The art of semiconductor manufacturing is a beautiful and yet dangerous thing. For the past 40 years it’s technology has constantly improved (sometimes at a steady, and other times at a not so steady) rate. Without it, it’s an understatement to say that our very society would be vastly different to what it is now.
Unfortunately, there are reasons why both AMD and Nvida (for example) use TSMC to create their silicone. Only the richest, most powerful in this industry can survive. The costs of refitting your factories for smaller and smaller manufacturing, the cost of research – and the competition alone is staggering. And with all of this said, IBM are jumping ship.
For those who’ve been following IBM’s business escapades over the past few years, this will come as less of a surprise. IBM have decided to transfer the bulk of their semiconductor business over to GlobalFoundries, meaning they’re effectively eliminating themselves out of the chip manufacturing business.
The part which of this which might freak you out however, is that IBM aren’t bailing on the business without a cost. They’re quite literally paying GlobalFoundries to to take the business from them. $1.5 dollars in cold, hard cash and working capital is said what IBM are paying to get rid of their business.
As mentioned a few paragraphs ago, this deal is somewhat expected owing to the continued technological and financial troubles IBM have been under. Their POWER chip volume isn’t providing the volume to sustain the business, and with IBM falling further behind the curve in process technology, the writing was on the wall. TSMC, GlobalFoundries, Samsung and other competitors are pushing out smaller and smaller processes, and this in turn means they’re in a better position to secure contracts than IBM.
IBM are quite literally cutting off a damaged limb, and helping GlobalFoundries in the process, who’re also having a few struggles of their own. GlobalFoundries are beginning to fall into the same rut as IBM, and simply aren’t able to produce either enough chips, or keep up with technologies. Sooner or later they’ll fall too far behind. And with this move, the two businesses should (in theory) be able to consolidate and become much stronger.
The one thing IBM aren’t including in this deal is their semiconductor R&D division, IBM are keeping that. But GlobalFoundries is acquiring IBM’s existing fabs in both fishkill and Essex Junction, IBM’s engineer’s and slew of other technical experts. Also, IBM’s patent pool is said to be ‘sold off’ too, and their contract manufacturing business.
While it’s easy to say that IBM doesn’t have cutting edge technologies, this cash investment and expertise (plus the plants themselves) will certainly only help GlobalFoundries remain relevant in an increasingly small field. Additionally, IBM have signed up to use GlobalFoundries – for 22nm, 14nm and 10nm chips over the next ten years. This means they’ve a good solid customer too. With news of IBM’s shares falling almost 4 percent, it’s high time they did something now, before the downward spiral continues.
Source – BloomBerg
