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Via aims new chips at developing markets

In an arena littered with casualties, the chip giant takes a global perspective in its continued fight against Intel to deliver budget-priced processors.

SAN JOSE, Calif.--Three years ago, a number of processor start-ups tried, and failed, to take on Intel in the arena for budget-priced processors. Via Technologies continues the fight, but with a more global perspective.

Taiwan-based Via is planning to bring out a number of processors and other chips over the next year in a push to gain a substantial foothold in the market for cheap PCs, Glenn Henry, one of the company's chief designers, said at the Microprocessor Forum being held here this week.

"Via has a bag of parts that can deliver a PC for $200 to $500, and that is going to open computing to the rest of the world," he said. "It's a 150 million-unit marketplace. More importantly, it is a worldwide marketplace."

The high-tech market is littered with companies that have failed to undercut Intel or established PC companies on the basis of price. Henry, in fact, once ran the processor group at IDT, which sold that group to Via in 1999 because it was losing money. Via also bought chipmaker Cyrix from National Semiconductor in a similar transaction.

Nonetheless, the market atmosphere appears to be growing more benign to budget-chip companies, Henry said. Although the North American and European markets are fairly saturated with high-tech gadgetry, PC penetration is low in developing nations. And there, cost is critical.

Nathan Brookwood, principal analyst at researcher Insight 64, said the global pervasiveness of computing will likely require low prices.

"In parts of the world, cash is tight and (consumers) don't want to spend a lot," he said. "The entry-level system today is overkill for most users."

Entry-level PCs contain more technology than many consumers need, and lower-priced, lower-horsepower chips are sufficient to run more modest machines. A newcomer, then, is not necessarily at a disadvantage to companies such as Intel and Advanced Micro Devices, which offer faster chips.

"Everyone says, 'Ooh, look at you. You've got a 600-MHz chip,'" Henry said. "But I've got a processor that I can sell for sub-$50 and make a profit on...The only application that I do that needs more megahertz is digital video editing."

Other factors at Via also stand to increase the company's chances of success. The company is the No. 2 manufacturer of chipsets, one of the crucial components inside a computer, and has taken control of S3's graphics chip unit. This means Via can offer small PC makers the bulk of the silicon they need.

The company is expected to approach revenues of $1 billion this year, Henry added.

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Chip competition
Toward the end of the year, Via will release a new version of the Cyrix III that runs at 600 MHz to 733 MHz. In 2001, it will follow up with a 867-MHz version, as well as a chip, code-named Matthew, that contains an integrated graphics processor.

The company still faces a formidable foe in Intel, with its manufacturing capacity, according to Linley Gwennap, principal at The Linley Group. The Santa Clara, Calif.-based chip giant has shifted its strategy to aggressively add manufacturing sites. If demand for the Pentium 4 and other high-end chips takes off, Intel may avoid going after market share in the low end.

However, if capacity begins to exceed demand, the company could move into the low-cost market. Pentium III or Celeron processors cost approximately $40 to manufacture, according to various studies, Gwennap added.

Bill Siu, vice president of Intel's Architecture Group, also made it clear that the company has its eye on that market.

"In the days when processors sold for $999 and stayed there, that kind of strategy made sense. Today, high-performance processors get discounted very quickly."