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IBM and Advanced Micro Devices will work on future chip-making technologies together, under an agreement that could help AMD compete against archrival Intel's manufacturing capacity.

The two companies will work together on developing extremely small 65-nanometer and 45nm process technologies for new chips, they announced Wednesday. The most advanced processors on the market today are built using 0.13-micron, or 130nm process technology. The size of the process technology refers to the width of the smallest wire on the chip.

AMD, Intel, and IBM are all working on 90nm process technologies, the next step in the evolution of chip-making technology. Intel is expected to release a version of its flagship Pentium 4 desktop processor built on the 90nm process technologies in the second half of this year, while AMD's 90nm products will begin production in the fourth quarter of 2003 and will reach the market in the first quarter of 2004.

AMD and IBM have worked together on projects in the past, jointly developing the silicon-on-insulator technology that is expected to be part of forthcoming processors based on AMD's Hammer architecture, said Dean McCarron, principal analyst at Mercury Research.

"Developing manufacturing technologies is a complex task, and it makes sense for them to work together since they don't compete against each other," he said.

Production Problem?

While shrinking the process technologies used to manufacture processors helps companies create better products, a crucial part of the production process involves the size of the silicon wafers from which the individual chips are cut. Both Intel and IBM already have their own production plants set up to use 300-millimeter wafers, while AMD's main production plant in Dresden, Germany, uses 200mm wafers. Using larger wafers helps these companies reduce their costs--and therefore their prices--through a more efficient manufacturing process.

AMD has partnered with United Microelectronics of Hsinchu, Taiwan, to build a 300mm plant, but that site remains under construction in Singapore and is not expected to begin production until 2005. Chip production plants are enormously expensive to build, and AMD's financial picture is not as healthy as that of Intel or IBM.

Products based on the 65nm process and 300mm wafers are expected in 2005, around the time AMD's 300mm plant comes online, the companies said.

IBM and AMD engineers will work together on high-speed silicon-on-insulator transistors, copper interconnects, and other technologies expected to allow chip designers to fit more transistors on a chip. The work will occur at IBM's plant in East Fishkill, New York, and will begin on January 30. Products based on the 65nm process are expected in 2005, the companies said.

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