Intel claims it will be able to mass-produce computer processors with features one-third smaller than the current cutting edge within two years, placing it well at the front of the semiconductor industry.

The world's largest chipmaker is moving to chips with features as small as 45 nanometers across and, for the first time in the industry, demonstrated working processors based on 32-nanometer technology, said chief executive Paul Otellini, speaking at the 2007 Intel Developer Forum in San Francisco.

A nanometer is one-billionth of a meter and is used to measure the width of circuits on a chip. Intel, which makes the processors that power about 80 per cent of personal computers, now uses 65-nanometer circuitry, but will be quickly crossing over to 45 nanometer, once it rolls those chips out in November.

Since stumbling in 2005 and losing market share to its rival Advanced Micro Devices, Intel in the middle of last year rolled out new chips with a new design that have propelled it back into the technology lead, analysts said. Now, having shown it can produce working 32-nanometer chips, Intel has demonstrated its "tick-tock" strategy is on pace, if not ahead of internal plans.

Mr Otellini said forthcoming Core processors would consume only 25 watts or less of power, which could give Intel a bigger piece of the $200 billion (€144 billion) consumer electronics industry.

Smaller sizes allow more circuits to be crammed on a chip, boosting performance of the devices and driving up profits at chipmakers by letting them make more semiconductors from a single platter of silicon.

"The innovations that we as an industry are making today are the basis for the future of the computing environment and probably for the basis of the digital world," Mr Otellini said at the start of Intel's twice-annual developers' forum. Mr Otellini demonstrated a dinner-plate-sized silicon wafer containing memory chips made with the 32-nanometer technology, saying that Intel could make processors based on the techniques within two years.

That would keep the Santa Clara, California-based company far ahead of smaller rival Advanced Micro Devices, which has said it would move to 45-nanometer chipmaking technology by the middle of 2008.