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GlobalFoundries to acquire semiconductor business from IBM

IBM and GlobalFoundries on Monday said that they have reached a definitive agreement under which the latter will acquire semiconductor manufacturing business of the former. GlobalFoundries will get intellectual property, world-class technologists and technologies related to IBM Microelectronics. It will also become IBM’s exclusive server processor maker for 22nm, 14nm and 10nm chips for the next 10 years.

IBM will pay GlobalFoundries $1.5 billion over the next three years. IBM will reflect a pre-tax charge of $4.7 billion in its financial results for the third quarter of 2014, which includes payment to GlobalFoundries as well as write-down of semiconductor business. GlobalFoundries will acquire and operate existing IBM fabs in East Fishkill, New York and Essex Junction, Vermont. GlobalFoundries will keep all IBM employees at the two facilities, except for a team of semiconductor server group employees who will remain with IBM. GF will also get IBM’s commercial microelectronics business, which includes ASIC and specialty foundry, manufacturing and related operations and sales.

GlobalFoundries will get substantial intellectual property including thousands of patents as well as radio frequency (RF) and specialty technologies and ASIC design capabilities. The technologies from IBM will make GlobalFoundries the holder of one of the largest semiconductor patent portfolios in the world.

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“This acquisition solidifies GlobalFoundries’ leadership position in semiconductor technology development and manufacturing,” said Sanjay Jha, CEO of GlobalFoundries. “We can now offer our customers a broader range of differentiated leading-edge 3D transistor and RF technologies, and we will also improve our design ecosystem to accelerate time-to-revenue for our customers. This acquisition further strengthens advanced manufacturing in the United States, and builds on established relationships in New York and Vermont.”

IBM continues its previously announced $3 billion investment over five years for semiconductor technology research. GlobalFoundries will have primary access to the research that results from this investment through joint collaboration at the Colleges of Nanoscale Science and Engineering (CNSE), Suny Polytechnic Institute, in Albany, N.Y.

The deal between IBM and GlobalFoundries allows IBM to get rid of its money-losing business and concentrate on areas that bring profits. GlobalFoundries gets intellectual property and $1.5 billion in cash, but will have to operate outdated fabs that will probably lose the company a lot of money. While the company will receive guaranteed orders from IBM, the volumes of these orders will be pretty low, which means that it will hardly bring substantial profits.

The transaction is subject to the satisfaction of regulatory requirements and customary closing conditions.

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KitGuru Says: While the deal seems to be favourable to GlobalFoundries, it should be noted that the company will have to keep outdated fabs online, which should be rather costly.

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