VIA and Intel settle legal dispute

VIA Technologies (威盛電子) and US chipmaker Intel settled their 1998 legal dispute out of court yesterday, but industry watchers say the case only ended now because Intel feared VIA may shift too far into the competitor's camp.

The court case over computer chipset technology ended with VIA agreeing to pay an undisclosed sum of cash and ongoing royalty fees to Intel, the two companies announced.

In return, Intel dismissed all patent infringement suits it has filed against VIA Technologies.

"I think Intel chose to settle the legal dispute with VIA because they wanted to build more collaboration with VIA to make chipsets to support their CPU instead of [competitor] AMD's CPU," explained Andrew Teng (鄧安瀾), semiconductor analyst at Taiwan International Securities Corp.

According to Teng, Intel had to work fast, "before demand started picking up for second half [of the year] orders."

VIA Technologies is one of the world's largest chipset makers, second only to Intel. The two companies compete in the chipset market, but also work together since Intel sells more microprocessors than for which it can provide chipsets.

VIA has for years worked closely with Intel to make chipsets -- the basic support system for computer CPUs -- for Intel's Pentium and other CPU lines.

In 1995, VIA licensed Intel chipset technology, requiring a unique relationship between the two as they act as both competitors and partners.

Later in 1998, VIA introduced its own chipset that Intel claimed violated the original licensing agreement.

To get around this agreement, VIA outsourced production of the new chipset to National Semiconductor, another large US chip maker who already has a cross-licensing deal with Intel, allowing it to use Intel technology in its own products.

Intel retaliated by filing lawsuits against firms that used the disputed chipsets in their products, including several Taiwanese motherboard makers.

According to analysts, the Intel strategy sought to put pressure on VIA, but the plan backfired. Instead of bowing to courtroom bullying, VIA continued to grow and found a powerful new partner in Intel's biggest competitor, Advanced Micro Devices (AMD).

The growing strength of the relations between the two culminated in a major announcement at this year's Computex Taipei, with VIA chosen as the key provider of chipsets for AMD's newest series of Athlon microprocessors.

At the time of launch, Athlon was the first CPU to outperform Intel's fastest chip -- the Pentium.

According to Henry Wang (王漢寧), semiconductor industry analyst at EnTrust Securities, a series of Intel fumbles also contributed to VIA's success, including cutbacks on Intel chipset production and delays in getting out low-end CPUs. Wang expects VIA to gain even more market share because Intel has announced that they are only able to supply local motherboard makers with one million chipsets per month, far below market demand.

VIA shares yesterday slumped NT$26, or 5 percent, to NT$490, pacing a 2.9 percent decline in Taiwan's electronics sub-index.