Applied Materials Inc, the world's largest maker of equipment used to produce computer chips, said it developed a technology that will let customers such as Advanced Micro Devices Inc make smaller and faster semiconductors.
Applied said Advanced Micro, the second-largest maker of processors after Intel Corp, as well as Taiwan Semiconductor Manufacturing Co (
Chipmakers are trying to make their products smaller, cheaper to produce and faster while boosting capacity, to improve the performance of electronic devices and to stimulate demand. To do so they must cram more capacitors onto smaller bits of silicon.
"It's an incredibly difficult problem and no one has come up with the optimal solution at this point. This is one of the big, big technical problems," said Mark FitzGerald, an analyst at Banc of America Securities. "Investors should be paying attention to this."
The race is on between companies such as Applied, based in Santa Clara, California, and Novellus Systems Inc to produce so-called low-k films that make sure that tightly packed capacitors don't interfere with each other. Circuit widths on the latest chips are down to 90 nanometers. One nanometer is a billionth of a meter.
"This is an inflection point not only for the company but for the industry. It's no longer a laboratory curiosity," said Mike Splinter, Applied's chief executive officer. "This is a clear break away from the competition."
About US$268 million of low-k chipmaking equipment will be sold this year, with the market rising to US$906 million by 2008, according to chip industry market forecaster VLSI Research Inc.
"There is a lot at stake in terms of chip performance here," said Risto Puhakka, an analyst at VLSI. "If it doesn't work then a lot of chipmakers aren't going to be able to meet their specifications."
A major problem with the introduction of the new material is that it is "mechanically weak" meaning that it requires expensive packaging to stop chips from cracking and failing, according to Wilbert Van Den Hoek, the chief technical officer of Applied's rival Novellus.
Van Den Hoek said Novellus has an advantage because it has produced a more robust material that will allow the technology to be applied to less expensive chips, which require cheaper packages, thereby opening the technology to wider markets.
Novellus has sold equipment to TSMC rivals United Microelectronics Corp (
TSMC said it is producing the latest laptop graphics chip for ATI Technologies Inc, the world's second-largest maker of graphics cards for personal computers, using the low-k material equipment from Applied.
TSMC said it has produced about 10,000 wafers using the new technology, equal to about 1 percent of its total output in the first quarter.
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