Semiconductor firm Intel (NASDAQ: INTC) and technology solutions provider International Business Machines (NYSE: IBM) announced separately this weekend that both companies have solved a puzzle that will allow the semiconductor industry to keep making ever smaller computer chips.

Most of today's current semiconductor chips use a manufacturing process that builds transistors - the tiny gates inside of a chip - at a width of 90nm, or about 1000 times smaller than the width of a human hair. Cutting edge processes, such as those used to build today's consumer grade microprocessors, are about two-thirds the size, measuring in at 65nm.

Intel and IBM both said they have developed new materials allowing the industry to continue to shrink the building blocks of chips to 45nm.

The path to smaller chips encounters limitations, explained electrical engineering professor Bernhard Boser of the University of California, Berkeley on Monday.

In order to be able to turn a transistor on and off, we put a gate on top of the [conducting] channel, Boser began.

As transistors become smaller and smaller, the insulating material between the gate and the channel becomes thinner as well. This insulation keeps electrical current from leaking - critical for proper and efficient operation.

As the semiconductor shrinks however, you make a very thin insulating material, [and] it is no longer insulating, Boser said.

Both companies have said, however, that they have been able to combat the problem with new, high-k dielectric materials.

Until now, the chip industry was facing a major roadblock in terms of how far we could push current technology, said Dr. T.C. Chen, vice president of Science and Technology, IBM Research. After more than ten years of effort, we now have a way forward.

Instead of using traditional silicon-dioxide, the companies now use Hafnium, a material that can maintain its resistance to current, even at thinner slices.

The results will open up a new era of faster computers and mobile electronics. And because the 45nm transistors are smaller than the previous generation, they take less energy to operate, reducing switching power by approximately 30 percent, Intel said.

But while some see the results as a breakthrough, the technology is seen as a natural next-step in semiconductor technology.

While impressive, Merrill Lynch's Joe Osha says the industry has been talking about new transistor materials at the 45nm node for years.

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