Intel is planning a multibillion dollar transition to a new generation of production technology that promises to double production volumes and cut manufacturing costs by a third.
The move is expected to bolster Intel's world leadership and spur a new round of investment in plants and equipment throughout the semiconductor industry.
The Silicon Valley company said it would begin next year to install equipment to handle 300mm diameter silicon wafers. Currently, Intel and other manufacturers use 200mm wafers of silicon, the base material for integrated circuits.
By 2002, Intel expects to begin commercial production using the larger wafers, which yield about 2.4 times as many chips per wafer as current wafers.
"We can improve our productivity and this will result in lowering our costs for each chip," said Mr Michael Splinter, senior vice-president and general manager of technology and manufacturing. However, the transition will be costly.
Intel plans to implement the technology first at a new facility in Oregon.
Building and equipping the plant during its development phase is expected to cost about $1.2 billion (€1.15 billion) over the next few years. Later, Intel will convert its existing plants.
Although Intel is not the first company to announce plans to use 300mm wafers, it is believed to be the first to set a firm timetable. Other large chipmakers are expected to follow its lead.
"The road to the Internet is paved with silicon," said Mr Craig Barrett, Intel president and chief executive.
"With a billion computers connected to the Internet, a huge volume of silicon building blocks will be required.
"Intel believes it is time for the industry to move to a new, larger wafer generation."
Intel's decision comes as the semiconductor industry is experiencing renewed growth after a prolonged downturn that dissuaded most manufacturers from making the technology shift.
As well as expanding the size of its wafers, Intel plans to shrink its chip sizes to 0.13 microns from 0.18 microns.
The move to smaller devices will also bring a change in the metal used to create connections on chips from platinum to copper.
Some chipmakers, including IBM, have made this transition, but Intel has maintained copper connections are not needed until device sizes shrink to 0.13 microns.
