14 April 2003 Intel’s attempts to diversify beyond its core commodity semiconductor business have again faltered. The company has said it is closing its high-profile custom chip division, Intel Microelectronics Services, after just 18 months.

The operation, highlighted by Intel in its corporate literature as one of its three most important ‘New Business Initiatives’, designs and manufactures application specific integrated circuits (ASICs) based on individual customer requirements. Typical target platforms have been for communications, automotive and consumer electronics equipment.

Commenting on the closure to the Financial Times, an Intel spokesperson said: “We realised this would not turn into a substantial business and also that it did not fit into our strategic direction.”

However, the Semiconductor Industry Association reckons that other participants in the ASIC chip market have prospered. It suggests that after a disastrous 2001 in which sales fell by a quarter, sector revenues rose by around 6% in 2002 to reach $15 billion and are set to jump 18% to $17 billion this year.

Intel’s departure from the custom chip market underscores the mixed success it has had in expanding beyond its primary product base. Since the start of the decade, the company has thrown itself into areas such as web hosting, data centre and e-commerce services, only to wind down these activities in the face of weak demand.