May 12, 2004 12:49 PM PDT

IBM says chip woes easing

IBM said Wednesday that problems with a new chip manufacturing process are easing but that it is still not getting the output it would like.

In presentation materials for a conference call, IBM said the rate of defects it is seeing from its 300-millimeter manufacturing lines is steadily declining and getting closer to the company's target.

"We are getting much closer to where we want to be," John Kelly, an IBM senior vice president, said in a conference call Wednesday.

Big Blue reiterated that it is getting the expected number of good chips from its 200-millimeter lines but said yields from the 300-millimeter lines, while improving, "are not yet where we want them to be."

IBM said last month that problems in the chip unit had hampered the financial results of its technology group, which includes IBM's server and storage products, as well as its semiconductor operations.

Additionally, Apple Computer criticized IBM in its earnings conference call last month, saying shipments of the Xserve G5 server were limited by a shortage of chips from IBM.

Apple is one of a number of tech companies that relies on IBM to supply it with chips. IBM sells its PowerPC 970 series of chips to Apple, which markets them as the G5 processor.

Kelly said IBM was working hard to meet the needs of those customers.

"We do expect to do a better job of meeting customer demand in the second quarter," he said. "We will do better and better as each quarter goes on."

When it launched the Power Mac G5 last June, Apple said it expected to have machines running at 3GHz within a year. Kelly declined to say whether that goal is still feasible, given IBM's manufacturing issues.

In much of the conference call, IBM addressed the technical challenges that the chip industry faces, as it continues to reduce the thinness of the wiring used for each transistor.

Historically, the consistent increases in performance and decreases in the cost of semiconductors have come through scaling--that is, by making each feature of the circuit progressively smaller. But as some transistors have gates that are only a few atoms thick, chipmakers are increasingly having to look to new manufacturing techniques and materials, rather than scaling, to see performance gains, IBM noted.

"That is a tremendous challenge, because these innovations can take five to 10 years to deploy," said Bernie Meyerson, the chief technologist in IBM's systems and technology group.

However, Meyerson said he is confident that IBM has enough tricks up its sleeve, including technologies like strained silicon, high-k dielectrics and an emerging process he called hybrid-orientation technology. "This is not remotely the end of the journey," he said.

 

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