Intel waives SiS chip royalty

Intel will exempt Taiwanese PC chipset maker Silicon Integrated Systems (SiS) from a standard royalty charge next year, according to a report in Taiwan's Commercial Times. 

The $1.50 per unit royalty, representing approximately 10 per cent of the total cost, will be dropped from chipsets that support Intel's low-end CPUs, said the newspaper, citing an unnamed industry source.

Intel Taiwan and SiS did not return calls requesting confirmation of the story.

The apparent shift in policy is being seen as an attempt by Intel to aid sales of its low-end CPUs, which require support from compatible chipsets. Chipsets act as a vital bridge between the CPU and the rest of the PC.

Earlier this year, Intel stopped production of some of its own low-end chipsets in an attempt to encourage sales of more profitable high-end CPUs, leading to a shortage of the components, according to various reports.

Following this, Intel restarted production of the chipsets last month, sources in Taiwan claimed.

"To maintain current market share for low- to mid-end processors, Intel has to rely more and more on IC suppliers such as SiS and ATi. Thus, starting from next year, Intel will for the first time, stop charging SiS $1.50 per unit premium," said MasterLink Securities in a report published today.

In Taipei shares of SiS were up on the news, while rival Taiwanese chipmaker VIA Technologies, which has often clashed with Intel in the past and was not mentioned in the report of a royalty waiver, fell slightly. 

Both companies have seen sales of low-end chipsets rise significantly since Intel cut back on production recently.

VIA and SiS are the world's second and third largest makers of chipsets respectively, with 15 and 12 per cent market share, compared to Intel's 47 per cent, according to Goldman Sachs.

Analyst firm In-Stat recently estimated the value of the global PC chipset market at $6.9bn this year, and forecasts a steady rise to $10.3bn in 2009. 

SiS reported sales revenue of $76.6m in the third quarter. The company focuses on desktop and notebook PC chipsets, but produces a variety of other products, including one of the key chips used in Microsoft's Xbox 360 games console. 

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