Intel moves into volume with new chips

Intel's had a tough time, but the manufacturing machine is still churning away in good order.

Intel has begun to produce chips made on the 65-nanometer process, adding an optimistic note to what has been a somewhat tough month for the chip giant.

The Santa Clara, Calif.-based chipmaker started to produce Presler desktop chips in volume a few weeks ago and is shipping them to PC makers, said spokesman John Casey. Presler is a dual-core processor sporting a new design. Computers containing Presler will come out next year.

Yonah, a 65-nanometer dual-core notebook chip, will go into volume production by the end of the year, he added. By the third quarter of 2006, more chips will be produced on the 65-nanometer process than on the 90-nanometer process, the so-called crossover point.

Although chip designs and novel transistor concepts often gain headlines, semiconductor producers live and die by manufacturing and much of Intel's success can be attributed to relentless advances in production.

Chips made on the 65-nanometer process sport features that measure, on average, 65 nanometers. A nanometer, derived from the ancient Greek word "nano" or midget, is a billionth of a meter. A human hair measures about 90,000 nanometers in diameter.

Current chips sport 90-nanometer features. Shrinking those features decreases costs because more chips can be punched out of a single wafer, and also improves performance. Semiconductor makers can further exploit the manufacturing shrinkage to add transistors and hence integrate features. In a few years, radios for wireless communications, now housed on individual chipsets, will become simply a feature on a processor.

Intel earlier said it would produce 65-nanometer chips in 2005. Often, however, manufacturers will miss the deadline when shifting to a new process, so merely hitting the deadline is the sort of thing that makes Wall Street and PC manufacturers sleep better.

"It disproves all those who thought 65-nanometer would never make it as recently as early this year," wrote Dan Hutcheson, CEO of VLSI Research, an analysis firm, in a recent report.

The first 65-nanometer chips are coming out of Intel's D1C facility in Oregon. Although used as a development facility, the company can produce a substantial volume of processors there. In 2006, 65-nanometer production will kick off in three more fabrication facilities in Arizona, Ireland and Oregon.

October has been a bumpy ride. Earlier in the month, Intel delayed a number of Itanium chips and overhauled its Xeon road map. A report from Mercury Research also reportedly stated that AMD gained over a point of market share at Intel's expense in the third quarter.

The 65-nanometer process means Intel now may have the jump on AMD, which could allow Intel to put pressure on its smaller competitor over the ensuing months. AMD, which recently cut the ribbon on its new "Fab 36" facility in Dresden, won't start producing 65-nanometer chips until 2006. The new factory will start producing 90-nanometer chips first, during the first quarter of next year.

"I'm guessing it (65-nanometer production at Dresden) will happen closer to mid-2006," said Nathan Brookwood at Insight 64. "Second quarter 2006 if they are lucky, and third quarter if they aren't."

The crossover point for AMD might not occur until the middle of 2007. AMD says it intends for the Dresden facility to be "substantially converted" to 65-nanometer production by mid-2007. However, AMD will also has another facility in Dresden that produces 90-nanometer and a contract to get 90-nanometer chips out of Chartered Semiconductor, so judging the location of the crossover point is difficult. AMD declined to elaborate.

In the past, when Intel has had an advantage in manufacturing over AMD, it has wielded it to boost performance of its chips and/or engage in price wars.

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