Ultra-tiny 90-nanometer technology can be very lucrative, or it can bankrupt a billion dollar company before it ever sees a dollar in profit. With such high stakes, investing in new semiconductor technology in many ways is more like playing an elite Las Vegas game than a relatively tame business investment.

The measurement notation of 90nm, or 0.09 microns, refers to the width of the smallest circuit line on a silicon chip. The move from 0.13 microns to 90nm allows manufacturers to fit more transistors onto a single chip. This reduces overall size, prompting billions of dollars of investments from companies like Motorola, Intel and IBM. In addition, as circuits get smaller, manufacturers are able to produce faster, more powerful chips that consume less energy and are more affordable. This is potentially a big win for the telecom industry.

Insight on 90nm was gained last month when the San Diego Telecom Council’s semiconductor special interest group gathered at Wind River Services in Sorrento Valley. Mark Christensen, one of three meeting panelists, says making ever-shrinking chips is expensive. “Most of the issue today around fabrication cost is in the up-front capital spending,” says Christensen, a v.p. and director of Intel Capital’s mobile and communications sectors. It costs about $3 billion to build a factory that produces 90nm chips.

Intel has invested $22 billion in semiconductor technology in the last few years. With such a large investment, Christensen says, Intel is “the world’s largest producer of product at 90nm … and (its plants) are at full capacity.” Demand is high, but with up-front costs in the billions, few companies are eager to fill the void.

Kevin Meyer, the v.p. of worldwide marketing and sales for Chartered Semiconductor Manufacturing, notes that “the number of units has gone way up at 90nm, in terms of how many you have to sell if you are going to recoup your investment costs.” Chris Hamlin, senior v.p. and chief technology officer of LSI Logic, adds that “the windows for getting to revenue are shrinking.” So while 90nm holds the potential for a very big win, there is also the very real possibility of investing billions of dollars, then going bankrupt.

While new factories cost billions, they can produce faster and cheaper technology for years to come. The ones being built will not only allow for production at 90nm, but for future production at 65nm. Players like Christensen, Meyer and Hamlin are confident that 90nm will take hold. Moreover, they are optimistic that 90nm is just a speed bump along the way to 65nm and beyond, where they can make even smaller, faster, cheaper computer chips for your cell phone and personal computer.

— Evan Rutledge