Holey Chip: Another IBM Breakthrough

When IBM, in January, announced it had found a way to drastically cut electricity leakage in chips BusinessWeek noted, "That announcement—made alongside a similar but separate one by Intel Corp.—was hailed as the biggest advances in transistor technology in four decades." It appears now, that IBM has done it again; on May 3 it announced it had developed a self-assembly process which brings, "the equivalent of two generations of Moore's Law wiring performance improvements in a single step." IBM has already made chips using the new processes in its East Fishkill, New York fabrication plant. John Kelly, IBM's senior vice president of technology, said "this is the advent of a new era."

According to the official press release, "The natural pattern-creating process that forms seashells, snowflakes, and enamel on teeth has been harnessed by IBM to form trillions of holes to create insulating vacuums around the miles of nano-scale wires packed next to each other inside each computer chip." These vacuum holes, considered the ultimate insulator, will lessen the wiring capacitance, or loss of electricity as it flows through the chips. Wiring capacitance generates undesirable heat and slows the speed at which data can move through a chip. Top Tech News refers to Mark Margevicius, Research Director at Gartner, when they state that the breakthrough, "could mean lower power requirements and less-expensive semiconductor manufacturing, as well as faster chips." IBM claims the new chips will be 35 percent faster or use 15 percent less power; or a combination of both.

Richard Doherty, research director at Envisioneering Group, has offered various praises of the breakthrough. He reportedly said, "It's likely to save energy and increase chip speeds more than any other single advance in the last few years," as well as that, "It's the most significant semiconductor technology innovation in a decade." In the latter comment whether Doherty was referring to IBM's transition ten years ago from aluminum to copper wiring in chips is not stated, however, that move has since become the industry standard. It is also worth noting that the chief scientist on that IBM project and on this more recent one are the same, Dan Edelstein. This backs up the thoughts of John Kelly, who said in BusinessWeek, "We believe we're way ahead of our competition with these technologies."

Unfortunately, being ahead with the technologies does not necessarily put one ahead in the market. However, the development may allow IBM to catch up with Intel, the current leader of the chip manufacturing pack. According to BusinessWeek, "Right now, Intel is about one year ahead of AMD and IBM in efforts to increase the density of transistors in its chips, which allows it to fit more chips on wafers in the manufacturing process. That's a key factor in reducing the cost of producing chips. AMD expects to be just one half-year behind during the next generation of chips, by the end of this year. After that, the air-gap insulation technologies will click in." IBM anticipates introducing chips utilizing this process in 2009.

While IBM will obviously capitalize on the development, it will also share it with its strategic partners; partners such as AMD, Toshiba, Sony, and Freescale Semiconductor. IBM would like to see Intel slip, and it will offer any help it can, at a price, to those with the same idea. The strategic partnership may very well give AMD a much needed boost; the company posted a first quarter loss of over $600 million. The New York Times notes, "That [partnership] could prove crucial for Advanced Micro Devices, which relies on I.B.M.’s manufacturing capacity, and which is currently struggling to keep from falling behind Intel in the market for mainstream commercial microprocessors." BusinessWeek reports, "The chip manufacturing advance won't help AMD immediately, but it hopes to be able to offer PC and server makers superior products to those of Intel in 2009."

The New York Times says, "The new material suggests that I.B.M. may be taking an approach different from that of the Intel Corporation, which in January announced that it would redesign the way it makes transistors to take advantage of a new insulating material." While IBM has not come right out and mentioned that it is going after Intel, BusinessWeek points out, "The timing [of the IBM announcement] seemed to be designed to undercut rival Intel, whose executives are giving their annual briefing to analysts in New York the same day." Intel has not commented on whether or not it will make use of IBM's innovation, but says that it has looked into the research.

A more complete version of this posting, with journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Processors & Semiconductors section of Northern Light's Software, Computers & Services Market Intelligence Center.

And in the following articles:

IBM's Chip Breakthrough
BusinessWeek, May 3, 2007
In an announcement that could shake up the global chip industry, IBM is scheduled to announce on May 3 two technology breakthroughs that analysts say could fundamentally change the way chips are made and dramatically improve their efficiency. The timing seemed to be designed to undercut rival Intel, whose executives are giving their annual briefing to analysts in New York the same day.

IBM's Latest Chip Advance Cuts Power Usage
Wall Street Journal, May 3, 2007
International Business Machines Corp. unveiled a new way of developing semiconductor chips that permits significantly lower power consumption and smaller size. IBM said the technique involves growing chips with tiny airless holes that serve as vacuums. These vacuums insulate the wires that run through the holes in the chips better than the silicon materials used for insulation.

IBM Chip Uses Self-Assembling Material
PC Magazine, May 3, 2007
IBM has developed a way to make microchips run up to one-third faster or use 15 percent less power by using an exotic material that "self-assembles" in a similar way to a seashell or snowflake.

IBM's Chip Technique a 'Tremendous Breakthrough'
NewsFactor, May 3, 2007
IBM's new chipmaking technique uses holes to alleviate a problem that has plagued the semiconductor industry: electricity leakage. "It's a tremendous breakthrough," said Envisioneering's Richard Doherty. "It's likely to save energy and increase chip speeds more than any other single advance in the last few years."

I.B.M. to Announce an Advance in Making Chips Faster and More Energy-Efficient
New York Times, May 2, 2007
The advance, to be announced Thursday, involves a manufacturing process that uses heat to create trillions of atomic-scale holes in a thin layer of material deposited on top of the conducting wires at different stages of chip making. The material is then extracted through the holes, leaving insulating vacuum channels around the miles of ultrathin wires that make up a modern microchip.

Microsoft

When Microsoft reported its earnings last month it drew some surprises; Vista, the company's new operating system, is selling well. Until the announcement, most of the news about Vista, and Microsoft in general, reported its problems and predicted its negative impact. It seems that in this Microsoft has had the last laugh. But as with any empire, there is a dark side. Microsoft trails its online rivals Google and Yahoo! and is well aware that it needs to make some headway in this area. Its need to do so was evidenced by recent talks between Microsoft and Yahoo! Talks were over quickly, but the fact remains that while Microsoft may keep moving ahead, its work is cut out.

If earnings reports are indicative of a company's strength Microsoft appears to be doing well; on April 26 the company posted a 65 percent rise in quarterly profit. While the projections of the company for 2008 are only at the midpoint of analyst projections, the rise was enough to send shares of the company up five percent. "The strength of Vista is really driving this," Kim Caughey, an analyst at Fort Pitt Capital Group, told Reuters. This piece of news was a surprise to many, and not just those in the press and analyst communities. According to Reuters, Chris Liddel, Microsoft Chief Financial Officer, said consumer sales of Vista surpassed even the company's own expectations by $300 million to $400 million. Apart from the standard Microsoft bashing Chief Executive Steve Ballmer's February statement that some analyst estimates for Vista sales were "overly aggressive," had led to concerns.

According to BusinessWeek, "while some corporate customers still opt for the predecessor Windows XP when they buy new computers, for software compatibility reasons, a remarkably large number are taking the new operating system." That 'remarkably large number' amounts to 85 percent of its current operating system's sales. Given all the negative hype that is likely a surprise, but even more so when it is pointed out that Vista is selling more robustly than XP did at the same time in its life cycle. Contrary to popular expectation, Vista appears to be paying off; the Client Division which consists mainly of Windows sales for PCs reached $5.3 billion. This of course is good news to Microsoft, Windows and Office account for more than half of Microsoft's total revenue and a majority of its profits. Benjamin J. Romano of the Seattle Times put it well, "The report served to quiet some grumbling about the new operating system's performance and acceptance, and it seemed to assure investors that the cash cows are safely in the pasture."

Though the new operating system and Office suite may represent cash cows, Microsoft's online search presence may be best referred to as a dog. Microsoft comes in a distant third, behind Google and Yahoo! Vista sales make Microsoft happy; its search performance does not. According to BusinessWeek, "At the end of January Chief Financial Officer Christopher Liddell expressed dissatisfaction with the company's search engine growth. 'We lost market share' . . . We are clearly not happy with that.'" The dissatisfaction expressed by Liddell was over a few numbers: As of March 1, growth on Microsoft's search site was up 2.5 percent; Yahoo!'s 29 percent and Google's 40.6 according to Nielsen/Net Ratings. Also while Google boasts 53 percent of searches, and Yahoo! follows with 23 percent, Microsoft stalls at 9 percent.

In early March Christopher Payne, the corporate vice-president in charge of Windows Live Search left the company and it is still being kept quiet as to why. BusinessWeek states that at that time, "Concerns over leadership of the division resurfaced," and that, "his replacement faces a tall order." As they look for a replacement Microsoft will also be looking for a solution. Knight Ridder reports that, "Beyond having enormous resources to spend on battling Google and Yahoo, Microsoft has a valuable roster of popular Web services and sites that can direct search traffic to the Live Search site." Microsoft will attempt to leverage this roster and encourage users to execute more searches; it will embed search into its instant messenger client as well as on its online sites. "If we got all of these people to do one search a day, that would be a big bump for us," says Whitney Burk, Microsoft's public relations manager for competitive strategy. In an unusual approach Microsoft will also try to woo users via financial incentives. According to Network World, "In an apparent attempt to boost its disappointing Web-search market share, Microsoft is giving financial incentives to large corporate customers whose employees use Microsoft's Live Search engine . . . In exchange for their employees' Live Search usage, Microsoft is providing 'service or training credits' to these customers." Justin Osmer, senior project manager for Microsoft's Live Search group, says, "We know it's an uphill battle, but we're in it for the long haul." That long haul has also directed Microsoft to look for some shortcuts.

According to the Wall Street Journal, "Recent talks between Microsoft Corp. and Yahoo Inc. over how to band together betray increasing unrest at Microsoft over how to compete with Google Inc. and get in step with the booming online-advertising market." When word of discussions between the two companies broke last Friday various sources tossed about numerous scenarios; however those might best be discussed at a later time, when the two companies are still talking. (Word of the talks ending arrived on the heels of word that they had begun.) Still, the scenario surrounding the talks is noteworthy. The Wall Street Journal stated that "Microsoft's online division could be heading for a shake-up, say people familiar with the situation. Failure by the Redmond, Wash., company to make better headway against Google in Internet search, combined with Microsoft losing a deal to Google last month to buy online-advertising specialist DoubleClick, has spurred Microsoft Chief Executive Steve Ballmer to consider new action, these people say." The Financial Times has similar thoughts, "The talks have been prompted by an acceleration in the shift of audience and advertisers online, and Microsoft’s failure to build effective search engine and online advertising arms of its own, say analysts and industry executives." And while the point is moot, now that talks are over, it is interesting to note the view that even Yahoo! couldn't help Microsoft. On this Forbes notes, "Microsoft's money-losing online business posted sales growth of just 10.9 percent last quarter. Yahoo! does make money, but last quarter its sales rose a mere 9 percent, excluding traffic acquisition costs."

A company as big a Microsoft with fingers in as many pots will have both victories and its defeats; both can come hand in hand.

A more complete version of this posting, with journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in Northern Light's Software, Computers & Services Market Intelligence Center.

And in the following articles:

Microsoft, Yahoo Discussed Deal
Wall Street Journal, May 5, 2007
Recent talks between Microsoft Corp. and Yahoo Inc. over how to band together betray increasing unrest at Microsoft over how to compete with Google Inc. and get in step with the booming online-advertising market. Microsoft and Yahoo discussed a possible merger or other matchup that would pair their respective strengths, say people familiar with the situation. The merger discussions are no longer active, these people say, but that doesn't preclude the two companies from some other form of cooperation.

Rumors Fly on Microsoft and Yahoo
New York Times, May 5, 2007
Microsoft and Yahoo are discussing a business partnership in their effort to compete with Google, people briefed on the talks said Friday. The New York Post reported Friday that Microsoft was pursuing an acquisition of Yahoo, a prospect that sent Yahoo’s shares soaring. But a person briefed on the talks as recently as Friday said they had been going on for more than a year and had focused recently on a “creative partnership,” not an acquisition.

Judge Approves $1.53 Billion Verdict against Microsoft
New York Times, May 3, 2007
A federal judge signed off on a $1.53 billion jury verdict in favor of Alcatel-Lucent in a digital music patent dispute against Microsoft. Judge Rudi M. Brewster of Federal District Court in San Diego concluded that Microsoft’s Windows Media Player software infringed on patents owned by Lucent Technologies, an American telecommunications equipment maker acquired last year by Alcatel of France.

Vista Pays Off for Microsoft
BusinessWeek Online, April 27, 2007
In the weeks before Microsoft's quarterly earnings release, reports abounded of security problems with the new Windows Vista operating system. And talk was rife that myriad software programs don't work well with Vista. It was enough to give the impression that Vista, launched in January, wasn't selling all that well. Microsoft's fiscal third-quarter results, reported Apr. 26, paint a different picture.

Vista's OK. But Microsoft May Not Be
Forbes, April 26, 2007
It's old news that Microsoft's latest operating system, Windows Vista, is underwhelming. Oh, and late, bloated and buggy. What is news is that this might actually be a problem for Microsoft Chief Executive Steve Ballmer and crew.

Microsoft Profit Tops Wall St. View on Vista Sales
Reuters, April 26, 2007
Microsoft Corp. posted a 65 percent rise in quarterly profit on Thursday, topping Wall Street estimates due to better-than-expected demand for its new Windows Vista operating system. Shares of Microsoft rose 5 percent after the announcement, in which the world's biggest software company also forecast 2008 profit at the mid-point of a range of analyst estimates.

Microsoft to Unveil Rival to Adobe’s Flash
Financial Times, April 16, 2007
Microsoft is set on Monday to unveil an internet technology to rival the Flash player, a piece of software made by Adobe that has become an ingredient in the success of video from YouTube and other online experiences. The move will touch off a fight over a strategically important internet technology, echoing earlier battles Microsoft waged against the Netscape browser and RealNetworks’ media player, according to analysts.