VIA Technologies fights on against Intel in chip sector

VIA Technologies Inc (威盛電子), the world's second-largest maker of chipsets for personal computers, has the potential to compete head-to-head against Intel Corp in the computer chip market but needs to change its strategy, according to a report released yesterday by US-based research firm In-Stat/MDR.

VIA, Transmeta Corp and Advanced Micro Devices (AMD) Inc are Intel's only competitors, but together accounted for less than 20 percent of the global market for computer chips last year, the report said.

"It is widely recognized that Intel makes a very formidable competitor, and conventional wisdom would dictate that it is fool-hardy of these companies to challenge the behemoth's grasp on this market," said Kevin Krewell of In-Stat/MDR. "But like moths to the flame, each is drawn by the promise of riches selling [computer] processors."

VIA needs to break free from copying Intel's infrastructure to compete, the report said.

"Just as AMD did with Athlon, VIA must create an infrastructure independent of Intel's. VIA is in a good position to do so because of its extensive system logic experience," the report said.

Gaynor de Wit of VIA's international marketing department welcomed the report.

"As part of our settlement with Intel we have to go ahead and start doing this [creating an independent infrastructure]," she said.

In April, VIA and Intel settled patent disputes that they had launched against the other in September 2001.

De Wit claims VIA is in a good position to achieve that goal.

"We have technology relating to all areas of the computer platform, such as networking, communications, graphics, multimedia and so on. We can fine-tune around this," she said, without elaborating on how VIA would create the new infrastructure.

But analysts were skeptical and advised VIA to stick to its current strategy of exploiting new markets.

"It will be very difficult for VIA to [create a new infrastructure," said Steven Liao (廖明正), technology analyst at HSBC Securities (Taiwan) Ltd.

"VIA's original intention was to move into the central processing unit market, but it couldn't compete with Intel, so it refocused its efforts on entry-level PCs. It has also focused on China, which is a new market. I think this is probably the only feasible way for VIA to go," Liao said.

Last year VIA introduced a new line of low-cost energy-

efficient chips that can be combined to create computer systems that perform the functions required by the average user, like playing DVD movies and connecting to the Internet.

"We offer low-power processors that do the job, but don't aim to match the gaming or high-power of Intel's processors," de Wit said.

VIA may not be able to match Intel's products as it does not have the resources.

"I don't believe they can beat Intel in computer chips," said Benny Lo (盧志恆), an analyst at Primasia Securities Co.

VIA spends around NT$600 million per quarter on its research centers in California and Texas, Lo said.

De Wit confirmed that 75 percent of the company's 2,500 employees worldwide are engineers. That contrasts with Intel which spent US$4 billion on research last year, according to its Web site, and employs 6,000 researchers and scientists in laboratories around the world.