IBM Finding Nemo

I'm a selective penny-pincher. I hate buying new cars. I've had the same pair of shoes for the past six years. And I haven't bought a box of paper clips, ever.

I appreciate similarly frugal behavior in companies. That's why I'm thrilled to see today's news out of IBM (NYSE: IBM  ) . Big Blue has created a technology called Nemo that will allow it do more with less when it comes to manufacturing chips.

Let me explain. Printed circuits are the veins of a microprocessor. These circuits are made in bulk, using big, round pieces of silicon called wafers. Manufacturers can pack more power into chips by increasing the number of circuits. Higher-yielding wafers tend to lead to more powerful chips. Still with me? Good.

Researchers have long held that wafer production was reaching its physical limits with current equipment, which produces circuits at 65 nanometers. (A nanometer is one billionth of a meter.) IBM's Nemo tool, built in conjunction with privately held JSR Micro, is capable of going to 30 nanometers without substantially altering the current manufacturing process.

In other words, this might well be a huge win for the chipmakers. Intel (Nasdaq: INTC  ) , Advanced Micro Devices (NYSE: AMD  ) , and others have invested hundreds of millions of dollars in new manufacturing equipment, with more likely on the horizon. Now, says IBM researcher Robert Allen, it may be seven years before any radical changes in chipmaking techniques are needed.

Provided that it's everything it's cracked up to be, Nemo might represent a problem for semiconductor equipment makers such as ASML Holdings (Nasdaq: ASML  ) and Canon (NYSE: CAJ  ) , both of whom develop products using advanced lithography techniques -- that is, using light to etch circuits.

Don't get me wrong; Nemo is still very much a small, wet-behind-the-ears fish, which means there's not likely to be an imminent change for equipment makers. But if he's groomed well and manages to make nice with Intel, AMD, and other chip manufacturers, he could become the Big Blue shark that fed on the equipment industry's profits.

Train your microscope on related Foolishness:

Fool contributorTim Beyersbelieves he owned a half-dozen fish when he was a kid. But not all at the same time. (Cue flushing noise.) Tim didn't owns shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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