As far as IDT managers know, the planned acquisition is the largest of its kind involving a U.S. chip company and a major semiconductor operation in China. The purchase is expected to be completed later in April, after being approved by China and other government agencies.

The acquisition is aimed at greatly expanding IDT's presence in several key voice-processing and transport chip applications as well as immediately establish a local design presence in China. The move would put IDT in direct competition with Agere Systems (formerly Lucent Microelectronics), Legerity (a spin-off from AMD), Infineon, and Mitel.

Newave's first products are now being sampled by customers, and when these ICs are formally introduced in the second quarter of 2001, they will be offered under IDT's brand name, said Dave Côté, vice president of marketing and communications for IDT's application specific standard products (ASSP).

"This acquisition will help us overall in Asia, and it will give us with the ability to provide products for the voice-oriented telecom IC market in less time," Côté told SBN. IDT is also banking on the close proximity Newave's engineering center with Asia's telecom infrastructure manufacturing locations as well.

For Newave, the acquisition will open the door for new customers, said Ying Shum, president and CEO of the four-year-old startup.

IDT has moved into a number of new networking infrastructure markets since turning more of its strategic focus on communications applications two years ago. The Santa Clara company introduced its first voice-oriented product--a time slot interchange (TSI) device--for switching applications last year. It also announced an Internet protocol (IP) co-processors developed for Cisco Systems Inc. (see Sept. 11, 2000, story), and it plans to offer general-purpose versions of those processors later this year, said Côté.

The Newave Semiconductor purchase will greatly expand IDT's communications chip efforts, primarily in voice processing and transport segments. "This transaction is primarily focused on gaining strategic design resources in mixed-signal and analog technologies," Côté explained. "This acquisition is not just aimed at building products for China--although we do expect to benefit from that--but it is for the world markets.

IDT just started its local presence in China last October when it opened a sales office in Shanghai. IDT can also potentially benefit from Newave's used of silicon foundries, but Côté said the company will consider manufacturing some of the new products designed in Shanghai at IDT's own wafer fabs in Hillsboro, Ore., and Salinas, Calif.

"We are still building 99% of our products in our own factories," Côté said. "We have some early foundry relationships to understand what it will take to begin using third-party fab services. In the long term, we don't build another new factory and look to use more of a hybrid foundry/integrated device manufacturer model," he said.

--J. Robert Lineback reporting from the U.S.