“IBM Corp.’s server business is coming off one of its better quarters, but its new sibling in the Systems and Technology Group, IBM’s microelectronics division, continues to struggle as yield problems plague its new manufacturing facility in East Fishkill, New York,” Tom Krazit reports for IDG News Service. “IBM’s chip business has lured some high-profile customers away from foundries in Taiwan such as Taiwan Semiconductor Manufacturing Co. Ltd. and United Microelectronics Corp. However, the business remains unprofitable, in part due to yield issues cited by John Joyce, senior vice president and chief financial officer at IBM, in a conference call last week.”
“A chip maker’s yield is the number of working processors that can be cut from a silicon wafer. IBM is attempting to engineer two changes to its chip business in the same period. It is rolling out its 90-nanometer process technology at the East Fishkill plant for building chips with smaller features than the previous 0.13-micron process generation, and sifting through the merger of the microelectronics business unit and the server business unit that was announced in January,” Krazit reports.
“The Armonk, New York, company’s manufacturing facilities are responsible for churning out IBM’s own Power products, such as the Power 4+ processor used in IBM’s servers and the PowerPC 970FX used in Apple Computer Inc.’s XServe… Yield problems are not uncommon when a chip maker shifts to a new process technology, said Peter Glaskowsky, formerly editor-in-chief of the Microprocessor Report and now an independent industry analyst,” Krazit reports. “Customers such as Apple that produce premium products are usually more interested in buying individual chips, putting the yield risk squarely on IBM’s shoulders, he said… While Apple’s market share doesn’t compare with PCs based on Intel processors, it accounts for more units than IBM’s server business at lower margins, Nathan Brookwood, principal analyst with Insight 64 in Saratoga, California.. Therefore IBM has a vested interest in increasing its yields, especially if Apple isn’t buying entire wafers, but doesn’t seem able to do so, he said.”
Krazit reports, “Apple doesn’t appear to be happy with IBM’s performance in the last quarter, blaming IBM on its own earnings call for the late arrival of the XServe G5 based on the new PowerPC 970FX processor. This is the first generation of Apple processors in which IBM hasn’t shared the role of supplier with Motorola Inc.’s chip division, Brookwood said.”
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