IBM and Compaq announced a chip-supply alliance under which IBM will produce
Compaq’s Alpha processors. There are also reports circulating in Silicon
Valley that IBM is close to a deal to produce advanced new RISC processors for
workstation and server competitor, Hewlett-Packard.
The deal would further position IBM as a major contract manufacturing source
for state-of-the-art ICs. Now, leveraging the company’s advanced copper-based
process technology, IBM is offering computer companies the ability to vastly
increase the performance of their processors and other chips.
"IBM and Compaq have signed an agreement under which IBM will
manufacture an Alpha copper chip for Compaq," said Compaq spokesman Dick
Calandrella, who refused to discuss the financial details of the deal. IBM would
act as a second source for Alpha chips, along with Samsung Electronics, which
will continue its supply to Compaq as well.
IBM's semiconductor business generated some $3 billion in revenue in 1999.
That is expected to grow at a rate of 20-30 per cent per year for at least the
next three years. And the shift to high-value products like Alpha processors
could accelerate revenue growth.
Meanwhile, IBM said it is now shipping AS-400 mainframes with new ICs using
copper interconnects and silicon-on-insulator (SOI) transistors that reduce chip
power consumption.
As with copper interconnects, IBM is the first major chipmaker to produce
computers based on the SOI technology. "One of the critical aspects of
getting computers to boost performance is to reduce heat. You can only put so
many new computers in a room before calling someone to put in a new cooling
system, which could take months," said analyst at Envisioneering Richard
Doherty.
Similar to the Compaq-Alpha deal, IBM has been producing copper-based G4
PowerPC chips for Apple Computer for about a year, helping Apple bring advanced
new graphics systems to market ahead of the competition. "IBM’s strategy
so far has worked pretty well. They pick key partners that don’t pose a major
threat. They keep a good percentage of the secret sauce to themselves. You won't
see IBM supplying SOI chips to Sun Microsystems," Doherty said.
An SOI-copper deal with Hewlett-Packard has been the subject of speculation
in Silicon Valley this past week. Officials at HP have so far denied knowledge
of such an agreement. For decades, IBM closely guarded its IC technology and
manufacturing prowess. The company was one or more generations ahead in DRAM
manufacturing for much of the 1970s and 80s when it produced the chips for
in-house consumption. But in 1993, IBM CEO Louis Gerstner directed the chip unit
to start competing in the contract manufacturing market.