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Tuesday, 18 January, 2000, 10:09 GMT
Intel forges chip alliance

factory Manufacturers will be able to cut research costs

Intel has joined with five other computer chip makers to develop the next generation of memory chips.

The deal is a landmark one, as it will create an industry standard for next-generation dynamic random access memory (DRAM) technology. It should reduce costs for both manufacturers and consumers.

Intel has allied itself with Hyundai, Samsung, Siemens, Micron Technology and NEC.

High cost of R&D

The high cost of developing microchips means that an alliance to pool the costs of research comes as no surprise.

"What these major producers are trying to do is create a world standard for next generation chips so that overall research and development as well as production costs can be reduced," Chang Hwa-Jong, an analyst at KEB Salomon Smith Barney said.

The technology developed is expected to be used in computers from 2003.

Intel bonus

Intel is the world's largest semiconductor maker and its presence is an added boost for the other companies in the alliance.

"Intel's role will be that they provide us with the application guidelines, their application expertise and the process or requirements for the future," said Farhad Tabrizi, a vice president of Hyundai Electronics Industries.

The advantage for Intel is clear. The alliance should enable it to cut its growing research costs.

Last year, the company spent some $3.1bn on research & development and $3.3bn on capital investment such as new chipmaking plants.

So far, its new Pentium chips have maintained their lead on rivals such as AMD.

But there are fears that the whole computer industry could be entering a cyclical slowdown after a period of strong growth.

The move may hurt other chip makers and prompt them to forge alliances.

But the alliance said that other firms are welcome to join them and share the burden of developing new chips.

The cost of building a new chip fabrication plant is now well over $1bn.

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See also:
22 Aug 99 |  The Company File
Chips are down in price war
13 Oct 99 |  The Company File
Intel disappoints the market
25 Oct 99 |  The Company File
Intel deal boosts chip firm
24 Sep 99 |  The Company File
Chip crisis may hit mobiles
14 Jul 99 |  The Company File
Intel profit hit by cheap PCs

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