Advanced Computing in the Age of AI | Friday, March 29, 2024

Chip Designs Might Be On Table In IBM-Glofo Talks 

IBM may again be moving closer to a long-anticipated exit from the semiconductor manufacturing business.

According to a report in Bloomberg, IBM and Globalfoundries have resumed talks that broke off during the summer aimed at agreeing on an amount IBM would pay Globalfoundries to take over the loss-making chip operations. Bloomberg also reported that the transfer of intellectual property and engineering talent could also be part of the discussions.

IBM reportedly offered Globalfoundries about $1 billion in July to take the chip operations off its hands. The Silicon Valley chipmaker is said to have backed away because IBM's chip facilities are outdated and no design know-how was being offered.

Before talks broke down, one possible scenario had Globalfoundries acting as a supplier for IBM Power and System z microprocessors. As Globalfoundries seeks to compete with foundry and chip giants like Taiwan Semiconductor Manufacturing Corp (TSMC) and Samsung Electronics' chip unit, gaining access to IBM's microprocessor design details would sweeten a deal that would require it to take on outdated chip fabs.

A potential sale involves IBM fabs in East Fishkill, New York and Burlington, Vermont. Both are equipped with dated process technologies, although East Fishkill continues to produce Power chips used in servers and perhaps future mainframe chips that are based on reasonably current 22 nanometer technologies.

Those chip plants have been a weight on IBM's bottom line since it largely abandoned efforts to keep pace with fast-moving chip manufacturing technology. IBM's fab in East Fishkill cost about $2.5 billion to build.

Further complicating a transaction is IBM's "Trusted Foundry" program with the federal government that requires chip suppliers to meet stringent security requirements. Hence, federal agencies would likely have to sign off on any deal between IBM and Globalfoundries.

Nevertheless, IBM has plenty of experience navigating sensitive trade and regulatory issues. Last week, it announced the sale of its X86 server business to Chinese computer giant Lenovo. That $2.1 billion deal along with the earlier sale of IBM's PC business to Lenovo were reviewed by a panel called the Committee on Foreign Investment in the United States, or CFIUS.

The interagency panel would likely review an IBM-Globalfoundries deal since the latter is owned by an investment arm of the government of Abu Dhabi. Scrutiny of the deal would likely be heightened if IBM moves to sweeten the chip deal to include design and manufacturing details.

Either way, IBM is under pressure to jettison unprofitable technology units as it focuses on cloud computing, data analytics, and services like its Watson cognitive computing initiative.

While IBM wants to shed its chip manufacturing operations, it still plans to invest as much as $3 billion on semiconductor research and development over the next five years. That likely signals a shift to a fabless semiconductor model in which IBM would work with a foundry like Globalfoundries or market leader TSMC to manufacture future chips for its systems.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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