International Business Machines Corp. (NYSE:IBM) is planning to spend $3 billion on semiconductor research and development in the next five years, in the hopes of finding a game-changing breakthrough that can help revive its slumping hardware unit.
Shares edged down 0.3 percent to $187.90 at 3:28 p.m. in New York.
The company will fund two programs to create smaller, more powerful chips that can be used in systems like IBM’s Watson technology -- which analyzes data in plain English -- and to develop semiconductor parts out of materials other than silicon, according to a statement from the Armonk, New York-based company late yesterday.
Silicon chips, which have been made smaller every year, are reaching a point of diminishing returns, preventing chips from delivering performance improvements demanded by new technology, the company said.
IBM announced the plan a week before its widely anticipated second quarter earnings. Last quarter, sales in its hardware sector plunged 23 percent from a year earlier and the company posted its lowest quarterly revenue in five years.
IBM hopes to find ways to scale and shrink silicon chips to make them more efficient, and research new materials to use in making chips, such as carbon nanotubes, which are more stable than silicon and are also heat resistant and can provide faster connections.
IBM’s semiconductors, which include the PowerPC lineup, have been used in personal computers, game machines and other equipment. Still, Intel Corp.’s dominance in the processor market has left IBM with less of a role in the chip industry. Manufacturing microelectronics accounts for less than 2 percent of IBM’s $100 billion in annual revenue.