Intel to Use Technology for Building Tinier Chips

Intel Corp. on Tuesday unveiled a new way to make the world’s smallest commercial transistors, a critical advance in the manufacturing of semiconductors that run everything from mainframe computers to hand-held gadgets.

Intel, the largest manufacturer of chips, said the first product made using this technology will roll out in the second half of 2003. Code-named Prescott, the chip will have wires that are 90 nanometers wide, about 1/1000th the width of a human hair and 30% smaller than its current 130-nanometer standard. Eventually, Intel will use the new standard to manufacture all of its processors.

“This is a process that will define all of our chips for the next couple of years,” said Bill Calder, a spokesman for the Santa Clara, Calif., semiconductor giant.

While the semiconductor industry struggles in its worst downturn in decades, Intel has deliberately kept up its pace of churning out newer and faster technology. This year Intel ramped up its research-and-development budget to $4.1 billion from $3.8 billion in 2001 despite sluggish demand.

“Intel very much marches to its own beat,” said Mark Margavicius, research director at Gartner Inc., a technology consulting firm.

Under Chief Executive Craig Barrett, Intel has focused on driving its manufacturing process to accommodate smaller transistors and larger silicon wafers, moves that involve enormous upfront spending but that pay off in the long run with fabrication plants that can produce smaller, faster and less expensive chips. Intel’s announcement is a particularly aggressive stance because its rivals are just now advancing to 130-nanometer technology.

“Intel is essentially saying that it’s the biggest semiconductor company in the world by a large margin, and it’s leveraging that by investing heavily in process technology and buying competitiveness,” said Joseph Osha, an analyst at Merrill Lynch & Co., which does not own Intel stock or provide investment banking services for Intel.

The new technology relies on four innovations to produce smaller, faster chips that consume less power.

The first involves stretching silicon, the foundation for all chips, so that signals run faster across the chip. In stretched, or strained, silicon, there’s more space between atoms, leaving wider “lanes” for signals to travel in, said Rob Willoner, technology analyst with Intel.

The second is the ability to build tinier transistors, microscopic silicon-based switches that rapidly open and close to create the ones and zeroes of the digital world. Smaller transistors result in faster processing speeds because they cut down on the distance that electronic signals must travel.

The third is the exclusive use of copper instead of aluminum to connect transistors. Copper is a better conductor than aluminum.

The final innovation is a carbon-based wire insulator that helps reduce power consumption by cutting down the drag, or capacitance, on signal speeds.

Intel would not comment on how much the process would improve speeds, but such new technologies in the past have roughly doubled chip speeds.

Despite its considerable resources, Intel, which has $8 billion in cash, is not immune to market forces. The company last month posted second-quarter earnings that fell short of analyst expectations and announced it would cut 4,000 jobs this year through a combination of attrition and layoffs.

On Monday, a leading industry analyst at Salomon Smith Barney Inc., Jonathan Joseph, trimmed his estimates for Intel’s third-quarter sales and profit. Joseph predicted that sales would be $6.44 billion, down from an earlier estimate of $6.78 billion, and earnings per share would be 12 cents, contrasted with a previous estimate of 14 cents.

Intel’s shares fell 83 cents to $16.70 Tuesday on Nasdaq.

Advancements in manufacturing technology can involve billions of dollars in new equipment, but the 90-nanometer process can be run on 75% of Intel’s existing tools, helping the firm conserve cash.

“This is a huge advantage for us, even if it’s not great news for the equipment providers,” Calder said.