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GlobalFoundries Logo 2021
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GlobalFoundries and IBM

GlobalFoundries and IBM
by Paul McLellan on 10-19-2014 at 9:12 pm

 So it’s true. IBM is selling its semiconductor division to GlobalFoundries. Actually, selling is a sort of euphemism for paying them $1.5B to take it off their hands. At least according to Bloomberg. There have been rumors for weeks that IBM wanted to pay $1B to get rid of the division, but GF wanted $2B. Looks like they split the difference.

Dan wrote about this recently. But he was wrong. But only in the small print. He predicted early October (it is now late) and $2B (it is only $1.5B). But pretty close. Read his earlier post here GlobalFoundries Acquire IBM Semiconductor Unit

Is it all true? Probably:IBM will also receive $200 million worth of assets, making the net value of the deal $1.3 billion, said the people who asked not to be identified because the agreement is private. The companies plan to announce the deal tomorrow morning, the people said. IBM put out a statement today saying it planned to make a “major business announcement” tomorrow.

So we need to wait until tomorrow to know for sure. But the background is true. IBM has been trying to find a buyer for their semiconductor business which has been losing a lot of money. GlobalFoundries would like some more research power in technology development (process). But I predict there will be problems because IBM employees are paid at a very high rate, much higher than GF probably pays people in the same position.

So what is the deal likely to be:In a 10-year partnership, Globalfoundries will supply IBM with Power processors in exchange for access to IBM’s intellectual property, the people said. That would allow Globalfoundries to access key chipmaking technology and guarantee supply of chips that IBM needs for its systems, like mainframe computers and its Watson data-analytics technology.

It will remain in the future to tell if this is a good deal. GlobalFoundries currently gets its process from Samsung so all those IBM researchers are duplicate. But that is only at 14nm. I don’t know if the Samsung deal goes to 10nm, or if IBM have any secret sauce for future processes that would make GF competitive. For the time being (meaning 28nm) they are an also-ran to TSMC. But at 14/16nm with Samsung’s help that could change. And at 10nm, with the IBM expertise, maybe they could pull ahead.

UPDATE: here is the first paragraph of the press release, which, apart from financial terms, is the heart of the agreement:GLOBALFOUNDRIES today announced that they have signed a Definitive Agreement under which GLOBALFOUNDRIES plans to acquire IBM’s global commercial semiconductor technology business, including intellectual property, world-class technologists and technologies related to IBM Microelectronics, subject to completion of applicable regulatory reviews. GLOBALFOUNDRIES will also become IBM’s exclusive server processor semiconductor technology provider for 22 nanometer (nm), 14nm and 10nm semiconductors for the next 10 years.

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