Intel Corp. said it will invest about $50 million in a small computer chip firm that in turn will gain the right to use an Intel microprocessor design to make custom chips for pocket-size computers.
As part of the agreement, Intel will license to the company, VLSI Technology Inc., the rights to its 386SL microprocessor, which acts as the "brains" of portable computers. Intel is the world's largest microprocessor maker.VLSI will add specialized functions to the 386SL "core," such as communications capabilities, said Alfred Stein, VLSI's chairman.
These VLSI chips will allow computer makers to build even smaller portable computers with greater functions, such as proposed personal communicators and personal digital assistants, said Intel, which is based in Santa Clara, Calif.
The chips will be compatible with the estimated 100 million personal computers that use Intel microprocessors, meaning users should be able to transfer information easily between the portable devices and traditional PCs.
"We both have a very strong belief that whatever this handheld market is going to be it will be an adjunct to the existing PC market," Andy Grove, Intel's president, said in a telephone interview.
By making the handheld devices compatible with today's Intel-based PCs, software could be reused.
The chips will be manufactured by Intel but marketed by VLSI. The first chips from the alliance should be available by the second half of next year.
Grove said Intel decided it could not offer customized chips in the low quantities that will be needed at first for the handheld computer market, and with the rapid delivery time these customers expect.
Intel said its investment will not amount to more that 20 percent of VLSI's stock. In addition, Intel will gain the right of first refusal should an offer be made to buy control of VLSI, which is based in San Jose, Calif.