Will Via Technologies Inc. prove to be the Intel Corp. of the low-end PC?
That's the question the industry is asking in the wake of Via's unexpected purchase today of the Centaur Technologies microprocessor division of Integrated Device Technology Inc.
The deal brings with it Centaur's WinChip line, its patent portfolio, and its design team, which will complement the Cyrix chip subsidiary Via acquired last month from National Semiconductor Corp. for $167 million. Centaur's Austin-based design team will likely remain in Texas, and given its proximity to Cyrix's Richardson facility could become part of a new subsidiary, according to Via.
"As a big Asian company with very good relationships with systems houses, adding up the designs from Centaur and Cyrix with our existing infrastructure gives us a very competitive position in the future, especially in the low-end market," said Jonathan Chang, director of operations and sales for Via's U.S. headquarters in Fremont, Calif.
If the purchase is approved by government agencies, then Via, a Hsinchu, Taiwan-based core-logic chipset maker, will own a substantial portion of the value-line x86 PC microprocessor market. But precisely what role Cyrix and Centaur will play in the company is subject to speculation. Chang declined to reveal the future of the design teams, or say whether one chip or the other would be cancelled, integrated into another product, or separated into individual market segments.
Keith Diefendorff, analyst at MicroDesign Resources, Sunnyvale, Calif., said he doubted either core would be dropped, adding it was also improbable the two designs would be combined in any way. "If you start to stir the pot together, you're going to come out with something that smells really bad," he said.
With IDT's departure, only Rise Technology Co. remains in the ultra-low-end, stand-alone PC microprocessor market. While Advanced Micro Devices Inc., Sunnyvale, Calif., said this week that it's committed to manufacturing its low-end K6-2 and K6-3 lines well into next year, analysts believe that the company's financial health is predicated upon sales of its high-end Athlon chip. Intel, meanwhile, has been reluctant to dip its toe into the lowest depths of the market, although its integrated Timna processor is slated for a mid-2000 release and may target that segment.
"The single biggest question in my mind is what happens in the low end of the market," said Dean McCarron, principal at Mercury Research, Scottsdale, Ariz. "Via is consolidating the low end of the market into a single player, and the low-end market could be left with potentially no competition."
In its brief history, Centaur has faced a losing battle in the marketplace; combined, the unit market share for both Centaur and Cyrix was less than 7% in the first quarter, according to Mercury Research.
Centaur's struggles were partly a function of IDT's inability to fabricate its WinChips at high clock speeds, according to Diefendorff. Hoping to increase performance, IDT even contracted with IBM Corp. to manufacture the next-generation WinChip 4, an architecture designed for 400- to 500-MHz clock speeds. That relationship to date has yielded only sample volumes of the faster chips.
But speed ultimately might not matter, analysts said. Via's interest in Centaur has more to do with the WinChip 2 design, which observers have praised for its efficiency and small die size. The chip measures 58 sq. mm when manufactured on a 0.25-micron process, compared with 88 sq. mm for the Cyrix M-II, and 135 sq. mm for Intel's Pentium III.
That may prove to be an ideal fit for Via's integration strategy, which it has already established through a combination of third-party graphics chips and its own core logic products. Even before wind of the sale hit the street, Diefendorff reported that Via and IDT were in talks to integrate Via's core logic technology with the WinChip processor.
By minimizing the die size of each of the cores, the chip's overall cost can be held in check, which is a critical factor for success in the low-price PC market. While high-end PC OEMs will pay for performance, system makers at the market's fringes are setting a fixed price and challenging chip suppliers to give them as much performance as possible, analysts said.
As he did at the time of the Cyrix acquisition, Chang said sales and production of Centaur's current parts would not be affected. However, future product roadmaps are under evaluation. "In the low end, we believe integration is the trend," Chang said. "In the low-end market, every dollar counts. We anticipate that [Centaur and Cyrix] will coexist for a period, but then next-generation products might replace them." When asked to elaborate, Chang said the strategy is still under evaluation.
Chang declined to comment on specifics of the deal, noting that the agreement is preliminary. A final deal is scheduled for the end of the month; a sale price was not disclosed. Although IDT has no plans to produce any x86-based products in the future, both sides have signed a patent cross-license to eliminate any potential legal issues, said Dave C??t??, vice president of marketing for IDT, Santa Clara, Calif.
Chang also deferred questions regarding the company's foundry strategy, or if it can make Intel-compatible processors while it's ensnared in a legal dispute over whether its Intel-compatible chipsets are being legally manufactured. Chang said National Semiconductor and IBM are the WinChip's foundry candidates, and added that other possibilities include United Microelectronics Corp. (UMC), Chartered Semiconductor, and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).
Several foundries, including IBM, may be called in if necessary, he said, although MDR's Diefendorff said chip makers are paying a high price for IBM's quality. "UMC, TSMC, and Chartered have really, really improved lately," he said, noting that UMC has "an absolutely first-rate 0.18-micron process."
Whether Via can succeed where both National Semiconductor and IDT have failed is an open question. But if IDT's most recent fiscal results are any indication, Via has a long slog ahead of it. IDT posted modest quarterly income of $8.5 million on revenues of $154 million, but the performance prompted chief executive Len Perham to complain that competition in the processor sector was sapping hoped-for revenue and earnings growth. That admission was followed by Perham's resignation.
Without its WinChip line to tie it down, IDT said it will now focus on its RISC-based communications business. "As the years moved forward and the competitive landscape worsened, the synergy wasn't there," C??t?? said.