Graphics chip maker S3 Inc is the proud owner of the highly sought-after semicondutor patents from defunct PowerPC chip maker Exponential Technology Inc. S3 has confirmed that it was the winning bidder in last summer’s auction, edging out the likes of Intel Corp, Digital Equipment Corp and Advanced Micro Devices Inc. The company would not say how much it paid for the patents, but the price is believed to be between $5m-$10m. It was reported at the time of the auction that Intel’s $5m bid fell short. The patents in question – of which there were 23 issued and another 20 filed – inspired keen interest among industry heavyweights because several of them concerned dual instruction sets on a single chip, essentially the realm of Intel’s next-generation Merced processor. Thus, ownership of the patents could allow S3 to develop a Merced-like chip with minimal fear of legal action from Intel. At the very least, the patents could be used as leverage against Intel, a sort of weapon aimed at the near- monopoly and ready to fire if the completed Merced employs any of the same technology. Whether S3 plans to use the patents as a springboard into the production of more mainstream chips remains a mystery. For now, the company will only say that it bought them to increase its competitive position in the market. Times have been increasingly tough in the graphics chip market and S3 has struggled. Just two weeks ago, the Santa Clara, California company cut its workforce by 15%, shedding 100 people (CI No 3,330). Last November it said it would have to restate revenue for several prior quarters downward to the tune of $40m-$70m, leading to a class action suit by shareholders (CI No 3,282). Still, it seems S3’s commitment to graphics chips and related software shouldn’t be questioned too hard, as it recently handed over $40m to Cirrus Logic Inc for 10 graphics patents and 25 patent applications. Another point to consider is that S3, fearing things could get even worse in the graphics arena with Intel’s acquisition of Chips and Technologies Inc, was reportedly one of the prime movers behind scrutiny of the deal by the Federal Trade Commission. So the possibility is very real that S3 purchased the patents just to have an ace up its sleeve where Intel is concerned.
