IBM 2 Steps Closer to Making Serious Money on Chips

As computers get faster, most chipmakers are hard at work trying to improve capacity and reduce the size of the chips they produce. IBM (NYS: IBM) has taken a few more in that direction and it says it will be marketing a substantially more efficient memory chip by 2016. If Big Blue succeeds in its plans, it could usher in a new era in computing technology and hopefully very good business.

What's the big deal?
In May, IBM researchers recently presented a paper at the IEEE International Memory Workshop where they claimed that they have been able to place two bits of data in a memory cell that traditionally stored one. Multilevel storage has been done before but has also created new roadblocks on almost all occasions prior. This time, IBM scientists have been able to skirt those issues. This means IBM is now closer to the technology breakthrough that could open new vistas in the computing world.

The new technology, called Phase Change Memory (PCM), can be easily used alongside Dynamic Random Access Memory (DRAM) chips in order to endow the computer system with more efficiency than what typical flash memory can offer.

But the new technology is not quite ready to be put into commercial use. The IBM scientists who wrote the paper for the IEEE workshop believe that this technology will be ready for the marketplace by 2016.

If the breakthrough does come about in the next five years, it could mean a major business opportunity for IBM and a breakthrough for large, powerful servers that will be able to use smaller memory chips with higher efficiency.

One more area of success
Another recent IBM breakthrough in the semiconductor space comes courtesy of a glue it developed with 3M that allows the "stacking" of up to 100 chips. The glue works by dissipating heat to allow stacked "silicon towers," which would be up to 1,000 times faster than today's fastest microprocessors. Unlike PCM's breakthrough, which could take another five years-plus to hit the market, IBM is hoping its super glue can hit the market by 2013.

Big business in the offing
As I see it, this technology will usher in a massive shift in the manufacturing of semiconductors and the technology writ large. With IBM's plans of licensing the technology out to other companies, there could be a great opportunity for investors to do some brisk business.

The path for IBM isn't an easy one, however. Intel (NAS: INTC) has been researching the use of PCM and for a while now and has its own advanced designs for future processors. Apart from that, leading memory-chip makers such as Micron (NAS: MU) and Samsung are also working on PCM, as is Philips Electronics, a division of Philips (NYS: PHG) . In addition, PCM competes with Memristor technology from Hewlett-Packard (NYS: HPQ) , which also claims to store twice as much data in the same area.

The biggest challenge for most data centers has probably been the handling of large amounts of data. With increased operations in the IT environment and the growing popularity of cloud networks, data centers for various service providers across the world will have to be equipped with infrastructure that can handle huge chunks of data. A Gartner survey from November last year says that 47% of enterprises surveyed see data growth as their top challenge. With a chip like the PCM, which is capable of handling large amounts of data, these enterprises will find a solution to their problems without spending a lot of money to upgrade their current technology.

Gartner also forecasts worldwide spending on hardware, software, telecommunication, and related IT infrastructure to go up by 7.1% to $3.6 trillion in 2011. For public cloud services, Gartner says spending will increase on an annual average growth rate of 19% through 2015. With all that growth, data centers and enhanced infrastructure are going to be a necessity for several IT enterprises. In 2016, when it is scheduled to arrive, the PCM chip will enter a market that's already facing high demand for such technology. As I see it, the companies making it are in for quite a killing.

The Foolish bottom line
Ultimately, it may not ever come from IBM, but with growing demand for efficiency in the computing world, I think this technology will sell like hotcakes when it comes out of the lab and moves into the factory. Those with a long-term view on the business should take note of the leaders in these big advancements.

At the time thisarticle was published Fool contributor Arunava De owns no shares of companies mentioned in this article. The Motley Fool owns shares of IBM and Intel and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of and creating a diagonal call position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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