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IBM, Xilinx in Multi-Million Dollar Chip Deal

By @NY Staff

International Business Machines and microchip company Xilinx have signed a two-year, multi-million dollar deal under which IBM is to manufacture semi-conductor parts for Xilinx.

The products are part of a new category of "off-the-shelf" programmable chips that could help speed new mobile computing devices to the market.

The contract to manufacture the "Xilinx" and "Virtex-II Pro" semiconductor chips for the San Jose, Calif.-based Xilinx is potentially worth in excess of $100 million.

IBM said it plans to manufacture the parts using its most advanced 0.13 and 0.10 micron copper-based chip-making process (a micron is a millionth of a meter). The deal would mark the first time that IBM is making the high-volume parts for a foundry customer, which entails processes normally used in high-end custom-built chips and memory products.

The deal is also a win for IBM's chip plants in Burlington, Vermont and East Fishkill, N.Y., which will make the products. The plants have weathered layoffs of about 1,000 people in IBM's chip division in the past few months as a result of the worldwide slowdown in semi-conductor sales.

The two companies have been working on the Virtex-II Pro products, which integrates IBM's PowerPC microprocessor with Xilinx field programmable gate array (FPGA) technology, for close to two years. The goal is to build a new type of hybrid chip that can be used in communications, storage and consumer applications.

Xilinx estimates that the market for new types of the custom-built (yet flexible to program) chips could be worth about $5 billion.

At the same time IBM also announced a deal to help South Korean electronics company LG Electronics (LGE) enter the market place as a supplier of information and communications applications for cars and mobile devices.

IBM will provide LGE with its J9 J2ME software platform, which LGE will use to develop Java-embedded applications that run on a number of mobile and handheld devices such as PDAs, cell phones and Telematics applications that help consumers reach their cars remotely.