International Business Machines Corp (IBM) agreed to pay GlobalFoundries Inc US$1.5 billion to take an unprofitable chip-manufacturing unit off its hands.
IBM plan to pay GlobalFoundries the cash over three years, the companies said in a statement yesterday.
GlobalFoundries is set to be IBM’s exclusive provider of specific Power processors for the next 10 years, in exchange for access to IBM’s intellectual property.
IBM plans to take a third-quarter pretax charge of US$4.7 billion.
GlobalFoundries, owned by an investment arm of the government of Abu Dhabi, is taking on the unit to tap the expertise of its engineers in the fundamentals of semiconductor design and manufacturing.
The cash portion paid to GlobalFoundries is set to be partially offset by US$200 million of working capital.
IBM’s third-quarter charge plans to account for the cash payment and a US$2.4 billion non-cash writedown on the business.
GlobalFoundries stands to acquire and operate manufacturing facilities in East Fishkill, New York, and Essex Junction, Vermont, and also add IBM’s commercial microelectronics business.
The company said it plans to provide jobs for all IBM employees, aside from a group that is set to remain with IBM.
The 10-year partnership and exchange of thousand of patents plans to allow GlobalFoundries access to key chipmaking technology and guarantee supply of chips that IBM needs for its systems, like mainframe computers and its Watson data analytics technology.
The business is set to be classified as discontinued operations, which had a pretax loss of US$400 million in the first half of this year and US$700 million last year, IBM said in the filing.
The companies are aiming to complete the deal next year, pending regulatory approvals.
Analysts expect IBM to report that third-quarter earnings, excluding some items, rose to US$4.32 a share, according to estimates.
That is with revenue projected to fall for a 10th straight quarter, according to the average of analysts’ estimates.
The results are important as Rometty tries to reach a target of US$18 a share in adjusted earnings this year, even as the company tries to keep up with a shift across the industry to cloud computing. It is all part of a five-year plan to bolster profit by next year.
The company is already part of an alliance with GlobalFoundries, created in a spinoff of Advanced Micro Devices Inc’s production facilities in 2009, to develop chip-production technology.
IBM had been seeking a buyer for its chipmaking division since at least last year, a person with knowledge of the unit said in February.
Throughout the talks, GlobalFoundries has been primarily interested in acquiring IBM’s engineers and intellectual property, rather than the manufacturing facilities, people with knowledge of the matter said in June.
As the industry pushes the limits of material science in producing devices that have some dimensions as small as one atom thick, that know-how is becoming more important.
GlobalFoundries stands to gain IBM’s manufacturing-related intellectual property, according to the filing.
IBM plans to retain its systems-related IP, and its licensing income is set to decline over time.
Even as IBM sought to exit the chip manufacturing business, the company is still investing in semiconductors.
IBM reportedly wanted to maintain control of the design and intellectual property of the chips it uses.
The company plans to spend US$3 billion on semiconductor research and development in the next five years.
IBM’s shares had fallen 2.9 percent this year through last week, compared with a 1.2 percent dip in the Dow Jones Industrial Average.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts