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IBM pays Global Foundries $1.5bn to take over chip-making unit

by Mark Tyson on 20 October 2014, 15:05

Tags: IBM (NYSE:IBM), GLOBALFOUNDRIES

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IBM will offload its chip manufacturing division to Global Foundries and pay $1.5bn for the privilege of doing so, reports Reuters. Big Blue is divesting itself of the loss-making chip manufacturing unit to focus upon semiconductor research, software and cloud computing. The deal means that IBM won't have to invest more in upgrading the loss-making (coincidentally about $1.5bn lost per year) operation.

As a result of the deal IBM will take a $4.7bn charge in the third quarter, reveals the official press release about the new business arrangements. That sum includes asset impairment, divestment costs and the $1.5bn for GloFo, paid over the next three years. Meanwhile GloFo will become IBM's exclusive server processor semiconductor technology provider for 22 nm, 14nm and 10nm semiconductors for the next 10 years and gain "substantial intellectual property including thousands of patents".

Current IBM employees will be safe in their jobs at IBM's manufacturing operations in New York and Vermont but now be employed by GloFo. However a small number of semiconductor server group employees will remain with IBM. GloFo has expenditure plans of approximately $10 billion for 2014-2015 and most of that money will be used to develop the New York facility.

IBM scientists explore post-silicon semiconductor materials

As IBM focuses upon fundamental semiconductor, material science research and software the chip making operations will be looked after by its exclusive provider, Global Foundries.

Shortly after the deal news came out IBM released its third quarter results showing a 17 per cent drop in profits. While an admittedly disappointing result, IBM still made $3.5bn in profit from revenues of $22.4bn, reports the BBC. The firm is optimistic about its new non-manufacturing direction.



HEXUS Forums :: 4 Comments

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Interesting, but I was more expecting GloFo to pay IBM for the fabs! I wonder how that works? Maybe a cash injection for further investment etc to better their competitive position?

Either way, IBM seem to have been a strong player in the semiconductor business over the years; I'm sure GloFo would benefit from this, and more competition should be a good thing.

It's also good to see IBM will be keeping their research sector up and running.
On the big plus side, if GloFo gain access to IBM semi-conductor research, that will quickly nip over to AMD who will be able to make use of it, save them a lot of R&D costs and allow them to begin catching up to Intel, making for better competition in the CPU sectors, higher performance and lower costs.
Seems like a good way to divest a loss making enterprise from the balance sheet whilst retaining all its benefits of production, presumably linked very closely to exploitation of IBM's development of new materials (nano glass for instance).
Very interesting. Be interesting to see what they do with the capacity, although I fear we will be looking at more ARM chips, rather than AMD x86.