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IBM’s ‘Strategic Imperatives’ Will Get a Boost from the Chip Launch

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7nm chip launch will strengthen IBM’s strategic imperatives

Previously in this series, we saw that although IBM (IBM) wasn’t able to post any revenue growth in fiscal 2Q15, its “strategic imperatives” continued to post growth. IBM is strategically divesting its low-margin operations to focus on high value and rapid growing areas.

IBM’s smallest chips use 7 nm (nanometer) transistors. Their size is approximately one-thousandth the size of a single red blood cell. It’s important to note that 1 nm is one-billionth of a meter. The power density enhancements of the 7 nm technology will further strengthen IBM’s foothold in its strategic imperatives—for example, big data, cloud, mobility, cognitive computing, and other emerging technologies.

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Although IBM sold off its chip manufacturing business to GlobalFoundries, it remained committed to chip innovation. This is evident in IBM’s launch of the world’s smallest chip to date on July 9, 2015. IBM has developed the 7 nm chip in collaboration with GlobalFoundries and Samsung (SSNLF). Currently, the smallest transistors used in chips are 14 nm.

IBM used advanced technology to overcome a technology barrier

In the chip manufacturing space, shrinkage continues to be a barrier. To overcome the inherent technology barriers and shrink the process technology, IBM went ahead and replaced silicon with silicon-germanium and leveraged EUV (Extreme Ultraviolet) lithography in its 7 nm chip. To know why lithography holds so much importance in chip manufacturing, read Semiconductor Lithography (Photolithography) – The Basic Process.

While 7 nm transistors will still take some time before they go into commercial production, they’re rumored to offer approximately twice the power density of 10 nm processors. Intel (INTC), in its fiscal 2Q15 earnings release, divulged its plans to launch 10 nm chips by late 2017. Taiwan Semiconductor Manufacturing Company (TSM) plans to start the pilot production of 7 nm chips in 2017.

If you’re bullish about IBM, you can invest in the Technology SPDR ETF (XLK). XLK invests 3.51% of its holdings in IBM.

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