IBM to Craft Chips with Electronics Makers

IBM Corp. dipped into the consumer electronics well Tuesday when it inked a four-year, multi-million-dollar deal
with a trio of Japanese entertainment appliance heavyweights to develop semiconductors based on Big Blue’s silicon-on-insulator
(SOI) technology.

Sony Corp. , Sony Computer Entertainment Inc. (SCE) and Toshiba Corp. have joined with IBM in a deal the firms hope
will bear fruit in the form of powerful, yet small chips that burn less power. The four companies embarked on this venture with the
belief that such chips, some as small as 50 nanometers on 300 mm wafers, will be important for future home electronic products,
including from digital consumer applications to supercomputers.

The companies are not quoting actual figures for the pact, but said they will spend several hundred million dollars over four years
to develop these new process technologies that will yield new system-on-chip (SoC) designs that integrate processor, memory and
communications functions. These are traditionally included on individual chips in a TV, VCR or DVD player.

The agreement should raise the bar on IBM’s current push for chips that consume less energy and therefore last longer because they do not burn out as fast as other chips. IBM has
for a few years relied on copper wiring, silicon-on-insulator (SOI) transistors and “low-k” insulation to craft new semiconductors.
Silicon-On-Insulator (SOI) is a semiconductor fabrication technique developed by IBM that uses pure crystal silicon and silicon
oxide. SOI chips generally clock processing speed that are some 30 percent faster than current metal-oxide semiconductor
(CMOS)-based chips. Also, power consumption is reduced 80 percent, which makes the chips ideal for mobile devices.

As for the Tokyo-based companies, new designs and materials will be guided by the software requirements of Sony, with Toshiba adding
its manufacturing prowess to the mix. SoC will lend its technology expertise for quality control.

Noting that PCs no longer propel chip innovation, John Kelly, senior vice president and group executive for the IBM Technology
Group, summed up the impetus for the deal: “Networking and consumer electronics applications are driving the evolution of a new
semiconductor industry — one based on closer collaboration with customers.”

In a separate, yet related agreement, Big Blue will transfer SOI technologies, forged at the IBM Semiconductor Research and
Development Center (SRDC) in East Fishkill, N.Y., to Sony and Toshiba. This is so all of the firms may work on new chips for their
respective products and applications.