GlobalFoundries Inc asked a judge to rule that it does not owe US$2.5 billion to International Business Machines Corp (IBM) over a 2014 deal in which the semiconductor maker agreed to take an unprofitable chip-manufacturing unit off IBM’s hands.
In a complaint filed on Monday in New York Supreme Court, GlobalFoundries is seeking a declaratory judgment that it did not breach the agreement and said IBM is threatening to sue.
The suit comes as GlobalFoundries works with banks on an initial public offering (IPO) that could value the chipmaker at about US$30 billion.
Photo: Bloomberg
“This action arises out of what seems to be a misguided and ill-conceived effort by IBM’s law department to try to extract an outlandish payment,” GlobalFoundries said its in complaint.
IBM agreed in 2014 to pay GlobalFoundries US$1.5 billion for GlobalFoundries to acquire the unit. As part of the deal, GlobalFoundries became IBM’s exclusive provider of certain power processors for the next 10 years, in exchange for access to IBM’s intellectual property. GlobalFoundries acquired manufacturing facilities in East Fishkill, New York, and Essex Junction, Vermont.
In its lawsuit, GlobalFoundries said IBM’s request for damages is “highly suspect,” as it follows news of the potential IPO.
GlobalFoundries also said that IBM “has yet to provide any substantive explanation” to its claims over the alleged breach.
GlobalFoundries said in its lawsuit that it invested billions of dollars to develop cutting-edge chipmaking technology, but that it decided not to pursue IBM’s “failing strategy” and notified IBM in 2018.
According to the filing, development of the chip technology was more challenging and expensive than initially anticipated, causing delays in the project’s targeted milestones.
GlobalFoundries said it spent more money to catch up, but still fell behind competitors including Samsung Electronics Co and Taiwan Semiconductor Manufacturing Co (台積電).
It also said IBM was “well aware” of delays and the switch to Samsung was beneficial for the company, as it was cheaper and faster than GlobalFoundries would have been able to deliver.
IBM did not complain about GlobalFoundries’ actions until news of its potential IPO broke, and it now seeks “a quick payday,” GlobalFoundries said.
A call and e-mail to IBM was not immediately returned.
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