IBM Pays Global Foundries $1.5 Billion To Take Unprofitable Chip Manufacturing Business Off Its Hands

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InvalidError

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The rate at which chip manufacturing is consolidating due to "smaller players" no longer having sufficient volumes to justify on-going fab ownership is scary.

It shows how ridiculously expensive moving forward is becoming.
 

usertests

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I don't think you read the article, but if you did, your comprehension is staggeringly low.
 

IInuyasha74

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Sounds like Global Foundries got an amazing deal. The additional facilities, cash, and patents is a huge plus to them and on top of the contract from IBM to make all their stuff.

@junkeymonkey: Like usertests said, you really need to read the article better. Global Foundries is owned by an investment arm of the government of Abu Dhabi. IBM's foundries were not owned and did not have any connection to Abu Dhabi. IBM just signed an agreement giving their foundries, money, and patents to Global Foundries, as well as an agreement to work together for at least the next 10 years. If they wanted to distance themselves from the middle east, why would they sign an agreement saying they legally have to work with them or stop producing computer chips?
This has nothing to do with WWII at all.
 

yeesh

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I'd have offered to do it for $1B, but they probably could have talked me down to $750M.

Of course, it's not some silly one-way street: the people who negotiated, arranged, and closed the deal on both sides are being very well compensated I'm sure. Fair is fair, after all.
 


Both sides had to think it was a win for them , and presumably it will be .
IBM stops making losses , Global Foundries gets economies of scale and a large new client .
Good for them , good for us the consumer
 

IInuyasha74

Splendid
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More than just that, the big plus to Global Foundries you have pretty much spot on, however the bigger win for IBM is they will get smaller processes for a much lower cost. Upgrading one of these things costs billions of dollars, more than the $1.5 billion that IBM paid Global Foundries, and while its being upgraded the facility cannot produce units. By doing this deal, IBM gets Global Foundries to produce whatever it needs in other places on already smaller fabrication processes (IBM's facilities were at 45nm, Global Foundries is at 28nm, working on 22/20nm) and at the same time their old facilities are upgraded to the newest equipment to further their manufacturing goals.

Also, slightly off topic, because of what I just said we should expect to see we should expect to see a new Wii U come out that is probably smaller and uses less power. The Wii U parts are currently made at the IBM facility, and after it closes will need parts made else where. Its doubtful that it will be 28nm upgrade since those are heavily used at the moment for pretty much everything AMD makes, but likely a 32nm low power version is coming.
 

rdc85

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Can someone please explain this article for me ? (my English rather bad)

"IBM then agreed to give Global Foundries all of its manufacturing-related patents along with $1.5 billion in cash. IBM will keep the systems-related patents as well as its intellectual property for the design of its own chips. The company intends to invest $3 billion on semiconductor R&D over the next five years."

So is the IBM or The GoFo that have to invest in the R&D ($3 Bi.) ?
 
So is the IBM or The GoFo that have to invest in the R&D ($3 Bi.) ?
IBM.

They have a bunch of engineers (and IP) that design the machines and processes that build the chips. That's what GloFlo really wanted.

And, for those not paying attention, the 'investment arm' of the UAE is a major player in private equity and investment around the world.

 

f-14

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this is interesting. IBM supplies alot of things for apple still right? one big fish off the market for Global to compete against and a larger portion of the market share picked up in the process with all those IBM contracts as well & 1/2 the funding for the next die shrink and a bonus of a bunch of engineering R&D and patent access to every bit of electronics fab IBM holds.
nobody has yet to scoop up the RIM patents or take over Blackberry.
somethings get better when the world is in a depression...elimination of competition is one of them.
 


Elimination of competition?

IBM has done this because they cannot compete and be profitable

Perhaps you meant "elimination of your competition" ?
 

InvalidError

Titan
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IBM was never much of a chip manufacturing company - most of their fabs were baking chips for IBM's own internal uses so external sales mostly did not matter.

But then, IBM backed out of HDDs, PCs, laptops and tons of other heavily commoditized fields and their internal chip fabrication needs dramatically decreased to the point they can no longer justify owning their own fabs anymore. Apple switching to Intel nearly a decade ago did not help that either.

Chip fabrication used to be an internal necessity (cheaper to make your own chips than contract them out) but now that IBM has decided to focus exclusively on low-volume, high-margin markets, it has become an unnecessary liability.
 

IInuyasha74

Splendid
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Yea its Global Foundries that have to to do the upgrade. IBM is letting go completely of everything except their patents, and some engineers. If IBM was going to pour out 3 billion for an upgrade to the facility on top of the 1.5 billion given to Global Foundries and the site itself, it would of been very ignorant of them to give it up. That would be like Samsung having just finished the 20nm fabs and then giving them to Apple or something with a few extra billion for good measure. It wouldn't make any sense.
 

InvalidError

Titan
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It makes no sense to hold on to fabs when your order book is growing empty from shedding all those non-core businesses they used to make many of their own chips for. Three billions is only a fraction of the costs of upgrading a fab to 14-16nm, which is not such a bad deal to gain access to all of GloFo's fabs including future process upgrades and no longer having to worry about booking production to keep their own under-used fabs running.

Companies contemplating having chips made by IBM might be worried about potential conflicts of interests. Signing those fabs off to a neutral third-party who does not design any chips of their own should make it easier to book orders for them.
 

IInuyasha74

Splendid
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I never said IBM should keep its fabs, I said it would be ignorant to upgrade them then give them away. In fact if they just completely closed the fabs they could of got Samsung or another group to make their products, and they would have access to all future upgrades the same way the majority of everyone does. Why would they just toss out money for an upgrade for no reason?
For the 3 billion, thats what I heard it cost to upgrade a fab to 22nm so I am just estimating best I can. I'm sure very few people know exactly how much a fab costs. There is still no reason to think IBM is going to pay to renovate a fab facility to the latest technology and give it to another company.
 

InvalidError

Titan
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IBM would likely lose even more than the 1.5B$ they are giving GloFo by shutting down the fab. Also, that further 3B$ they plan to invest in GloFo's future R&D is because even though IBM is bailing out of being a chip manufacturer, they are still interested in the manufacturing R&D side of things. If IBM no longer owns their own fabs for R&D purposes, they have to borrow someone else's.

Do you think Samsung and other foundries would accommodate IBM's scientists and engineers, letting them mess around their fabs, for free?
 
Lets face it : most semiconductor design companies are FABless .

AMD its self
nVidia
Apple

are all major industry players and none have FABs.
Add to that list a huge number of other companies designing logic circuitry for just about everything. One of my clients designs chips for washing machines !
 
... For the 3 billion, thats what I heard it cost to upgrade a fab to 22nm so I am just estimating best I can. I'm sure very few people know exactly how much a fab costs. There is still no reason to think IBM is going to pay to renovate a fab facility to the latest technology and give it to another company.
GloFlo already has 28 ---> 20nm at Luther Forrest, and is pumping 14nm FinFET at the facility, too.

It's been a while since I added everything up, but I suspect GlobalFoundries is pushing beyond 200K 300mm wafers/month across all Fabs, even before what the IBM deal brings to the table.

 
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