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Technology Stocks : SEMI Sweets and Chocolate Chips -- Ignore unavailable to you. Want to Upgrade?

To: Jack Hartmann who wrote (17)	5/24/2000 11:21:00 PM
From: Jack Hartmann	Read Replies (1) \| Respond to of 38

IBM Research Adds To Bottom Line By Arik Hesseldahl NEW YORK. 12:25 PM EDT-If you want to see where computer-chip technology is headed, your best bet is to keep an eye on IBM. The company announced Monday that it will begin shipping servers that use a version of its PowerPC processor made with a new chip-making technology called silicon on insulator (SOI). More news from... Forbes.com Streaming Media War Heats Up Net Stocks Continue Downward Spiral Advent Makes Broadband Broader Complete headlines... -------------------------------------------------------------------------------- Newswires U.S. Stocks End Higher On Intel Output Boost Nasdaq Market Down At Midday; Dow Mildly Positive American Seen As Possible Loser In United-US Airways Deal Complete headlines... -------------------------------------------------------------------------------- Message boards Enter ticker symbol to see latest posts: Go! SOI uses very thin glass to prevent electrons from spilling outside the tiny transistors on a chip. As the individual chip transistors get ever smaller, keeping electrons where they should be is difficult. But IBM (nyse: IBM) says doing it can increase chip performance by 20% to 30%. SOI is the fourth major chip-technology advance from IBM in recent years, as part of a wide-ranging research effort to push chip performance to new limits. According to its 1999 annual report, IBM spent $5.8 billion overall on research and development, or about 6% of its revenue for that year. Bijan Davari, IBM vice president of semiconductor research and development, admits his unit received a "significant portion" of that money but would not reveal the figure. He did say the investment has paid for itself at least ten times over, mostly by making chips for other companies. An IBM spokesman says that the company?s so-called custom logic business doubled its revenue growth in 1999 over 1998. In that business, companies which lack chip-making capacity design proprietary chips for use in specific products and then turn to IBM to manufacture the chips. Among IBM's customers are Cisco Systems (nyse: CSCO), Nortel Networks (nyse: NT), Juniper Networks (nasdaq: NPR), Alcatel (nyse: ALA) and Qualcomm (nasdaq: QCOM). Compaq Computer (nyse: CPQ) said this week that IBM will manufacture its Alpha Microprocessor, which it uses in a line of high-end Internet servers. Hewlett-Packard (nyse: HWP) may be close to striking a similar deal with IBM to manufacture the next generation of its PA-RISC chip for servers and workstations. Such deals are not new. Apple Computer (nasdaq: AAPL) was the first company to use IBM?s copper wiring technology on chips for its computers. The name of the game for IBM is to selectively spread its technology around, keeping the best stuff for itself. The first benefactor of the SOI technology will be IBM itself. The company will debut the technology on its own PowerPC chip in a new series of servers. Joe Clabby, server analyst at Boston-based Aberdeen Group, says IBM was struggling to keep up with its competitors in the server space and will now be better able to. "A lot of people go to IBM because of the technology," says Nathan Brookwood, principal analyst with Insight 64, a Saratoga, Calif.-based consulting firm. "You?re not necessarily going to get the lower price per wafer from IBM like you would from other foundry companies like [Taiwan Semiconductor Manufacturing Corp.] or [United Microelectronics Corp]. But you will get access to some really exotic technology." The rest of the industry tends to catch up with IBM. Taiwan Semiconductor Manufacturing, for example, is close to bringing up copper interconnect capabilities on its manufacturing lines. Motorola (nyse: MOT) has also developed copper technology, which it has in turn licensed to Advanced Micro Devices (nyse: AMD) for use in its Dresden, Germany, chip factory. And Intel (nasdaq: INTC) is slowly making its way to using copper technology but won?t get there until next year at the earliest. Korea?s Samsung is working on its own SOI technology but is apparently nowhere near as far along in the development process as IBM, industry observers say. "A lot of people were working on copper for a very long time because the benefits were very obvious," says Insight 64's Brookwood. "But it was IBM who finally figured out how to do it, and the process they pioneered is the process that is used widely in the industry." Although these technologies aren't likely to show up in mainstream desktop processors, they will generally appear in Internet servers where they're needed. "Processing speed still matters in the server space," says Brookwood. "We?re still trying to figure out what to do with all the processing power that has come to desktop systems, but in servers--where you are aggregating computing demand from hundreds or thousands of users via the Internet--raw processing speed and throughput still matter. And the techniques that IBM has pioneered really make a significant contribution here." forbes.com *************** Not follow IBM, but may have to DD it this weekend. Jack