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IBM chip output hit by ceramic panic

No, not a shortage of coffee mugs for engineers...

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IBM yesterday fell victim to claims that it can't supply enough chips to Cisco, one of its largest customers. The rumour knocked six per cent off Big Blur's share price, which closed at $112.81 after hitting a day low of $107.5.

IBM admitted that it did have problems producing processors, but refused to comment on the effect the supply shortage is or might be having on specific customers.

Big Blue's spokesfolks blamed the production hitch on a shortage of ceramic packaging - the black plastic-like casings tiny, delicate silicon chips are encased in for protection.

Only this Monday, SGI warned that its quarterly revenue would be down, thanks to the same shortage of ceramics.

On the same day, IBM said it intends to invest $5 billion in building up its chip-production facilities.

The Cisco connection comes not only from the router company's role as IBM's biggest customer - according to Reuters, analysts claim it takes a whopping 96 per cent of IBM's output - but Silicon Valley rumours that its demand for silicon has trebled since January. Big Blue has had to ramp up output to 110 per cent of normal capacity to meet that demand, and the last thing it needs now is a shortage in of its key materials. ®

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