For now, ATI has a nominal advantage over leading chip set makers Via Technologies Inc. and Acer Laboratories Inc., which lack their own licenses.

But that fact has not stopped Via in the past, which has used the terms of current licensing agreements to its own advantage.

A week ago, Intel and ATI signed a cross-licensing agreement settling outstanding litigation between the two companies, as well as granting the right for ATI to manufacture core logic chipsets.

Intel officials confirmed Friday the agreement included aPentium 4 bus license, and that it was the first it had granted in the PC space.

Officials at ATI, Thornhill, Ontario, were unavailable for further comment.

Allowing third-party manufacturers to produce chip sets has always been somewhat of a dicey proposition at Intel, Santa Clara, Calif.

Historically, analysts say Intel entered the chip set market because vendors weren't developing their own products fast enough to keep up with Intel's microprocessor development.

That has roiled Taiwan's chip set vendors, who have courted the favor of Intel's microprocessor team but have competed furiously against Intel's chip set business.

While Intel has introduced a 1.3-GHz Pentium 4 to push the new chip into lower-cost segments, market watchers perceive the price of the associated Direct RDRAM still to be too high.

Intel's Pentium 4 chip set designed for cheaper SDRAM, dubbed "Brookdale," isn't due out until at least the third quarter.

So if third-party chip set vendors can obtain a license, they can also help to make the Pentium 4 more successful, analysts reasoned.

"Our theory is that it's in Intel's best interests to start licensing the P4 bus," said Dean McCarron, analyst with Mercury Research Inc., Scottsdale, Ariz. "It may be negative for Intel's core logic business, but if Intel remains too closed, the low cost integrated chipset vendors will support AMD."

Still, that ATI would receive such a license first is somewhat surprising.

Traditionally, Taiwan's Via and Acer Labs have been first to market with the latest chip sets, with Silicon Integrated Systems Inc. close behind.

ATI is officially the first with such a license, analysts said, although Intel's server partner, ServerWorks Corp., officially owns a license to use Intel's Pentium III bus as well as a "next-generation processor bus," according to Tammy Lee, a company spokeswoman.

Although many believe ServerWorks has been granted a license to design Pentium 4-compliant chip sets, analysts aren't sure whether ServerWorks will design a chipset for a desktop PC, especially after its pending acquisition by Broadcom Corp. closes.

Officials at Via and Acer have claimed that they have been "in discussions" with Intel over licensing the Pentium 4 bus for about a year, and on Friday executives at both companies hadn't changed their stance.

Tim Chen, a spokesman for Via's U.S. headquarters in Fremont, Calif., said Via was in discussions with Intel. "But I'm afraid I can't reveal the details right now," he said.

But, he said, the agreement to obtain a Pentium III bus license took well over a year, with meetings occurring roughly every week.

Fred Leung, an associate vice-president of marketing and sales at Acer Labs in San Jose, Calif., also said both Intel and Acer were in talks, but could not offer a time frame on their successful completion.

"Let me put it this way," he said. "Acer Laboratories will support all viable CPU vendors, and we'll definitely do one for Intel. Intel is one of the key ones."

A traditional loophole has been to manufacture finished chip sets at so-called "protected" foundries, which already own a broad cross-license to Intel's patents.

In 1999, Via had manufactured its Apollo Pro chip sets at National Semiconductor Corp. in defiance of Intel and its subsequent lawsuits.

Via and Intel settled all of their chip set litigation in the middle of 2000.

Last year, Via showed a roadmap to an "Apollo Pro 2001" chip set, designed for the Pentium 4.

Although ATI's license seemingly gives the company an advantage in product development, Acer's Leung disagreed.

"As long as you buy a P4 system and reverse-engineer it, there's no problem," he said. "If you sell it, it's a different story."