China’s Arca breaks into global CPU market

Marking an important milestone for China’s domestic chip industry, Beijing’s Arca Technology Corp. is set to become the first Chinese company to provide microprocessors for a line of computers sold in markets around the world.

Arca has signed an agreement with Wyse Technology Inc., of San Jose, California, to provide its 350MHz Arca-2 processor for an upcoming version of Wyse’s Winterm 1000 line of thin clients that will be sold globally, said H.K. Hung, manager of Wyse China. Thin clients are computers that do not have a hard disk drive and access applications that run on a central server.

The first Wyse computers based on the Arca-2 will be introduced next month, Hung said, adding that pricing has not yet been finalized. Describing the deal with Arca as “large”, he said Wyse will purchase “hundreds of thousands” of Arca-2 chips.

The Arca-2 — which runs at speeds of 333MHz to 400MHz — will likely replace the use of Advanced Micro Devices Inc.’s (AMD) Geode processors throughout Wyse’s Winterm 1000 line of network computers, Hung said. The Geode will continue to be used in Wyse’s Winterm 3000 line, he said.

“The performance is better and another reason is that the pricing is better than (the Geode),” Hung said. The agreement between Arca and Wyse marks the first time that a Chinese-developed CPU will be used in computers sold by a multinational vendor outside of China and it gives Arca an important entry into the global market for thin clients.

Wyse is the world’s largest vendor of thin clients, accounting for 38.9 per cent of global thin-client shipments during the third quarter of 2003, according to market analyst IDC. The company’s closest competitor, Neoware Systems Inc., accounted for 16 per cent of worldwide thin-client shipments during the same period, it said.

Wyse is strongest in the U.S., where the company accounted for 54.2 per cent of thin-client shipments during the third quarter, IDC said. The company had a smaller share of the thin-client markets in Western Europe and Asia-Pacific during the same period, accounting for 25 per cent and 19.2 per cent of shipments, respectively, it said.

Arca was the first Chinese chip vendor to develop a homegrown CPU, producing its first chip, the 166MHz Arca-1, in 2001. Rival chip vendor BLX IC Design Co. Ltd., which is also based in Beijing, followed with the introduction of its 266MHz Godson-1A chip in 2002.

Wyse considered using the Godson but opted for Arca because BLX did not offer a clear roadmap for the development of future processors, Hung said.

“Their roadmap is not very clear. As far as we can tell, they just have one chip,” Hung said, noting that by comparison Arca has plans to develop at least two next-generation chips, the Arca-3 and Arca-4. The Arca-3 chip is expected to enter production in April, he said.

Despite losing out on the deal with Wyse, BLX’s chief executive sees the deal between Wyse and Arca as an important step forward for China’s chip industry and a validation of Chinese efforts to develop microprocessors.

“This deal is evidence that Chinese-built technology can match international requirements,” said David Shen, the chief executive officer of BLX. “It’s good for all of us.”

Shen defended BLX’s processor roadmap, saying the company hopes to offer a range of chips that can be used in different applications.

BLX is currently shipping a 266MHz version of its Godson-1 chip and plans to introduce a 300MHz version before the middle of this year, Shen said.

In addition, the company is gearing up to introduce a second processor line, called Godson-2. Unlike the Godson-1, which is intended for applications such as set-top boxes and thin clients, the Godson-2 is a 64-bit chip designed for networking applications, such as routers, switches and firewalls, Shen said.

Samples of the Godson-2 are currently running at 300MHz in BLX’s labs and the company expects the chip to run at 500MHz when it becomes commercially available during the second half of 2004, he said.

“I don’t think the deal between Arca and Wyse puts big pressure on us because the market is so huge,” Shen said.

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