While researching the book “Fabless: The Transformation of the Semiconductor Industry” the importance of the pure-play foundry business model became crystal clear. Traditional semiconductor companies (IDMs) had become monopolistic and laxidasical. Pure-play foundries and the fabless semiconductor revolution, which started with IDM foundries, changed all that of course and through increased competition innovation came roaring back to our industry.
Unfortunately, competition in the pure-play foundry business has been mostly based on price. Having multiple manufacturing sources is critical to the fabless semiconductor ecosystem but it also puts the emphasis on cost. TSMC would innovate and UMC, Chartered, and SMIC would simply copy and do it for less margins. When AMD shed its manufacturing unit and GLOBALFOUNDRIES was formed I saw this as an opportunity to raise the innovation bar for the pure-play foundry business.
Also read: A Brief History of GLOBALFOUNDRIES
Of course it has not worked out that way thus far. GLOBALFOUNDRIES did not really raise the innovation bar and the Common Platform foundry initiative that came with it failed miserably. Combining the technical expertise of IBM with the marketing prowess of GLOBALFOUNDRIES however will bring ( I hope and pray) a second leading edge pure-play foundry to the fabless semiconductor ecosystem eliminating the need for IDM Foundries (Intel and Samsung).
Also read: IBM and GLOBALFOUNDRIES Deal!
From what I was told the negotiations initially broke off because of the price tag. IBM wanted to PAY GLOBALFOUNDRIES $1B to take the semiconductor unit and GF wanted $2B. Last year IBM’s semiconductor business shrank to less than $2B and is expected to shrink again this year to less than $1.5B so time was on GLOBALFOUNDRIES’ side. In most negotiations there is a point where you just stare at each other and the first one to blink loses. IBM definitely blinked because the final number that was mentioned to me is in excess of $2B.
My message to fabless semiconductor companies around the world is to aggressively support GLOBALFOUNDRIES in this acquisition. The same goes for the fabless semiconductor ecosystem. We desperately need two leading edge pure-play foundries to keep our industry growing. The IDM foundries do not have our collective best interests at heart, believe me. I have always been told by the top fabless semiconductor companies that if they had a choice they would chose pure-play over IDM foundries. Well, with this acquisition you will have a choice so it is time to put your wafer money where your mouth is!
Also Read: Intel says fabless model collapsing... really?
Also, when you show the IDM foundries to the door please thank them for their time and CAPEX. Both Intel and Samsung raised the innovation bar and pushed TSMC and the entire fabless semiconductor ecosystem to innovate at a much faster pace and for that we should be forever grateful.
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