IBM's New Foundry Service Takes on Intel

chipboard1IBM today said it will offer a new foundry service that could enable a startup to compete on the same level as Intel. IBM (s IBM) says it will make 45-nanometer, silicon-on-insulator chips designed by other other semiconductor companies as a contract manufacturer. This means everyone from startups to Texas Instruments (s TXN) can now design high-performance chips that can consume less power — ushering in new designs for consumer electronics, cell phones and maybe even servers.

As it becomes ever more expensive for semiconductor companies to build manufacturing plants to make their own chips, there are plenty of foundry services out there. However, IBM has combined two important manufacturing technologies to make this offering unique. One is the process node, which affects how many chips can be crammed onto a wafer. Smaller process nodes, such as 45 nanometer, offer better power efficiency (or performance) and better economies of scale. The other technology is silicon-on-insulator (SOI), which is more expensive than the traditional CMOS process. Foundries offering SOI technology typically do so at larger nodes, such as at 90 nanometers, where it’s hard to justify the higher cost of SOI when a chipmaker may be able to get the same cost efficiencies or performance and power gains by going to a smaller process node with CMOS chips.

If it’s an apples-to-apples comparison at 45 nanometers, it can be worth it to pay more for SOI, because a processor gains more performance, with certain types of power advantages provided by SOI that help make devices smarter and more energy efficient. ARM — the design and intellectual property firm behind many of the chips that act as the brains for cell phones, including the iPhone– has signed a partnership with IBM to offer some of its IP libraries as part of this foundry offering.

This foundry service will provide a compelling service for companies building cell phone applications processors, embedded chips for networking equipment and gaming chips, but it may not be the only offering out there for long. AMD also has the ability to make 45-nanometer SOI chips, which means as it spins out its fabs, the newly formed Foundry Co. may also sell such capacity to all comers. An AMD spokesman said he didn’t know when I asked.

This also heightens the divide in the semiconductor world between Intel and everyone else. Intel had resisted SOI technology for years — although it appears to be coming around for later generations of chips. However, by offering such cutting-edge foundry services, IBM and its partners are making it possible for other firms to keep up with Intel without worrying about manufacturing R&D. This means Intel is running two races — one in manufacturing and the other with its design. How long it can keep this up is anyone’s guess.