VIA overcomes challenges to shake up the PC industry

In its bid to transform the personal computer industry, VIA Technolo-gies Inc (威盛) has faced challenges from all sides, including lawsuits from mighty Intel Corp and stiff competition at home from competitors like Silicon Integrated Systems Corp (矽統).

So far, VIA has been able to overcome these obstacles and grow at a phenomenal rate, last year reporting a 174 percent increase in revenue over 1999. In just one year, VIA jumped from being a US$350 million a year company to a US$1 billion a year firm, as a result of what Marketing Director Richard Brown called "a culmination of years of research and hard work."

VIA accounts for over a third of the world's US$3 billion market for computer chipsets, which control the flow of information between the central processing unit (CPU), memory and other chips inside a computer. The firm plays second fiddle worldwide only to Intel Corp.

Now, the economic downturn has added strain atop reinvigorated competition from Intel and Taiwanese chipset makers like Silicon Integrated and Acer Labs. In October, VIA's third quarter earnings dropped 64 percent year on year to NT$880 million (US$25.5 million) due to increased competition and fallout from multiple legal battles with Intel.

Market share

The firm also slashed its earnings forecast for the year by 38 percent to NT$5.3 billion (US$153 million). It had predicted a pretax profit of NT$8.4 billion for the year. VIA's stock has dropped 37 percent from its high this year to close at NT$143 last Friday.

Another company stung by the downturn, Intel, opened this year with renewed vigor in taking back the lead CPU speed and looking to regain market share it had lost to VIA in the chipset business.

In mid-1999, Intel began promoting the use of a memory chip based on new Rambus technology in combination with its Pentium 3 CPU. The computer market balked both at the heavy cost of the new memory chips and the new manufacturing techniques that would be required. A number of companies looked for a different memory chip which could also boost the performance of a computer, but at a lower cost. The answer was VIA's PC-133.

VIA became a leader in this revolt against Intel's Rambus initiative by creating the first chipsets to connect PC-133 memory with Pentium 3 chips. Intel responded with lawsuits, contending the company needed a technology license to make the chipsets and to pay royalties. The case was settled out of court for an undisclosed amount, but many analysts say the settlement was probably close to the amount VIA would have had to pay in royalties anyway. The Pentium 3 chipset made by VIA became a cornerstone in its becoming a US$1 billion company last year.

History repeated itself with Intel's launch of the Pentium 4 chip series. The firm again told the computer industry that Rambus would be necessary to keep up with the processing power of its new Pentium 4 chips. The industry again balked at the cost, and promoted PC-133 and its new cousin, DDR memory as less expensive alternatives. VIA again launched a new chipset to connect the low cost DDR memory chips with Intel's P4 CPU -- without a technology license from Intel. Intel again sued, charging VIA with violating five patents. That was in August.

Intel soon stepped up the pressure on VIA by suing motherboard maker Elitegroup Computer Systems Co (精英電腦). Elitegroup made the first motherboards able to connect the Pentium 4 with VIA's new chipset. Heeding Intel's warning shot, most of Taiwan's motherboard industry dropped the idea of making similar motherboards, and only a few smaller motherboard makers kept up with designs.