IBM to manufacture Nvidia’s graphics chips

IBM landed a major foundry deal expected to be worth over $100 million Wednesday, agreeing to manufacture the next generation of Nvidia’s GeForce graphics processors at its fab in East Fishkill, N.Y.

Work on the new chips will start in the middle of 2003. IBM will use its 0.13 micron process technology to produce 300 millimeter wafers, which is the most sophisticated level of production currently used in mass quantities by other chip makers such as Intel, and Taiwanese contractors such as Taiwan Semiconductor Manufacturing (TSMC), which currently manufactures graphics chips for Nvidia.

Responding to the announcement, TSMC issued a statement Wednesday saying that the Taiwanese chip maker had been reassured by Nvidia that it would remain the primary manufacturing source for the graphics chip vendor.

GeForce processors bring enhanced graphics to PCs, and are usually found in PCs used in gaming and other graphics-intensive applications. Nvidia shipped 32% of total graphics processors shipments in the fourth quarter of 2002, according to data from Jon Peddie Research.

IBM refitted its East Fishkill facility last year, laying off a number of workers in other technologies to make way for the contract chip-making services. Wafer fabrication plants are notoriously expensive to build from scratch, and many chip designers choose to outsource the manufacturing to foundries such as TSMC and United Microelectronics in Taiwan.

Since bringing the fab online last year, IBM has signed agreements with Qualcomm and Xilinx to manufacture chips for those companies on the new chipmaking technology, an IBM spokesman said.

In January, IBM announced it would work with Intel rival Advanced Micro Devices on developing 65 nanometer process technologies. At the time, the two companies said there were no foundry services involved in the deal. AMD and Nvidia work closely together on a number of different technologies, such as Nvidia’s chipsets for AMD processors like the Athlon XP.