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Testing, Packaging and Speed Rating
Due to the extreme precision required to make semiconductor chips, there are always process variations that result in some of the chips that are manufactured being no good. They must be individually tested to make sure that they perform all of their necessary functions. The first tests are conducted on the chip while it is still "loose". These are generally to confirm basic functionality, because some chips never work at all due to manufacturing or material defects.
Packaging refers to putting the tiny chip into a larger package that can be inserted into a circuit board. This is the square with many pins, or the small daughterboard, that you see when you buy a processor. Packaging is itself a very complex technology, again due to the precision required to make the connections to the tiny connection points on the chip, and due to the sheer number of pins (hundreds).
Final testing is done on chips to determine both proper function and also rated speed. Because of the same variations that render some chips unusable, some are capable of passing the battery of tests they are put through at higher speeds than others. Similar processors like say, the Pentium 133 MHz and Pentium 150 MHz, are typically manufactured on the same lines from the same wafers, and the ones that are able to pass at the higher speed are given the higher rating. Some cannot pass the tests without failing or possibly exceeding allowable heat generation limits, so they are rated lower. In some cases, dedicated manufacturing lines are created to produce parts of specific speeds, but occasionally chips may be marked at a different speed than what is trying to be produced, to meet market demand.
Next: Manufacturing Yield