A strong bond between Transmeta and TSMC, as well as other foundries, could become a pivotal factor in Transmeta's growth. Transmeta created the Crusoe processor, a chip for notebooks, Internet appliances and other computers, that consumes less power than standard chips from competitors such as Intel and Advanced Micro Devices.
Although Transmeta has chips that compete against Intel and AMD, it does not have factories like those companies. Instead, it has to farm out manufacturing work to foundries, which is more expensive.
To date, IBM has served as Transmeta's exclusive foundry. While IBM's chip plants are held up as an example of technological excellence and innovation, Big Blue charges a lot for the service. "We certainly look for a premium on our state-of-the-art technology," an IBM representative said.
A deal with TSMC, however, could open the start-up to potential legal challenges from Intel. IBM has an extensive licensing deal with Intel that insulates Transmeta, IBM and any PC company that buys IBM-made Crusoe from legal liability. TSMC does not have a similar license.
But just because the legal right exists doesn't mean Intel will exploit the advantage. TSMC also makes processors and chipsets for Via Technologies, an Intel competitor. Intel and Via have sued each other in the past over patent issues relating to chipsets, but not over microprocessors or any issue relating to TSMC.
Last August, TSMC produced proof-of-concept versions of Transmeta's Crusoe chip, a low-powered chip designed for notebooks and Internet appliances, a Transmeta spokesman said at the time. Experimental versions of Crusoe also have been produced at United Microelectronics, TSMC's main rival in the contract chip manufacturing business.