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With a Little Chutzpah and a Lot of Faith, Via Takes on Intel

Via CEO Wenchi Chen is waging a battle against Intel on two fronts. Industry watchers -- and the chip giant itself -- aren't taking him lightly.

SAN FRANCISCO -- It takes such chutzpah to challenge Intel (INTC) - Get Free Report in the microprocessor market that the few who do, such as Advanced Micro Devices (AMD) - Get Free Report founder and Chief Executive Jerry Sanders and National Semiconductor (NSM) CEO Brian Halla, tend to be legendary figures.

Now here comes Wenchi Chen, CEO of Taiwan-based

Via Technologies

, who has such gumption that he takes on Intel in microprocessors while waging a smaller battle against the chip giant in chipsets, or devices that connect a microprocessor to memory. But because of some recent success he's had in that battle, the industry is taking seriously Via's latest attack.

Five months ago, Chen says, he had no plans to sell microprocessors. When National Semiconductor's Halla came to him around May, looking for someone to

buy his money-losing


PC chip company before he shut it down, Chen passed on the idea. "We told National they could go out and find someone else, but there wasn't a good candidate," Chen told the

in an interview at Via's U.S. headquarters in Fremont, Calif.

Chen doesn't come across as legendary. Unlike the flamboyant Sanders -- who has shocking white hair and a thick, white moustache, and who once showed up at an investment conference in a tailored suit that had his name stitched into the pinstripes -- Chen has a slight build and dresses for work in a short-sleeved, white polo shirt and slacks. He could easily be mistaken for any one of his company's electrical engineers. He describes himself as unimportant. "I'm just a common person," he says.

The confidence Chen has to take on the Goliath that is Intel doesn't stem from the $738 million in cash Via raised in March in an initial public offering on the Taiwan stock market. And it doesn't stem from Via's close ties to a group of companies controlled by giant Taiwanese concern

Formosa Plastics

. Chen's confidence stems from his deep belief, as a born-again Christian, that like David against the biblical Goliath, he has the full support of God.

"As president of the company, I believe everything is under God's control," Chen says. "With that kind of boss how can I be too wrong?"

Chen was baptized and raised a Catholic but was an atheist for years. He doesn't proselytize and says he mistrusts religious zealots who do. His belief is personal, a one-on-one relationship with God. But with it comes a strong belief that the guidance he follows and the decisions he makes are heaven sent. "I try to do my best to follow his will," Chen says.

When you run a company that is expected to generate less than $275 million in sales this year and are up against one like Intel that netted $6 billion last year in a down chip market, that's an ally you can use. Over at Intel, spokesman Chuck Mulloy laughed when asked if CEO Craig Barrett has the backing of God. He declined to comment.

Chipsets and Chutzpah

For now, at least, Intel investors aren't worried that a company as small as Via can touch one of their favorite stocks. "As far as I am concerned, the battle has been won for the microprocessor and the winner is Intel," says one portfolio manager with a large technology fund who asked that neither he nor his fund be named. "The rest of them are just noise."

But within the industry, Via is watched closely. The

Semiconductor Industry Association

doesn't comment about individual companies, but analyst Doug Andrey says that Taiwan is becoming known for small chip design companies, run and staffed by engineers educated and trained by top U.S. universities and top U.S. companies. These companies have strong ties to powerful Taiwanese foundry operators and could become a strong force in industry, he says.

In the chipset market, Via has already proven itself an able competitor against Intel. Six months ago, Chen made the risky decision to produce next-generation


chipsets, against an industry that was following Intel en masse toward



(RMBS) - Get Free Report

chipsets, which aren't compatible with PC133.

But the revolutionary Rambus designs are proving so troublesome that Intel has yet to come out with the parts to support its own microprocessors. And Intel's customers have been buying so many Via PC133 chipsets this summer that they are in short supply. Intel is expected to announce at its developers' forum next week that it will follow Via with its own line of PC133 products.

"Without us, Rambus would have become the de facto standard," Chen says.

Via is now taking on the microprocessor market with the same determination. Shortly after announcing the $167 million Cyrix purchase, Chen turned around and announced Via would buy

Centaur Technologies

, a tiny division of

Integrated Device Technology

(IDTI) - Get Free Report

that had a low-priced microprocessor that IDT couldn't manage to sell in high volumes.

Chen's strategy is to capture the lowest end of the microprocessor market, one that has proven so unprofitable to AMD that Sanders has all but given it up, and one that Intel is in only to keep AMD at bay. Chen sees himself as AMD's partner. Via's chips will compete against Intel's low-end


chip, while AMD is taking on Intel's higher line

Pentium III

with its new Athlon processor: A one-two punch aimed at Intel's control of the chip market.

Intel is not invincible, Chen says. "In the end everything is temporary. Even Intel."

Intimidating Intel

Chen knows Intel intimately, having started out at the company as a top chip designer before trying his hand at his own start-up and then signing on with Via. He tried first to take on

Sun Microsystems

(SUNW) - Get Free Report

by cloning its


chips, but Sun prevented Via from using the designs.

Intel isn't taking Via lightly either. It sued in June to stop Via from selling its Intel-compatible PC133 chipsets, claiming it is violating Intel patents. Via is trying to bypass the patent issue by contracting with National, which has cross-licensing rights to Intel designs.

Dean McCarron, an analyst at semiconductor research firm

Mercury Research

, says Via has a stronger chance at success in the low-priced chip market than AMD, National or IDT. "They've always had really good engineering," he says. And it can keep costs low because unlike AMD, National, IDT or Intel for that matter, it is fabless, and contracts out all manufacturing. That means it doesn't have to shoulder the infrastructure costs that have gobbled up huge sums of money at the other companies and can more easily increase production as sales grow.

At Intel, Mulloy wouldn't comment about how the company views Via as a potential competitor. At AMD, spokesman Scott Allen says Via has been an important partner in chipsets. "We view them as a strong company," he says, and says the company now sees Via as a potential competitor. "We had competed against Cyrix at the low end," Allen says, "and that will continue to be a very important market for us."

Chen intends to have Via chips on the market next month as soon as the Cyrix deal closes. And he plans on having those chips in every low-priced machine, in the U.S. and worldwide, wherever people once found a Cyrix part. That means




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, although he doesn't have a commitment from either yet.

But he knows that those contracts will come, if God wills it.