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IBM Inks Foundry Deal With Intersil

IBM's Microelectronics Division on Thursday said it has struck a major chip making deal with Intersil Corp. .

The multi-year foundry services agreement calls for Intersil's semiconductor process technology to be installed at IBM's Burlington, Vermont chip manufacturing facility.

IBM will also become Intersil's "second source manufacturer" for its Endura power management integrated circuits. The Endura IC's power everything from CPUs, chipsets, memory graphics, buses and ports for desktop PC's, servers and other computing devices.

IBM will begin manufacturing of the Endura IC's starting in the first quarter of 2004.

The pact with Intersil adds to IBM's growing roster of foundry agreements that includes Broadcom , Nvidia , Qualcomm , Xilinx , Sony and others chipmakers.

IBM will be working together with Intersil on its P6 process along some of its own processing technologies.

"IBM plans to reserve capacity for Intersil's power management IC's manufactured in Intersil's P6 process. Over the life of the agreement, however, the parties may extend the agreement to cover additional processes, including potentially jointly developed processes. The agreement marks an expansion of IBM's foundry services capabilities into power management and other high-performance analog applications," the companies said in a joint press release.

The companies said customers "can be assured that we are now strongly positioned to meet their growth needs because both of our highest-volume wafer fab processes for power management are now dual-sourced."

This news also comes just a week after Intersil said it has adopted an anti-takeover measure known as a stockholder rights plan, which would assist it in any possible corporate fight against an unsolicited bid to take control of the company. The shareholder rights plan kicks in, if any party takes control of more than 20 percent of its common stock.

Intersil recently closed on a deal to sell off its wireless networking business to GlobespanVirata Inc. . Globespan Virata is a provider of integrated circuits, software and system designs for broadband communication applications that enable high-speed transmission of data, voice and video.

Now that IBM has built several huge manufacturing facilities, it is looking to lease those fabs to a variety of partners. Through the lease and technology deals with IBM, the chip companies are able to lower their costs, and be tied to one of the industry's leaders.

IBM's Microelectronics Division is facing its own challenges, reporting that it lost close to $100 million in the latest financial quarter, and would lay off 600 employees in the division.

About 500 of the jobs being eliminated are at the plant in Burlington, Vermont, with the rest scattered among the company's other IBM Microelectronics facilities in the United States, the company said.

The Burlington plant specializes in analog chip technologies, while IBM's East Fishkill fab is using more advanced processes.

In IBM's most recent financial filing, the company said it cut 1,400 workers from its Microelectronics, and 14,213 workers from its services division, late last year. With the cutting of 600 additional jobs in 2003, IBM Microelectronics has eliminated 2,000 jobs in less than a year.

IBM has close to 316,000 employees worldwide.

While the global chip market has been struggling, but there is evidence of improvement. The World Semiconductor Trade Statistics organization recently reported that global semiconductor sales totaled $12.9 billion in July, up 2.9 percent from $12.5 billion in June, and up over 10 percent from July 2002.