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Via breaks Intel grip on chips

The companies sign an agreement making it easier for Via to cut further inroads into the critical chipset market.

Intel and a processor rival have reached an agreement paving the way for more competition in the market for Pentium II chips.

Intel and Via Technologies, a manufacturer of companion chips to the main processor, have signed an agreement that should enable Via to make further inroads into a critical computer chip area now dominated by the Santa Clara giant.

Announced today, the agreement will make it easier for Via to sell chipsets for desktop computers using Pentium II or Celeron chips, said Dean Hays, director of marketing for Via. The Taiwan-based firm is the first company to enter into a cross-licensing agreement with Intel for chipsets used in the Pentium II desktop computer market, Intel confirmed.

The chipset enables a computer's main processor to communicate with everything else in the computer, from graphics cards to keyboards. Together, the processor and chipset comprise the core of a personal computer.

Via aims to be the top chipset supplier, and the company has nibbled away at Intel's market share since the days when Intel sold 85 percent of chipsets, Hays claims. Starting about five years ago when Intel revved up its chipset business, the chip giant all but wiped out major 486 and Pentium chipset companies such as Chips and Technologies--which Intel later absorbed--and VLSI.

Competitors such as Via have also been concerned about being locked out of the lucrative Pentium II business since Intel has maintained a a tight grip on this technology.

But Via's strength lies in the low-cost computer market, where there is enormous pressure to watch every penny.

The agreement covers patent cross-licensing, which protects Via from litigation in the event that its technology infringes on Intel patents, said Chuck Mulloy, a spokesman for Intel. In addition, Via will pay Intel an undisclosed royalty, and Intel will be similarly protected if it infringes on Via patents.

Intel didn't transfer any technology to Via in the deal.

Via already was selling its Apollo Pro chipset--the chipset that works with Pentium II chips and their lower-cost Celeron siblings--but some customers were deterred from buying because they feared lawsuits by Intel, Hays said. Those customers now will be reassured, he predicted.

"We think it's a win-win scenario all around, because it makes everyone comfortable," Hays said. "There wasn't any overlap in the intellectual property anyway."

Mulloy said Via is the first company to enter into a cross-licensing agreement with Intel for chipsets for use in the Pentium II desktop computer market. Asked if other chipset manufacturers such as SIS or ALI had cross-licensing deals under way, Mulloy declined to comment.

Perhaps more significant than the royalty payment is the fact that the deal might help Intel to sell more of its chips into the competitive low-price computer market. The agreement will help Intel, Hays said, because the company will sell more processors, even if it doesn't sell as many chipsets. "What this [agreement] says is that Intel is looking at us to help them sell more CPUs," Hays said.

CPU stands for central processing unit.

Intel's Mulloy agreed that Intel and Via are "competitors in the chipset space. But at the same time, both sides felt they found a solution here that we can both live with."

Via also has been selling chipsets that support Socket 7, the method Intel developed for plugging in its last-generation Pentium processors.

When Intel moved on to the Pentium II--and a new way of plugging in chips called Slot 1--some in the industry stayed with older Pentium-based Socket 7. For example, AMD's K6 and K6-2 chips and Cyrix's 6x86 chips use Socket 7.

As a result, Via's chipsets that supported Socket 7 were "extremely successful," Hays said. Via's designs brought the latest features, such as support for the Accelerated Graphics Port, to low-cost systems.

The Pentium II Slot 1 architecture put the processor and a special type of high-speed memory, called cache, onto a separate circuit board. But the extra components for Slot 1 cost more, and low-cost Intel Celeron chips come with the cache built into the chip itself, so Intel has gone back to the socket-type design for low-cost Celeron systems, Mulloy said.

The new twist on the socket design is called simply "370-pin socket," Mulloy said; Hays referred to it as Socket 370. Whatever it's called, though, a chipset for Slot 1 will also work for the 370-pin socket design, Mulloy said.

By supporting both Slot 1 and Socket 370, not to mention Socket 7, Via won't have to worry about which way the market is leaning, Hays said. "We have a very extensive product line for Socket 7, upgraded to be compatible with...Slot 1 and Socket 370. Now the marketplace can decide what they want to buy."

Meanwhile, Intel is moving toward new designs to house its chips. One design uses a cartridge called SECC 2, for "Single Edge Contact Cartridge." The design is scheduled to debut in Intel's 500-MHz Katmai processors.

Via is a privately owned company with about 400 employees, most of them in the company's Taiwan headquarters, Hays said. The company plans an initial public offering in 1999, when the company's stock will become publicly traded on the Taiwan stock exchange.

The company's chips are made by several foundries in Taiwan and elsewhere, Hays said.

Intel is an investor in CNET: The Computer Network.