SAN JOSE, Calif. — IBM struck a historic and much-anticipated deal to transfer its chip fabs to GlobalFoundries, but the complex deal has its share of regulatory twists that could take well into 2015 to conclude.
The deal is sweeter in several respects for GlobalFoundries than anticipated, but the foundry will have its hands full sorting out technical details of the implications for its roadmap. Just what impact the move might have for IBM’s slumping Power Systems server business is still unclear.
The news came as IBM came under pressure from "disappointing" third quarter results. Revenues fell 4% from the same period last year, and IBM said it would not hit in 2015 a long held target of $20 in earnings per share. IBM's stock price initially dropped more than 7% to $166 on the news.
Here’s a snapshot of the proposed deal:
- IBM will take a $4.7 billion charge in its current quarter to represent the transfer of its fabs and about $1.3 billion in cash to GlobalFoundries.
- The two primary fabs had losses of about $700 million in the past 12 months.
- GF plans to make offers to employ virtually all the more than 5,000 IBM fab and ASIC design employees indentified in the sale.
- GF also gets ownership of more than 10,000 IBM semiconductor patents
- No layoffs or plant closures are anticipated by either company.
- GF gets an exclusive 10-year deal to supply all IBM’s 22, 14, and 10 nm chips.
Overall, the deal could expand by more than 10 percent GlobalFoundries' current capacity, to produce more than 2 million wafers a year.
“It would appear that IBM gave in on both the price as well as the IP in order to get rid of the operations,” said analyst Robert Maire in his Semiwatch newsletter. “In a way it’s a bit of a sad ending for IBM's once-proud hardware technology, but times have changed, and the industry has long since moved on, and it took IBM way too long to wake up to that fact.”
The deal involves IBM’s East Fishkill, N.Y., fab that makes about 15,000 wafers a month mainly in 45 and 32 nm silicon-on-insulator processes. The fab is also ramping the 22 nm process used to make IBM’s Power 8 processors and has some 14 nm technology in development for the follow-on generation.
It also involves IBM’s Burlington, Vt., fab which makes 45,000 200 mm wafers per month. The fab uses a wide variety of processes, including a 130/180 nm RF SOI process for RF front-ends and switches used mainly in cellphones and a 90 nm silicon germanium process, mainly for power chips used across a wide range of high-end applications including car radars and high-frequency radios and testers.
“Demand well exceeds capacity” at the Burlington fab, said Gregg Bartlett, senior vice president of product management for GlobalFoundries in an early morning telephone interview with EE Times. So GF wants to spread the Burlington processes to its fabs in Singapore that have a complementary high-voltage analog capability.
GF expects the 14 nm FinFET technology it licensed from Samsung in April to continue to be its mainstream next-generation process offering. However, over time, other possibilities could emerge as GF wraps its head around the details of the IBM and Samsung 14 nm processes. It will also explore the possibility of bringing up fully depleted SOI and RF processes at East Fishkill.
The IBM 14 nm technology gives GlobalFoundries some leverage with "co-opetition" parter Samsung, but the Korean giant “still holds the keys and most of the cards in their relationship,” Maire wrote.
In addition, GF would acquire IBM’s ASIC design team, its customers, and “a tremendous pool of circuit IP to enable across our technology portfolio,” said Bartlett. IBM’s ASIC customers are “a dream list that includes every one of the big systems houses in the high-performance computing space.”
Cisco Systems and Ericsson are said to be among IBM’s ASIC customers.
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