IBM offloads foundering chip business

19 November 2014 News

IBM will no longer manufacture semiconductors as it announced it has sold its Microelectronics business unit to Globalfoundries.

According to IBM, at the heart of its decision to sell is a desire to return to its roots in fundamental semiconductor research, as well as to concentrate on the development of future cloud, mobile, big data analytics and secure transaction-optimised systems. It will continue its previously announced $3 billion investment over five years into semiconductor technology research for the next generation of computing.

IBM will reflect a pre-tax charge of $4,7 billion in its financial results for the third quarter of 2014, which includes an asset impairment, estimated costs to sell the IBM microelectronics business and cash consideration to Globalfoundries. Cash consideration of $1,5 billion is expected to be paid to Globalfoundries by IBM over the next three years, to be adjusted by the amount of working capital which is estimated to be $200 million.

For its part, Globalfoundries will become the holder of one of the largest semiconductor patent portfolios in the world. The intellectual property it inherits will include thousands of patents, over and above the influx of one of the best technical teams in the semiconductor industry. This will solidify the company’s path to advanced process geometries at 10 nm and below.

The agreement also sees Globalfoundries become IBM’s exclusive server processor semiconductor technology provider for 22 nm, 14 nm and 10 nm semiconductors for the next 10 years. It will also gain primary access to the research that results from IBM’s future technology investment, as well as business opportunities in industry-leading radio frequency (RF) and specialty technologies and ASIC design capabilities.

Globalfoundries will acquire and operate existing IBM semiconductor manufacturing operations and facilities in New York and Vermont, and plans to invest approximately $10 billion in its US operations in 2014-2015, the majority of which will go the way of New York.

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