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Infineon joins IBM, Chartered in chip alliance

Infineon Technologies AG said it will join a chip-making alliance with International Business Machines Corp and Chartered Semiconductor Manufacturing Ltd, after pulling out of a venture with rival United Microelectronics Corp (UMC, 聯電) of Taiwan.

Infineon will work with IBM and Singapore-based Chartered to develop semiconductors with transistors that are half the size of some of the smallest made today, the companies said.

The decision by Munich-based Infineon is a boost for Chartered, which has reported 10 straight quarterly losses, and a blow to UMC, Chartered's bigger and profitable rival in the made-to-order chip business. The Taiwanese company may lose orders from Infineon, Europe's second-biggest semiconductor maker, analysts said.

"This is clearly a positive for Chartered," said Dan Heyler, an analyst with Merrill Lynch & Co.

IBM displaced its Singapore partner earlier this year to become No. 3 in the so-called chip foundry business. UMC ranks second, behind Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).

IBM, Chartered and Infineon will work to produce chips with transistors that are 0.065 micron apart, or half the size of the 0.13 micron chips that are among the most advanced in use today.

Smaller chips consume less electricity and allow manufacturers of mobile phones and other electronic products to shrink the size of their devices and offer more functions.

IBM and Chartered will be able to fill Infineon orders for chips made with the new technology. Companies in the made-to-order chip industry often work closely with customers to develop systems in order to lay the foundation for future orders.

The three companies will contribute a total of almost 200 engineers who will work together in IBM's East Fishkill, New York, offices. They are also considering developing systems for 0.045 micron chips.

IBM and Chartered Semiconductor reached an agreement in November for developing chip-making systems and sharing manufacturing capacity.

Infineon said yesterday it has sold its stake in a US$3.6 billion Singapore-based venture with UMC for about US$100 million, the amount it invested in the project when it was founded in 2001.

Advanced Micro Devices Inc, the world's No. 2 maker of computer processors, on Jan. 10 said that it's "keeping its options open" on a similar venture with UMC in Singapore that would be housed in the same factory building.

"UMC's partners are now more cautious," said Merrill's Heyler. "Companies are being very careful about how they increase their assets."

UMC, which announced the venture in December 2000, said that it started moving production equipment into the factory building, which cost US$200 million, in the first half this year. The company, which has budgeted US$200 million for expansion this year, declined to say how much money it will invest in the plant next year.

The Taiwanese company now owns 85 percent of the venture, with the Singapore government holding the remainder.

UMC will still supply Infineon with semiconductors used in wireless communications products such as mobile phones.
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