IBM to manufacture chips for Via

Taiwan's Via Technologies has selected IBM Microelectronics to manufacture its next processor, another step in Big Blue's plan to become the helping hand to chipmakers in need.

IBM will manufacture the "Esther" microprocessor for Via. The chip is due to be released in the second half of the year. The chip will be made with the 90-nanometer manufacturing process. Via also said it is looking at silicon on insulator, a design promoted by IBM that cuts power consumption and increases performance.

Via commands less than 2 percent of the microprocessor market worldwide, but the company's chips can be seen in inexpensive Linux PCs available in Wal-Mart Stores and in "white box"--or unbranded--machines sold in China and India.

The deal underscores an ongoing sea change in chip manufacturing. Because semiconductor manufacturing facilities cost $3 billion or more to build, most companies are now outsourcing manufacturing and some design work to outside companies.

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Historically, Asian foundries--chipmakers such as Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics that produce semiconductors for companies that don't want to maintain their own factories--have performed these outsourcing functions for the industry. In recent years, however, power consumption and other issues have increased the complexity of manufacturing chips, making life difficult for traditional foundries. Transmeta, Nvidia and others, for instance, delayed products in 2001, in part because of manufacturing issues with TSMC.

Enter IBM. With a cutting-edge manufacturing facility and large research and development labs, IBM has landed development and manufacturing deals with Sony, Advanced Micro Devices and others.

Competition between IBM and the Asian foundries will likely continue for years. IBM is generally more expensive, but it can provide services many other companies can't. Meanwhile, the Asian companies are trying to build up their expertise. TSMC has hired a former professor from the University of California at Berkeley to help it develop multigate transistors, a design convention coming in 2007, according to sources familiar with the company's plans.

Many semiconductor makers work with a variety of contract manufacturers. Via, in fact, will continue to work with TSMC, a Via representative said.

The Via-IBM deal is something of a historical irony. Back in the late 1990s, IBM manufactured chips for Cyrix. Cyrix, however, had difficulty selling its chips, and company executives often complained about IBM's high prices.

Eventually, Cyrix was sold to National Semiconductor, which then sold its microprocessor unit to Via in 1999. Few remnants of Cyrix's technology or personnel, however, remain at Via.