Intel said it will manufacture new microprocessors based on a breakthrough technology using hundreds of millions of 3D transistors.

The technology was first announced nearly a decade ago in 2002. It is only now that Intel has figured out how to make chips with the new transistors. Intel expects at least a three year lead over rivals.

Intel said that the announcement is the most important technology of the year and that it will extend the rule of Moore’s Law, which describes the doubling in chip performance every two years, by at least two years.

The 3-D Tri-Gate transistor will be manufactured in 22 nm technology, which is significantly smaller than Intel’s current 32 nm technology. However, sources at Intel tell SVW that yields are very low and that there are significant challenges ahead to improve yields of working chips.

The smaller the transistor, the more difficult it is for Intel to create a high number of working chips per wafer. However, Intel always manages to find ways to improve yields. It is not only the world’s largest chipmaker but also leads in pioneering chip along technologies.

Intel said that the new transistor will allow for low power consuming chips. This could allow it to better compete against ARM based chips, which have found a lot of demand in mobile and tablet devices. Intel’s competing Atom chips lag in design wins against ARM.

The new transistor design, code named Ivy Bridge, will add two to three per cent to manufacturing costs but Intel says this is low compared with using Silicon On Insulator technology, which requires special silicon wafers and costs 10% more.

An additional benefit of the Intel technology is that it will improve graphics performance.

The first microprocessor using Ivy Bridge will be a server chip available next year. Atom chips will come later.

(I’m at the press conference and will update the story)

[Cross-posted at Silicon Valley Watcher]