AMD Teams with IBM to Fight Intel

To compete with an 800-pound gorilla like Intel , you have to be a 800-pound gorilla – or at least join forces with one.

That’s the thinking at Advanced Micro Devices (AMD) , which Wednesday said it is teaming up with IBM to jointly develop chip-making technologies for use in future high-performance products.

New processes, developed by Sunnyvale, Calif.-based AMD and Armonk, N.Y.-based IBM, will be aimed at making microprocessors run faster with less power and will be based on the latest chipmaking techniques such as high-speed silicon-on-insulator (SOI) transistors, copper interconnects and improved “low-k dielectric” insulation.

The two companies say the three-year agreement includes collaborating on 65 nanometer (nm) and 45nm (the size roughly of a billionth of a meter) technologies to be implemented on 300mm silicon wafers.

“We are set to commence production of our 90nm solutions in the fourth quarter of 2003, so we are now expanding process-technology development efforts for our next generation of processors targeted at 65nm and below,” said AMD chief scientist Bill Siegle.

The deal could also mark the end of AMD’s relationship with its Taiwan-based United Microelectronics and its planned 300mm wafer foundry. AMD’s relationship with Motorola to produce SOI and copper interconnects remains uncertain.

IBM said it is more than happy to lend a hand in making chips with AMD. Big Blue’s microprocessor division has also had a bone to pick with Intel with the advent of Xeon and 64-bit Itanium processors making bigger and bigger waves in high-end systems.

AMD and IBM said their engineers will be working together in IBM’s Semiconductor Research and Development Center (SRDC) in IBM’s East Fishkill, N.Y. facility. Work is expected to begin by January 30, 2003.

All of the saber rattling is an attempt to get the attention of Intel, which is focused on three major process transitions – 130nm lithography, 300mm wafers and copper interconnects.

Deutsche Bank Securities analyst Ben Lynch says Intel’s competition will have to deal with the No. 1 chipmaker’s improved performance as its top-line has slowed.

“A key element of Intel’s continued competitive advantage has been ongoing leadership in semiconductor process technology,” said Lynch. “We expect the company’s relative scale and aggressive investment budget to allow Intel to retain its technology competitive advantage over most, if not all, of its peers.”

Recent forecasts from Silicon Valley-based trade group Semiconductor Industry Association (SIA) predict industry growth of about 21 percent to $169 billion in 2003, 22 percent to $206 billion in 2004, and then remain flat at $206 billion in 2005.