makers superior products to those of Intel in 2009. "This is leapfrogging what traditional technology can do," says Nick Kepler, vice-president of logic technology for AMD.

Doughnut Design

Right now, Intel is about one year ahead of AMD and IBM in efforts to increase the density of transistors in its chips, which allows it to fit more chips on wafers in the manufacturing process. That's a key factor in reducing the cost of producing chips. AMD expects to be just one half-year behind during the next generation of chips, by the end of this year. After that, the air-gap insulation technologies will click in.

The IBM advances came from a small group headed by Dan Edelstein, an IBM Fellow and the chief scientist on the project. Edelstein also headed the team at IBM that switched from aluminum wiring in semiconductors to copper in 1997, forcing the entire industry to follow suit.

Experimenting with polymer material invented by IBM scientists, Edelstein saw that it could be used to create chips using tiny columns of air as insulators between wires. The material contains two kinds of molecules. After it's sprayed onto a disk, spun, and cured, one type of molecule forms the slots, and the other type forms the filler between the slots. Think of doughnuts and their holes. "The science was out there, but we decided to apply it this way, and we can scale it up to work in a semiconductor fab," says Edelstein.