Mike Clendenin
EE Times
(10/15/2001 9:18 AM EDT)
TAIPEI, Taiwan — Chip designer Via Technologies Inc. is moving into motherboard production to boost sales of its flagship product, the P4x266, a Pentium 4 compatible chip set. The decision, announced Monday, Oct. 15, surprised many familiar with the company, who generally viewed it as a desperate gamble in the company's showdown with Intel Corp. over licensing fees for the chip set.Via will outsource the motherboard production, most likely to one of Taiwan's second-tier suppliers, and will only offer one line compatible with the P4x266, which is based on the double-data-rate DRAM memory standard. The company plans to begin shipping the motherboards this month.
Intel and Via are locked in a legal battle over licensing for the P4x266, and that has made most top-tier motherboard makers reluctant to use it. Instead, they are using Intel's Rambus DRAM-based chip set, the i850; its slower, single-data-rate DRAM version, the i845; or products from chip set maker Silicon Integrated Systems (SiS).
Via CEO Chen Wen-chi said his company would take "full responsibility" for any action Intel takes against buyers or resellers of the new motherboards. He also acknowledged that the legal brawl with Intel has made it hard for Via to gain traction in the emerging Pentium 4 market, which represented about 25 percent of top-tier motherboard makers' shipments in September.
To sour acceptance of Via's newest chip set, Intel uncorked a barrage of lawsuits in September covering markets in the United States, Europe and Asia. Chen decried the suits as "scare tactics" by the world's leading CPU maker and added, "If P4x motherboards were widely available . . . then there would be no room for the 845 or 850 motherboards."
Intel intends to release its double-data-rate (DDR) chip set soon, perhaps next month, and has pressured Taiwan's top four motherboard makers not to use Via's DDR chip set, analysts said. Indeed, they said, any upper hand Via may have had in getting to market first is being quickly eclipsed by Via's top three chip set competitors: Intel, SiS and Acer Labs. The latter two are Taiwan-based companies to which Intel granted licenses earlier this year.
"If Via has to go for the motherboard business, then they are desperate," said John Leong, vice president of technology hardware research at Deutsche Bank. "I have a tough time seeing that there is such a necessity for a low-margin motherboard business unless they have been completely blocked out by Intel and SiS in terms of the P4 chip set."
The Intel suits allege patent infringement and seek to stop shipments of the chip set. Via counters that it does not need a new license, because of an older technology cross-licensing agreement it inherited through its acquisition of S3 Graphics.
The last time Intel and Via clashed in court, the dispute was over PC133 chip sets that Via had launched against Intel's wishes. At the time, Taiwan's motherboard makers opted for Via's lower-cost offering and shunned Intel's attempts to push its Rambus-based chip set. The two eventually settled out of court, and Via gobbled up market share.
But things are different this time around. Even though the performance of Via's P4x266 is better than that of the i845, motherboard makers aren't buying it. Keeping Taiwan's major motherboard makers in line with its chip set road map is key to Intel's strategy to regain market share because those companies — Asustek, Microstar International, Gigabyte and Elitegroup Computer Systems (ECS) — represent about 40 percent of the world's motherboard production. Last month, Intel's i845 was shipped with 50 percent of the Pentium 4 motherboards delivered by those companies. Thus far, only ECS has opted to use Via's chip set.
Chen called the Oct. 15 announcement the result of a "very, very long" decision-making process within Via that was only "coincidentally" timed with Intel's lawsuits. "It will provide a very good defense against what Intel is trying to do, but that is not the whole purpose," he said.
Offering Via-branded motherboards is part of a broader strategy to provide more hardware building blocks for system designers, Chen said. The motherboard group will be part of a larger Via Platform Solutions Division, which will develop reference designs and products for servers, PCs and information appliances.
Chen said Via's production of motherboards is not intended to compete head-on with the activities of its customers. He would not provide details on pricing, who would lead the division or how many people would work in it.
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