Intel's business is not microprocessors, it is in monetizing Moore's Law

People mistake Intel for being a microprocessor manufacturer. That's just an application of what it does best: it knows how to make the world's most advanced chips in massive quantities.

Late last week Intel briefed reporters and analysts on what is likely the most significant breakthrough in chip making since the late 1960s.

Intel said it had discovered materials that would enable it to make the world's tiniest chips, at 45nm, in high volumes--and could place it years ahead of competitors seeking to do the same.

IBM also says it has discovered such materials, and TSMC is reported to be close too, but Intel is the only one that has announced a multi-billion dollar fab rollout. This indicates a huge amount of confidence in its 45nm process.

Intel shares a lot of its chip research but it said it will keep these materials secret. If the information leaked out, it would enable competitors to shave years off their R&D efforts and enter lucrative chip markets years earlier.

Quite rightly, Intel is racing to take advantage of this lead. It is building three giant chip fabs which will use its secret process on silicon wafers the size of large dinner plates, 300mm (12 inch) across.

By the end of this year two fabs will be completed and ramping into high volume production, closely followed by a third in Israel, in early 2008--all using this advanced chip making process. This means servers, desktops, and notebooks  will run faster and cooler and will be less expensive.

With more smaller chips being able to be squeezed onto giant silicon wafers Intel, and anyone else with a 45nm process,  will be able to do a combination of several things:

• Existing chip designs will run faster because of shorter distances between transistors.
• Power consumption is reduced because of the smaller size of the chip.
• More transistors can be crammed into the same sized space which means larger memory caches-a performance bottleneck.
• Manufacturing costs are dramatically reduced. It costs about the same to process a silicon wafer in any process. More chips per wafer means more product for the same cost. Prices can be cut or the profit margin can be banked.

Here is another way to look at Intel: Intel makes microprocessors because they are the most profitable high volume application of its core business: to monetize Moore's Law and make chips cheaper, faster, smaller, and in vast quantities.