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IBM makes strategic shift to open technology

By Steve Lohr
NY TIMES NEWS SERVICE
Sunday, Apr 04, 2004, Page 12

"What we've learned from the Internet and Linux is that things move faster and you get more innovation, the more you open technology up to a wider community."

William Zeitler, senior vice president for IBM's computer systems group

IBM announced on Wednesday that it planned to adopt a more open strategy in its microprocessor business, borrowing a page from successful collaborative software projects like Linux.

The company said it would share more technical information about its Power family of microprocessors, would widely distribute free software tools for chip design and testing, and would set up a series of design centers around the world to help customers develop custom chips.

The strategic shift, IBM executives said, is largely shaped by the prospect of coming to the end of the traditional path of improving performance by steadily shrinking the size of transistors and piling more into each silicon chip to increase processing speed. Circuits are now a few atoms thick, they noted, and today's densely packed microprocessors generate a lot of heat and consume more and more power.

"That game is pretty much over," said Bernard Meyerson, chief technologist of IBM's systems and technology group.

Further gains in microprocessor performance, Meyerson said, are going to come not so much from increasing raw processing speed as from tailoring microprocessors to their use. They will be fine-tuned, he said, for everything from heart pacemakers to computer game consoles to supercomputers.

"This is going down a fundamentally new road," Meyerson said. "We'll still do bits and molecules, but we'll do it in concert with everybody else. We're going to offer customers very open, collaborative access to our microprocessor technology."

IBM, it seems, intends to offer customers an a la carte approach to microprocessor technology instead of a fixed menu. The move, analysts said, is a significant departure from the business formula of most microprocessor makers, like Intel and others, that sell finished chips to customers.

Yet, analysts added, the IBM strategy also appears to be born of necessity. The company is renowned for advanced chip design and manufacturing technology, notably at its US$2.5-billion plant in East Fishkill, New York, which opened less than two years ago.

But unlike Intel, whose plants are kept busy churning out hundreds of millions of microprocessors that run personal computers, IBM must hustle for work to fill its semiconductor factories. The internal demand for chips used in IBM's server computers consumes only about a third of its factory capacity. Servers using the company's new Power 5 chip will be shipped beginning in May.

Today, IBM does supply microprocessors for outside customers including Apple, Sony, Nintendo and Cisco. But those have been a comparative handful of tight alliances, covered by lengthy contracts controlling intellectual property. Now, IBM hopes to strike more deals by offering its technology more broadly in the marketplace.

"By being more flexible and opening up its technology, IBM is trying to create a volume opportunity," said A.M. Sacconaghi, an analyst at Sanford C. Bernstein & Co.

IBM can use the added business. Its technology group, which is mostly semiconductors, lost US$252 million last year on revenue of nearly US$3.7 billion.

There will be limits to IBM's openness with its technology. The basic instruction set of the microprocessor -- a chip's essential engine -- will remain tightly controlled. The company, however, will freely distribute software for developing custom chips, based on Power microprocessors and its library of more than 300 integrated-circuit designs for specific applications.

"What we've learned from the Internet and Linux is that things move faster and you get more innovation, the more you open technology up to a wider community," William Zeitler, senior vice president for IBM's computer systems group, said.

IBM said it would explore working with customers and industry partners in an "open governance model" to guide the future of Power chip design. Executives did not elaborate on how that might work.

"The IBM announcement is significant," Peter Glaskowsky, an independent semiconductor analyst said, "but it's still mostly a statement of intent at this point."
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