Xilinx Inc, the world's biggest seller of programmable semiconductors, said it's chosen United Microelectronics Corp (UMC,
Xilinx did not disclose the value of its agreement with UMC.
The Taiwanese chipmaker's 90-nanometer technology produces the smallest chips at present possible.
At this point, 90 nanometer chips account for less than 10 percent of Xilinx's sales.
Xilinx reported net sales of US$1.2 billion in the year ended March 31, 2003.
UMC, the world's second-biggest supplier of made-to-order chips, and bigger competitor Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have faced increased competition from Armonk, New York-based IBM, the world's biggest computer maker, which in 2002 opened a US$2.5 billion chip plant in East Fishkill, New York.
Xilinx said IBM will also be a supplier.
"United Microelectronics did an excellent job: at some point, you have to make a choice," Xilinx chief technology officer Ivo Bolsens said in an interview at an industry event in Taipei.
"We are still working with IBM. It's just a matter of priorities," Bolsons said.
UMC, based in Hsinchu, Tai-wan, will use its most advanced production technology to make Xilinx's Virtex-II Pro chips, which are used in telecommunications network equipment by companies such as Nortel Networks Corp and Alcatel SA.
UMC's largest customer, San Jose, California-based Xilinx said 80 percent of its chip orders will go to one chip foundry and the rest to its other supplier.
UMC shares rose NT$0.40, or 1.3 percent, to NT$31.60 in Taipei.
The company said yesterday that its December sales rose 51.77 percent to NT$8.35 billion (US$248.5 million) from NT$5.5 billion a year ago.
November sales were NT$7.7 billion.
Sales of so-called chip foundries such as UMC this year will grow at a faster rate than the semiconductor industry, as consumer electronics companies outsource more of their production to avoid multibillion-dollar investments in semiconductor plants, industry analysts said.
TSMC on Thursday said December sales rose 68 percent to NT$18.96 billion, from NT$11.3 billion a year ago.
Sales rose 2.5 percent from NT$18.5 billion in November.
"The foundry business will surge 43 percent, a rate that would once again be significantly better than the forecast industry growth of 27 percent," said Bill McClean, chief analyst of market researcher IC Insights, in an e-mailed statement.
UMC will make the chips on silicon wafers that measure 12 inches in diameter, which yield more than double the number of semiconductors that can be made from the industry standard 8-inch disks.
IBM last year won a contract from US chip designer Nvidia Corp, previously an exclusive TSMC client.
On Jan. 6, VIA Technologies Inc (
TSMC, which will continue to make chips for Via, was the sole supplier of processors to VIA.
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