Informing the IBM Community

GlobalFoundries gets $1.5 billion to make Power chips


SoldIBM is to sell its processor manufacturing arm to GlobalFoundries.

Big Blue announced today that it will pay GlobalFoundries $1.5 billion to take its chip factories in New York and Vermont off its hands. GlobalFoundries will be IBM’s exclusive provider for 22 nanometer, 14nm and 10nm processor chipsets for the next 10 years. Plus GlobalFoundries gets thousands of IBM’s semiconductor patents, making it the holder of one of the largest such portfolios in the world.

The sale, if the that’s quite the right word for this divestiture, comes after months of media speculation about a possible deal between IBM and the Abu Dhabi government-owned GlobalFoundries. On-again, off-again talks seemed to flounder over how much IBM wanted to pay its U.S. plants’ new owners (reports said IBM was willing to pony up a billion, GF wanted two) and how much intellectual property it was willing to hand over.

While IBM’s $1.5 billion dowry is expected to be paid in cash over the next three years, it says that it will still invest $3 billion over the next five years in semiconductor technology research. GlobalFoundries will have “primary” access to the results.

The entire move will actually cost IBM $4.7 billion, which it says will come off its third-quarter earnings – announced today. The sale is set to go through in early 2015, subject to regulatory approval.

The deal raises a number of important questions for Power System users and the ecosystem that surrounds them. How set in stone, for example, are current roadmaps for Power processor-driven servers now that IBM is no longer solely responsible for their underlying technology?

Will the job of making its Power Systems servers and even mainframes be the next to go to a third-party? And is Big Blue in danger of throwing the baby out with the bathwater in a bid to deliver $20 earnings per share to its stockholders by 2015?

Whatever the case, Silicon Valley-based GlobalFoundries could well be onto a winner. As well as buying a technology that can take on the ubiquity of Intel, it may pick up on a bunch of new customers in the form of non-IBM Power systems manufacturers from the OpenPOWER Foundation.

Taiwan’s Tyan, for example, launched its single Power8 processor-based Palmetto two weeks ago and others may be set to follow in the New Year.

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