TAIPEI, Taiwan -- S3 Inc.'s planned joint venture with Via Technologies Inc. in graphics chip sets has hit a regulatory snag in Taiwan after the country's new government delayed approval of the deal. The transfer of S3's graphics assets to the new S3-Via Inc. venture was set to be completed by the end July under an agreement announced last year by the two companies (see Nov. 2, 1999, story).
"We believe that the new Taiwan government should be taking positions supporting high-tech partnerships between Taiwan and global corporations, and we hope that the new Taiwan government will not cause harm to U.S. or international corporations," said Ken Potashner, chairman and chief executive officer of S3 in Santa Clara, Calif.
The Taiwan joint venture is a critical element in S3's attempts to refocus its business from highly competitive graphics chip sets to fast-growing Internet appliances, which as digital audio players and multimedia devices for the home.
To fully transform itself into an Internet systems company, S3 has agreed to sell its graphics chip business to Via Technologies in Taiwan for $323 million in cash and securities. Additional earn-outs were also part of the deal, if certain financial milestones were reached by the S3-Via joint venture (see April 11 story).
Under the agreement, S3 retains ownership of existing cross-licensing agreements with Intel Corp., covering chip set and bus technologies. Earlier this week, Via and Intel settled a legal dispute over chip set patents, enabling the Taiwan company to sell devices supporting Pentium III and Celeron processors, including desktop PCs using double data rate DRAMs (see July 6 story).
Despite the strong statement from S3's chairman about concerns over Taiwan's new high-tech policies, spokesmen for both S3 and Via in California tried to downplay the delay as a minor setback late on Thursday. A spokesman for S3 said the joint venture had been approved by U.S. regulatory agencies.
A spokesman for Via Technologies at the company's U.S. headquarters in Fremont, Calif., agreed with S3's assessment that the delay was a minor setback. Via has successfully negotiated deals with National Semiconductor Corp. and Integrated Device Technology Inc. (IDT) for the PC processor technology.
"Government approval always takes quite a bit of time," added the Via spokesman.
The Taiwan government has apparently left room for the joint venture to move forward if Via provides additional undisclosed information. Other options include modifying the deal's structure if the Taiwan government objects. Both sides said that they were unaware of what information the government might be seeking.
--Additional reporting by Mark Hachman of CMP's TechWeb Finance online news service
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