Tue, Apr 01, 2003 - Page 11 News List

Nvidia decision to farm out business to hurt TSMC sales

BLOOMBERG , TAIPEI

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), the world's biggest supplier of made-to-order chips, may lose half its business from Nvidia Corp within three years as the designer of computer-graphics chips places orders elsewhere, Electronic News reported on its Web site.

Santa Clara, California-based Nvidia is likely to farm out half its business to International Business Machine Corp's IBM Microelectronics by 2006, the report said, citing a research note written by Pacific-Crest Securities Inc analyst Michael McConnell.

Last week, Nvidia, which makes the semiconductors that power Microsoft Corp's Xbox video-game console, said it will use IBM's unit to build its new GeForce computer-graphics chip.

While the decision by Nvidia, which had used TSMC exclusively for five years, will have a negligible impact on the Taiwanese company this year, orders to IBM will increase gradually, the report said, citing McConnell's note.

IBM will take 15 percent to 20 percent of Nvidia's orders next year; Nvidia will equally place orders between IBM and TSMC by 2006, the online report said.

TSMC's shares have declined 10 percent since their end of trading on Wednesday when IBM said it would begin making the graphics chips for Nvidia using a processing technology capable of producing circuit features measuring 0.13 microns.

Markham, Ontario-based ATI Technologies Inc is the world's second-biggest maker of computer-graphics chips and Nvidia's next-biggest competitor. ATI makes the RADEON series of graphics chips. Calls to Pacific-Crest Securities's offices seeking comment were unanswered.

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