BusinessWeek Says IBM’s Chip Problems May Be Over Soon

April 28th, 2004 at 3:00 PM - News by Vern Seward

Sometimes it seems that Apple couldnit get a break if it paid top dollar for it. Not long ago, Appleis fortunes, and misfortunes, were tied to the ability of Motorola to produce the CPUs that were the heart of Appleis computers. Many complained bitterly that Motorolais inability to produce faster chips in large enough quantities was strangling Apple, and that all Apple needed to do was to drop Motorola and pick up IBM as the supplier of its processors.

The reasoning seemed simple enough: IBM had demonstrated several times that it could produce the chips Apple needed, and IBM was also intimately familiar with the RISC architecture used in the G4. If Apple bought from IBM, Appleis worries would be over.

Well, maybe.

Lately, IBM has had problems manufacturing the very same CPUs that Apple needs, as have other chipmakers. Big Blue has found itself scrambling to work out whatever gremlins were plaguing its East Fishkill NY plant, where Appleis G5 processors are made. A new report from BusinessWeek Online says that IBMis gremlin hunt may be coming to an end, and that the outlook for IBM chip production looks as rosy as ever. From the BusinessWeek Online article:

These days, IBM is the goat, as Apple clearly indicated in its Apr. 14 conference call. Itis counting heavily on Big Blue for rapid improvements to G5 chips that could drive sales of the high-end PowerMac line. So IBMis troubles at Fishkill could hit Appleis bottom line hard because the high-range Macs are disproportionately profitable.

[...]

Some experts still hold the view that in the long run, the IBM chip production problem is a blip and that Apple still looks smart for having thrown in with Big Blue. Fears that IBMis chip production problems are serious are seriously overblown, IBM Senior Vice-President and Chief Financial Officer John Joyce said in a recent conference call. And IBM has started to see much higher yields at its Fishkill plant lately, which means IBMis engineers are pretty close to ironing out the kinks, Joyce suggested.

If anyone can figure this mess out, itis IBM, which has a hard-won reputation for bleeding-edge research in chip fabrication. "IBM is in a better position to develop this technology because they have been doing more theoretical work in process technology. Iim reasonably confident they will solve these problems in the next several months," says Peter Glaskowsky, an independent chip analyst.

Thereis more information in the full article at BusinessWeek Online, which we recommend as a good read.