IBM in Deal for Chip Packaging

ARMONK, N.Y. —  IBM Corp., whose sales have been hurt by shortages of an increasingly popular material used to package chips, signed an agreement during the weekend to boost its supply of the material.

Combined with the No. 1 computer maker’s own capacity additions, the pact with Japan’s NTK Technical Ceramics will more than triple IBM’s supply of ceramic substrate chip carriers by the middle of next year, spokesman Michael Loughran said. Terms weren’t disclosed.

The packaging material has been in short supply this year as demand skyrockets for the computer-networking gear and powerful server computers whose chips are produced with it. IBM, one of few providers of the technology, says the carriers improve the reliability, power-distribution and cooling functions in chips.

IBM said last month that sales of the company’s RS/6000 server, now known as the pSeries, would have grown 30% in the third quarter--yet because of the packaging shortage only climbed 15%.

The Armonk, N.Y.-based company has started construction of a new plant that will begin production in the second quarter of next year and said NTK will use existing locations to fill orders.

IBM shares fell $6.44 to close at $93 on Friday on the New York Stock Exchange. They have lost 14% of their value this year.