I think the foundry business needs a lot of capitol to survive. If you can't survive, any desire to put "america first" or "new york first" is irrelevant. A company I worked for made explicit efforts to put "eurozone first" and went out of business. I would have preferred they made survival priority #1, #2 and #3.
I am really happy to read this very detailed article. We did some analysis in our recent post that detects GF getting really close to #2 (UMC)
click here to see the graph:
"Two other sticking points might be U.S. national security and national pride."
The first half of that is probably a point worthy of more attention than given here. I'm I mistaken that IBM fabs a lot of chips destined for military equipment?
Yes, IBM is a "secure foundry" and as such are permitted to manufacture ICs for classified military use. This is a small niche business, not sure if they would spin off or kill this activity if they merged with GF.
As Peter pointed out here, I, too, always wondered about what's in it for IBM in paying for research into manufacturing processes, extreme ultraviolet lithography, and 450-mm diameter wafers... i don't think we've ever gotten straight answers from IBM on that either...
I don't believe Global can buy IBM's chip entity. If it ever happends, It should be the other way around. Just like Chartered folded under Global. Abu Dhabi can buy IBM's chip entity and Global can be folded under. That makes sense from technology R&D & management skills perspective. It's too much for Global to manage IBM's chip unit. GF lacks management skills and experience to manage such a heavy unit.
By the way IBM chip unit was rumored to be on sales sometime ago and I believe that TSMC and Samsung looked at it. The price tag was rumored to double digit $B then.
I agree that such a deal could face too many political hurdles to be viable given the US gov't investments in New York and IBM's military business, but IBM might surprise us and make the rumors come true.
Just more idle speculation from poseurs in a country ( ARM included ) with not much skin or credibility in semiconductor technology or business.
For the last 10 years or so IBM's tactic of amortizing its semiconductor R&D expenses by licensing its process technology first to AMD and then newbies like Samsung & the Foundries that cater to ARM licensees has been a pain in the neck for Intel. If IBM was really in the market to cash out of its semiconductor activity and its still considerable R&D and IP goodies then Intel would probably outbid Abu Dhabi to acquire it. Would be more effective than even finFET and the US Govt. would be happy to see IBM technology stay within the US ( Intel still builds its leading Fabs in the US in order to slow down IP theft ).
I do know that IBM is a foundry supplier of chips. But it is in fact relatively small lying just behind TowerJazz in a 2011 ranking.
As to its role producing processors for games consoles I could argue that is largely historical and will diminish going forward.
IBM will never sell Chip business 100%. It is our National interest. Which country we can trust. These business people can say anything but we have $1T defense budget. Do you think we should sell DoD because it is not profitable? Oracle will not buy Sun. Why Sun? Ask these questions.
But come on PC business continues to shrink and reduce into a small profit market now a days, so there is no comparison on these 2 distinct business strategies.
Exiting PC was overdue IMHO, but giving up the jewels overseas, with all the national defense projects and other high profile business. I do not see Intel, or other USA interest passing this up.
PC business is a low tech labor intensive business and does not require much CAPEX. Semiconductor still an high tech business(diversified fields and skills) with lots of CAPEX. Anyone can assembly PCs but only a few can still fabricate semiconductor.
It doesn't make sense for IBM to sell its Fab. They can keep their proprietary design and Tech in house, and do not have to depend on a foundry for a supply & schedule of Tape outs.. They do not want a Qualcomm issue.
IBM Rev in 2011 was $107 Billion, spending 2-3 billion on research is not hard for them speacially when they pulled over $16 Billion in profit, some major Foundries, don't even have revenue of $16 Billion a year.
I agree IBM can afford it
But why spend $2 or $3 billion on chip manufacturing R&D and "suffer" a profit of $16 billion when you could forego the expense and have a profit of $18 or $19 billion?
Unless chip manufacturing technology is strategic to the company (and the country?) that is?
A lot of other vertically integrated companies, such as Philips and Siemens in Europe and now we are seeing Hitachi, NEC and Mitsubishi in Japan are made different choices.
While it is nice to say that IBM should put American interest first, it is too optimistic to think that they should have such a duty. After all, they are a business, and they would make decisions that would benefit them the most. I agree that it is controversial, but such things have been happening to many companies in America for years.
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