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Intel orders rival to stop making CPUs

Patent pressure wielded, sources claim
Thu Nov 23 2006, 10:58
GIANT CPU maker Intel is pressuring smaller rival Via Technologies to exit the CPU market, industry sources in Taiwan claim.

In exchange, Intel will allow Via to continue making PC chipsets which use Intel's patented technology, say the sources at PC mainboard manufacturers, who do not wish to be named.

Intel and Via offices had not replied to a request for comment by the end of business hours in Taipei. The two companies typically will not comment on negotiations while they are in progress.

Via-ceo-wen-chi-chenVia earns the bulk of its revenue from chipsets, but its CPUs are generating growing profits. The tiny, cheap CPUs have increasingly been adopted by designers of products like handheld PCs, low-cost notebooks, media servers and other applications where low cost, noise, heat and power consumption are strong selling points. Via's CPUs have begun to take orders from Intel in these niche markets. Via has recorded operating profits of $22.5 million in the first nine months of the year, compared to an $18 million loss last year.

Over the past decade, Via has endured an increasingly bruising battle with Intel over allegations that the smaller firm has illegally used Intel's patented technology in its chipsets. The patents cover details such as the timing of electronic signals that the chipset uses to communicate with the CPU. Intel's legal pressure has had a chilling effect on Via's relationships with the mainboard and PC makers who buy its chipsets, and Via is generally believed to have lost substantial chipset market share as a result of this.

In April 2003, Intel granted Via a four-year licence to use the disputed chipset technology. Although that deal apparently expires next year, Via contends that it is actually effective until the end of March 2008, recent press reports say. When the licensing deal does end, however, it appears Via will no longer be able to make the chipsets that generate the larger part of its revenue.

The suggestion that Via stop making CPUs in exchange for permission to make Intel-compatible chipsets has emerged as part of the ongoing negotiations over an extension of this licensing deal, analysts and other sources say.

Via recently announced a major reorganisation, with CPU and chipset operations now handled by separate business groups. This move would make it easier for Via to spin off the CPU unit as a separate company, although it has announced no plans to do so, and products which combine the CPU and chipset in a single chip might complicate such a move. Via founder and CEO Chen Wenchi now heads the new CPU business group. Ex-Intel employee Chen is generally seen as one of the key driving forces behind Via's success.

Via's revenue so far this year is 32 per cent higher than 2005. The company reported sales of $540m over the first 9 months of the year. However, revenues remain well below a peak of almost $1bn reached six years ago when Via held a larger share of the chipset market.

Notable products based on Via's CPUs include the Samsung Q1P and TabletKiosk EO Ultra-Mobile PCs (UMPCs), a range of thin clients from Hitachi, and a notebook PC from Via's sister company Everex which is described as the “world's most energy efficient notebook”. Another sister company, High-tech Computer (HTC), is also rumoured to be developing a second-generation UMPC which may use a Via CPU. µ

See Also
Intel terminates Via
Intel not guilty of damaging Via balloons


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