Chip manufacturer S3 has confirmed that it will transfer its graphics chip business to a newly-established joint venture between itself and VIA Technologies. The deal is worth about $323m (£203.33m).
Neil McGuinness, an S3 representative, said: "From now on, the company will have a lot more freedom. The joint venture will cut out the worry of having to constantly develop new cutting-edge chips."
Wen-Chi Chen, president of VIA Technologies, said: "The formation of the new joint venture provides us with an unrivalled opportunity in the volume OEM PC market.
"By combining S3's graphics and video capabilities with the VIA Technologies market core logic chipset technology, we believe that the joint venture will enable us to expand our strong competitive position in the integrated solutions market."
Under the terms of the agreement, S3 will still own its established Intel cross-licensing and bus-licensing agreement.
The VIA transaction is expected to be completed before S3's third-quarter results. Customers are not expected to suffer any disruption.
Dan Scovel, semiconductor analyst for market researcher Needham & Company, said: "This joint venture is a smart move. The growth opportunity for S3 as an Internet appliance company far outweighs that offered by PC graphics chip products."
Ken Potashner, chairman of S3, said: "As the company begins the next phase of its operations, we are faced with many challenges.
"These include broadening our product offerings by leveraging the success of the Rio MP3 players and our home networking products (HomeFree).
"We will also need to execute internal development and product plans."
Potashner said S3 expects to announce a number of key strategic partnerships "in the near future", aimed at expanding the graphics chip manufacturer's marketing and brand name following its move into the Internet appliance arena.
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