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IBM, NVIDIA to Build Graphics Chips

In an effort to diversify its manufacturing options, NVIDIA has signed a deal with IBM Microelectronics to make some its GeForce group of graphics chips.

Previously, NVIDIA was only working with Taiwan Semiconductor Manufacturing Co. and the pact with IBM gives the graphics chip specialist less dependence on Taiwan Semiconductor.

One of the reasons why NVIDIA has decided to also work with IBM may have to do with delays in the introduction of its GeForce FX processor. It has taken Taiwan Semiconductor longer than expected to make the transition from a 180-nanometer manufacturing process to a new 130-nanomenter process. TSMC has produced more than 200 million NVIDIA graphics chips over the last five years.

IBM is expected to begin manufacturing some of NVIDIA's GeForce chips using the 130-nanometer process by summer 2003.

The foundry contract is a major win for IBM and recently opened its $2.5 billion East Fishkill, New York chip manufacturing plant. IBM is moving to licensing some of its chipmaking technologies to companies, including Sony. IBM is also working with Singapore's Chartered Semiconductor on chipmaking technologies and manufacturing. IBM is also working with Advanced Micro Devices on future chip technologies, and Qualcomm and Xilinx on advanced cell phone chips. It's all part of IBM's strategy to build its microelectronics division into a viable competitor to Intel .

The specific financial arrangements of the IBM-NVIDIA multi-year deal were not disclosed, but published reports say the deal could be worth over $100 million.

In a related development, TSMC issued a press release saying it has been reassured by NVIDIA it would remain the primary manufacturing source for the graphics chip vendor.

NVIDIA is expanding its manufacturing relationships, in part, because of strong demand for enhanced graphics processors in PCs, utilized in gaming and other graphics-intensive applications.

According to Jon Peddie Research, NVIDIA shipped 32 percent of the total graphics processors shipments in the fourth quarter of 2002.

NVIDIA Corp. is expected to disclose more details about its deal with IBM and other ventures at its analyst day, which will take place in San Jose, California on March 27, 2003 from 8:00 a.m. PST to around 12:30 p.m. PST.