On Thursday, IBM (IBM) announced it has created a 2-nanometer chip, the smallest, most powerful microchip yet developed.

Most computer chips powering devices today use 10-nanometer or 7-nanometer process technology, with some manufacturers producing 5-nanometer chips. The lower numbers denote smaller, more advanced processors. IBM's new chip uses 2-nanometer process technology, a huge leap forward for the components used to power everything from consumers' smart phones and appliances to supercomputers and transportation equipment.

"There are not many technologies or technological breakthroughs that end up lifting all boats," director of IBM Research Dario Gil said in an interview. "This is an example of one."

The way to improve a chip's performance is to increase the number of transistors — the core elements that process data — without increasing its overall size. The new 2-nanometer chips are roughly the size of a fingernail, and contain 50 billion transistors, each about the size of two DNA strands, according to IBM vice president of hybrid cloud research Mukesh Khare.

Having more transistors will also allow more innovations related to artificial intelligence and encryption, among other things, to be added directly onto the chips.

"When we experience that the phone gets better, the cars get better, the computers get better, it is because behind the scenes, the transistor got better and we have more transistors available in our chips," Gil said.

The new chip is expected to achieve 45% higher performance — and about 75% lower energy usage — than today's most advanced 7-nanometer chips. With 2-nanometer chips, cell phone batteries could last four times longer, laptops could get markedly faster and the carbon footprints of data centers could be slashed as they rely on more energy efficient chips.

The 2-nanometer chips are expected to go into production starting in late 2024 or 2025, which won't be soon enough to make a dent in the current global chip shortage.

IBM is not typically the first company that comes to mind when thinking of semiconductors. Unlike Intel (INTC) or Samsung (SSNLF), the computing giant doesn't do large scale manufacturing of chips. Instead IBM will license its 2-nanometer processor technology to chipmakers.

IBM's research on the new chip will also help it develop its own future tech products that will utilize the 2-nanometer chips.

The announcement comes as the Biden administration is considering investing $50 billion to grow domestic chip research, development and manufacturing, after years of decline in the United States' role in the global semiconductor industry.

"The intent ... is to ensure we have leadership in semiconductor technology in the country," Gil said. "This is proof that we do have that leadership capability in the country, with the 2-nanometer announcement, but people are not standing still. We need to push forward."