Smartphones Challenge Chip Limits: Mobile-Device Progress At Stake As Companies Search For New Ways To Shrink Processors

Smartphones and other devices keep getting smarter, but that may change if a key step in manufacturing computer chips isn't updated soon. Semiconductors provide the brains, data storage and other capabilities of electronic products, so improving chips is necessary to make gadgets smaller, faster and cheaper.

Engineers are squeezing more transistors on each square of silicon, but the pace of miniaturization—known as Moore's Law after Intel Corp.'s INTC +2.31% co-founder—faces a major hurdle. The current photographic process that lays out circuitry on chips isn't believed capable of creating the tinier patterns needed for chips later in the decade.

extreme ultraviolet, or EUV, lithography. Tools based on the technology cost about twice as much as current machines—commanding price tags of more than $100 million each, by some estimates—and can't yet process chips quickly enough to be practical for high-volume manufacturing...