SAN JOSE, Calif. — In dueling announcements, Intel Corp. and International Business Machines Corp. separately say they have solved a puzzle perplexing the semiconductor industry about how to reduce energy loss in microchip transistors as the technology shrinks to the atomic scale.

Each company said it has devised a way to replace problematic but vital materials in the transistors of computer chips that have begun leaking too much electric current as the circuitry on those chips gets smaller.

Technology experts said it's the most dramatic overhaul of transistor technology for computer chips since the 1960s and is crucial in allowing semiconductor companies to continue making ever-smaller devices that are also energy-efficient.

It also ratchets up the competition between Intel and rival chipmaker Advanced Micro Devices Inc., which helped IBM develop the technology along with electronics makers Sony Corp. and Toshiba Corp.

Semiconductor experts said Intel and IBM scientists have concocted a clever way to maintain the industry's frenetic development pace.

Companies are feverishly trying to discover new ways to adhere to Moore's Law, the 1965 prediction by Intel co-founder Gordon Moore that the number of transistors on a chip should double about every two years.

So far, chip development has generally advanced according to that schedule, leading to the creation of faster and more powerful processors that also give off less heat and are cheaper to run.

But scientists in recent years have reported serious problems in stopping electric current from leaking out of the tiniest chip parts, threatening to halt the march of Moore's Law.

The problem is that the silicon dioxide used for more than 40 years as an insulator inside transistors has been shaved so thin that an increasing amount of current is seeping through, wasting electricity and generating unnecessary heat.

Intel and IBM said they have discovered a way to replace that material with various metals in parts called the gate, which turns the transistor on and off; and the gate dielectric, an insulating layer, which helps improve transistor performance and retain more energy.

Intel said new materials help provide a 20 percent boost in transistor performance. IBM did not release specifics of its project.

"This gives the entire chip industry a new life in terms of Moore's Law, in all three of the big metrics — performance, power consumption and transistor density," said David Lammers, director of WeSRCH.com, a social networking Web site for semiconductor enthusiasts and part of VLSI Research Inc. "It opens the door to some pretty rapid improvements."

Intel appears the furthest along in bringing a product based on the technology to market.

The Santa Clara-based company said it has created working microprocessors using the new materials that will go into mass production in the second half of 2007.

Intel also said the chips will be built using its new manufacturing process that involves shrinking parts of the chips down to 45 nanometers, or billionths of a meter, from the 65-nanometer process the company uses now.

The advanced manufacturing process allows Intel to shrink the size of the circuitry on its chips and pack more transistors onto a single sliver of silicon at a lower cost.

While IBM won't sell the chips by themselves, the Armonk, N.Y.-based company said it would begin selling servers with chips using the technology in 2008.

"This is a very big deal for the industry," said Richard Doherty, research director at the Envisioneering Group. "Intel will be the first to have this in production, but IBM could potentially have a density advantage compared with Intel's scheme. But both should get gold medals."

Sunnyvale-based AMD said it was not disclosing when it expects to use the technology in its own chips, but said it plans to introduce its own 45-nanometer products in mid-2008.