Have No Plans to Mass Market Chips, IBM Says

International Business Machines Corp. said Monday that it has no plans to mass market semiconductors even though it has supplied small quantities of its computer chips to competitors.

“Over the past couple of years we have offered limited quantities of semiconductors to a very small number of companies internationally,” said IBM spokesman Peter Thonis, who declined to identify the companies or the amounts involved.

Thonis spoke after Jack Kuehler, IBM vice chairman and its highest-ranking engineer, disclosed the chip sales in an interview with the New York Times. The newspaper reported Monday that IBM has for more than two years supplied some competitors with advanced computer chips. Rumors that IBM had been selling chips to its rivals have circulated throughout the chip industry for more than a year.

The newspaper said the huge computer maker--in response to inquiries--disclosed last week that it had offered small quantities of its advanced chips to fewer than a dozen U.S. and European competitors. The paper reported that Kuehler said the shift in long-standing corporate policy was not a move to prevent U.S. firms from becoming dependent on Japanese semiconductor suppliers.

Thonis also rejected speculation that the chip sales were aimed at preventing U.S. computer companies from becoming dependent on Japanese suppliers or at paving the way for IBM to mass market its semiconductors.

IBM is the world’s largest maker of both computers and semiconductors, the tiny silicon wafers that are the brains of virtually all electronic equipment, from computers to microwave ovens to guided missiles.

The Armonk, N.Y.-based company considers its chips a major competitive advantage and does not routinely sell them on the open market. Thonis said the chip sales were not a move by IBM to enter the mass market.

Analysts said the sales probably do not exceed $20 million a year, compared to IBM’s total output of about $3.5 billion. “We are neither accepting orders for semiconductors nor are we increasing (manufacturing) capacity,” Thonis said.

Instead, Thonis said IBM’s goal was to “sharpen our effort competitively. We wanted the companies to assess the price, performance and function (of IBM’s chips) against the best chips in the world available from other vendors, including the Japanese.”

Industry analysts believe, however, that IBM’s motivation goes beyond wanting to gauge the technical standards of its chips. IBM has played a key role in helping to ensure that the U.S. chip industry keeps pace with the Japanese, most notably with its strong support of Sematech, a consortium of chip makers that is trying to boost U.S. competitiveness.

Adam Cuhney, an analyst with Kidder, Peabody & Co., said IBM sees the sales to rival computer makers as a backup to its support of Sematech. “It’s a two-pronged effort. IBM can provide chip technology through Sematech, and it can sell directly to other companies,” he said.