Sun Microsystems Wednesday named Taiwan Semiconductor Manufacturing Co (TSMC) as its foundry partner for a deal expected to generate 500 million dollars a year for the Taiwan chipmaker. TSMC, the world's leading contract microchip maker, will manufacture processors based on 45-nanometer geometry as well as future generations for Sun, the company said.

"TSMC is already fully engaged with engineers from both Sun and TI (Texas Instruments) as we make this transition as seamless and as fast as possible," Sun vice president Sridhar Vajapey said in a statement.

Industry watchers said TSMC had scored a significant victory over rivals IBM and United Microelectronics Corp with the deal.

The Sun business is expected to provide TSMC with an annual 500 million US dollar revenue stream and a new customer accounting for 5.0 percent of revenue.

Sun Micro's choice validates TSMC's move into the bulk-process microprocessor segment, an area where AMD is also making inroads, it said.