Taiwan's Via Challenges Intel, Others With New Chip
Taipei, Feb. 22 (Bloomberg) -- Via Technologies Inc., a Taiwan-based computer chip designer, said it will begin selling its latest microprocessor next month, challenging industry leader Intel Corp. in the low-priced processor market being fueled by Internet usage.
The Cyrix III processor, code-named ``Joshua,' was originally developed by California-based National Semiconductor Corp.'s Cyrix unit, which Via purchased in September. The company said the chip was designed for the ``cost-conscious consumer' -- that is, for use in personal computers priced under $1,000 and basic Internet access devices such as set-top boxes.
``This will give Via a shoehorn into the processor market,' said Stephen Conner, an analyst covering the Asian semiconductor industry at Donaldson, Lufkin & Jenrette in Hong Kong, which has a ``buy' recommendation on Via. ``They will sell a lot,' which will in turn ``do a lot of positive things for their image,' he said.
Still, the chip probably won't make much money for Via -- a consequence of the chip's relatively large ``die size,' Conner said, which limits the number of individual chips that can be cut from a silicon wafer.
What the chip will do is establish Via -- already a major seller of other kinds of computer chips -- in the processor market. That will pave the way for the introduction later this year of a second processor, code-named ``Samuel,' which will focus on the mobile computing market and promises to be more profitable, Conner said.
The ``Samuel' chip is being developed by another recent Via purchase, the microprocessor unit of Integrated Device Technology Inc.
Intel Challenge
The Cyrix III chip, even if only a marginal contributor to earnings, may still boost Via's revenue and pose a challenge to competitors such as Intel Corp., Advanced Micro Devices Inc. and Transmeta Corp.
The chip ``shows Via Technology's focus and concrete commitment to the growing potential of the low-priced computer processor market,' said President Chen Wen-chi in a statement.
Via has 800 employees, three quarters of them in Taipei, giving it about 1 percent the workforce of Intel. Still, Via has proven itself adept outmaneuvering bigger rivals and finding niches within the industry.
Nearly all Via's sales now derive from the sale of chipsets, which are integrated circuits that manage the flow of information between the computer's central processor -- such as the Cyrix III chip or Intel's Pentium -- and separate chips within the computer that control memory, graphics and other functions.
Via competes directly with Intel in the chipset market, and last year saw demand surge after Intel made changes to its chipset product line that weren't well received by some customers. Via's 1999 sales nearly doubled from the previous year to NT$11.4 billion ($372 million), and it accounted for about 22 percent of the global ``core logic' chipset market in the fourth quarter, according to DLJ estimates.
Via will continue to see strong demand, while Intel may transfer more production capacity away from chipsets and into more profitable high-priced processors, DLJ's Conner said.
Via predicts it will attain a 35 percent chipset market share this year, while revenue should rise 60 percent to 70 percent.
Diversify
The surge in chipset sales, as well as prospects for the processors, helped make Via the best-performing stock among Taiwan's top 100 publicly traded companies last year, up 369 percent from its initial offering price in March.
Via isn't betting the farm on chipsets, though. The processors are partly an attempt to hedge its bets in the traditionally volatile semiconductor market.
``Most of the focus now is on chipsets,' said Richard Brown, Via's marketing director. ``But to continue rapid growth, we need to aggressively expand revenue on the processor side.'
The Cyrix III chip will be manufactured at National's wafer fabrication facility in Portland, Maine. Pricing hasn't been decided, though it will be lower than that of Intel's Celeron chips which are also targeted at sub-$1,000 PCs.
Among Via's competitors, Intel has been particularly aggressive in responding. Last year, it filed suits in the U.S., U.K. and Singapore alleging Via, a former Intel technology partner, had infringed on patents. Via denies the charges, and Brown calls the suits ``a fairly standard Intel tactic' which ``ties up our resources.'
Conserving resources is partly how Via tries to compete against much larger rivals. The company has no production facilities, relying instead on subcontractors: National for the Cyrix chip and Hsinchu-based Taiwan Semiconductor Manufacturing Co. for most of its chipsets. That relieves Via of the cost of building chipmaking facilities, which can run well over $1 billion per plant.
``Also, as a Taiwan company, we are lean and mean on salary and benefits' compared to some U.S. rivals, Brown said.
The Cyrix chip won't have any material affect on financial results until the fourth quarter of this year, when volume shipments should kick in, Brown said. The company said it is aiming to reach 10 percent of the global microprocessor market by the end of this year.
``This is a goal,' Brown cautioned, ``and we have a long way to go to achieve it.'
Feb/22/2000 6:32
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