IBM and Seiko Epson plan Asian chip venture

IBM and Seiko Epson are planning a joint venture to manufacture semiconductors in Japan, IBM confirmed Thursday.

The companies will use IBM's existing plant in Yasu, Japan, and manufacture chips for servers, networking gear, handheld devices, gaming systems and set-top boxes, IBM spokesman John Buchholz said.

"IBM will be turning over the plant in Yasu to the joint venture. The joint venture will produce chips ideal for low power, but high performance devices," said Buchholz, adding he can't comment on the specifics of the deal as these still have to be ironed out.

"We plan to wrap up the negotiations by late June or early July," he said.

The alliance with Seiko Epson, which is most known for its inkjet printers, strengthens IBM's position in Asia, the company said.

"Seiko Epson is a key PC electronics equipment maker. The deal allows us to get good access to the Asia/Pacific region," said Buchholz. Seiko Epson, in turn, gets early access to IBM's latest technology, he noted.

IBM currently makes semiconductors on 200-millimeter wafers for hard disk drives in its Yasu semiconductor plant. The joint venture will expand the plant to include 300-millimeter wafers using 0.13 micron technology, said Buchholz. Eventually the production line will make chips with 0.10 micron line-widths.

The newer, larger wafers yield more chips and thus save costs in the production process. Narrower line-width, measured in microns, allows a single chip to carry more transistors making it more powerful and more energy efficient.

Buchholz stressed that the semiconductor plant is the only operation in Yasu that is included in the deal. IBM will continue production at the campus-style location with plant output of, for example, LCD (Liquid Crystal Display) panels.

It will be at least three years before the joint venture produces its first products, Buchholz said.