IBM will help Advanced Micro Devices develop future chip technologies, the companies announced Wednesday, an alliance that will better insulate AMD from the growing risks of making processors.
Under the deal, the two companies will develop semiconductor manufacturing technologies for 65-nanometer and 45-nanometer chips from AMD. The 65-nanometer chips will likely emerge in 2005, with 45-nanometer chips following in 2007. The nanometer measurement refers to the average size of features on a chip.

The deal is the latest in a series of ventures that is transforming the semiconductor industry from a collection of independent companies to groups of interlinked alliances.

The hundreds of millions of transistors that will be packed into chips coming out in the next few years will create a heat crisis. Transistors require energy, but pumping electricity into chips produces heat, which in turn can melt internal components and cause other problems. A substantial amount of energy also "leaks" out of these chips and never gets used.

Developing energy-conservation technology, however, isn't easy and requires extensive research and development facilities.

"What the industry is faced with is very significant capital costs, very high revenue requirements, and very basic changes in process technology," said Sumit Sadana, director of strategy for IBM Microelectronics, in an interview in December.

AMD's Bill Siegle, senior vice president, technology operations and the company's chief scientist, said Wednesday that by collaborating with IBM, "AMD can deliver industry-leading performance and functionality for our customers while reducing the rapidly escalating cost of technology development."

The IBM-AMD alliance will specifically concentrate on how to better incorporate energy-saving technologies, such as silicon-on-insulator (SOI) and "low-k dielectrics," into chips.

Integrating SOI has been a problem for AMD, according to analysts. The company was going to include SOI in an upcoming chip called Barton, but it removed the technology and delayed the chip. Until now, AMD was obtaining its SOI technology from Motorola. A Motorola representative said Motorola and AMD mutually agreed to end their pact in early 2002, with cooperative work terminating in the second half of the year.

The deal also marks a break in an alliance between AMD and Taiwan's United Microelectronics, a foundry that makes chips for other companies Earlier, AMD and UMC agreed to jointly develop 65 nanometer processes and build a fabrication facility together. AMD also said it would use UMC for excess factory capacity if necessary.

The effort to develop 65 nanometer processes has ended, said an AMD representative. AMD continues to explore jointly owning a fab with UMC but is looking at other candidates, including potentially IBM, the representative added.

IBM, of course, will also benefit. The company rivals Intel in semiconductor research, but its chip sales are only one-eighth as large. Licensing its technology, and manufacturing chips for other companies, opens revenue streams for Big Blue. Late last year, IBM signed a joint manufacturing and technology licensing deal with Chartered Semiconductor, a foundry that makes chips for others.

IBM's services and technology don't come cheap, though. Companies typically hand over several million dollars--even hundreds of millions of dollars, depending on the deal--to IBM under these alliances, according to sources.