Costly Chip Investments Will
Pay Off"> To date, chip makers have invested billions of dollars to ensure their ability to move to 65-nanometer production on time. Intel has begun production of 65-nanometer chips at its Fab 12 factory in Chandler, Ariz., after an 18-month, $2 billion renovation. Fab 12 is Intels second 65-nanometer factory.The transition to 65 nanometer will serve other components inside PCs as well. The transition will eventually free up capacity for building things like chip sets, chips that assist a computers processors, in 90-nanometer plants that are now dedicated to building processors. For Intel, moving chip sets to 90 nanometers also offers a chance to load them with more features, such as expanded graphics capabilities. AMD, Intels chief rival in x86 chips, has also been executing a 65-nanometer plan. AMD, which has worked with IBM on 65-nanometer manufacturing technology, has begun pilot production at its recently opened
Fab 36 in Dresden, Germany. AMD expects to begin full 65-nanometer production in the latter half of 2006, Kepler said.
"Our progress on 65-nanometer technology is going very well," Kepler said. "Weve gotten very good results on the technology at this stage."
IBM of Armonk, N.Y., said it also plans to convert its chip plant in East Fishkill, N.Y., to 65-nanometer production from 90-nanometer production over time.
It has already begun prototyping its 65-nanometer process while it moves equipment into a special annex, also designed to produce chips at 65 nanometers and then later at 45 nanometers.
IBM has yet to say exactly when it will start its 65-nanometer chip production. However, a company executive told Ziff Davis Internet earlier this year that its aiming for 2006.
Despite the cost, the companies stand to benefit greatly from their technology transitions, analysts say.
"Intels 65-nanometer products will hit en masse in 2006. That alters the cost and margin equations for Intel," said Dean McCarron, analyst with Mercury Research. "Its combining a move to [larger] 300-mm wafers and 65 nanometers in some factories, so its a double whammy. Yields in terms of functional devices and speed bins [otherwise known as chip clock speeds] will increase."
Thus, by moving to 65-nanometers sooner, Intel could possibly make gains against rival AMD, which gained market share during the third quarter due to its strong product line, McCarron said.
However, AMD has similar designs.
"Were making the same product and get twice as many on a wafer. That means the cost of each of those products is lower. We can move costs down," Kepler said. "The other thing that we can dothe other side of thatis we can put twice as much on a chip that was the same size at 90 nanometers. You can just fit more in it."
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By the end of 2006, the chip maker said, it expects to be turning out 65-nanometer Pentiums and Xeons from four factories.