Taiwan Semiconductor Manufacturing (TSMC) - the world's largest contract chip maker - will begin producing chips using a 65-nanometer process starting in December, with 45-nanometer ready in 2008.

The company will also offer an 80-nanometer manufacturing technology process "very soon". Switching to a more advanced production process allows chip makers to produce semiconductors that consume less power, perform faster, and cost less.

Currently, TSMC's most advanced technology used for commercial chip production is the 90-nanometer technology. The size refers to the average feature size on a chip. One nanometer is one-billionth of a meter.

TSMC has been working on the shift to the 65nm process for some time now. It produced its first chip, an SRAM chip, with more than 100 million transistors in April last year. Since then, several TSMC customers, including Altera, have had prototypes of their products produced using the 65-nanometer technology.

The 80-nanometer process will allow chip designers to save money while improving performance on semiconductors, as they move toward 65-nanometers. For the past few years, TSMC has offered customers a "half-node" shrink, to ease the transition to a new technology. The 90-nanometer to 65-nanometer transition costs millions of dollars in design work to complete. But a half-node shrink, like 80-nanometer, or previously 110-nanometer, allows companies to make slight alterations to existing designs, while gaining cost reductions and better chip performance.

Chips made using the 80-nanometer node, for example, could be around 20 percent faster than chips made using the 90-nanometer process, Tzeng said. Because of the reduced size, companies will also gain around 20 percent more 80-nanometer technology chips from each silicon wafer run through the manufacturing process, helping lower costs.