IBM Also Considers Leaving Chip Manufacturing

Subject: General Tech | February 7, 2014 - 01:18 PM |
Tagged: TSMC, IBM, GLOBALFOUNDRIES

Well this is something which I expect they will not sell to Lenovo...

IBM, one of the world's most advanced chip fabrication companies with the capability to manufacture on a 22nm node, is looking to sell this division. According to The Financial Times, via Ars Technica, the company selected Goldman Sachs to seek options. They are primarily looking for interested buyers but would also consider finding a business partner to offload the division into a joint venture.

The two initial candidates are GLOBALFOUNDRIES and TSMC.

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Image Credit: IBM via ZDNet (Outside photographers are not allowed inside their fab lab).

IBM is not willing to get rid of its chip design ability. IBM creates many chips, often based on its own "Power Architecture". This trademark comes with their RISC-based instruction sets which rival ARM and x86. It forms the basis of the Xbox 360, the Cell processor found in the PS3 (and rarely elsewhere), and the last three Nintendo game consoles starting with the Gamecube.

Despite designing all of the above chips, only some were actually fabricated by IBM.

Personally, I am not sure how serious the earlier mentioned potential buyers are. It could have easily been someone who looked at the list of leading foundries and picked the top two. TSMC is not even a member of "the Common Platform" alliance, not to mention how small IBM is compared to them, so I cannot see much reason for TSMC to bother.

GLOBALFOUNDRIES is a different story, It would make sense for them to want that part of IBM (Josh notes they even share some resource centers). Still, the both of us wondered if they could afford the deal. ATIC, parent company of GLOBALFOUNDRIES, might be able to get the money from somewhere - but would they? They purchased Charter only just recently. Now, if they simply enter a partnership with IBM, that might be a different story than an outright purchase.

Fabrication is hard and expensive. Creating a foundry is about $10 billion, give or take a few billion depending on yield, and changing your equipment for new nodes or wafer sizes is not much cheaper. I can see IBM, a company that is increasing concerned with high profitability, wanting to let someone else deal with at least some of the volatility.

IBM has not commented on this rumor.

Source: Ars Technica
February 7, 2014 | 01:55 PM - Posted by Anonymous (not verified)

There you go Apple, get this foundry business for your A7 and A* ARM ISA based CPUs! You get a foundry business with the technical expertise to rival Intel's, and it should not be hard to go to a smaller process node, utilizing those IBM process engineers that come with the business. This is just a couch change for Apple.

February 7, 2014 | 03:21 PM - Posted by Scott Michaud

That makes sense on the surface but I seriously doubt Apple would want to run that treadmill in the long term, for a variety of reasons.

February 7, 2014 | 05:49 PM - Posted by Anonymous (not verified)

If they can keep the fab/s busy producung their A7, and future A*'s then Apple should be able to save money and have the level of control that TSMC, or global foundrys could not offer, Apple would not have any problem running the IBM foundry/s at full capacity, and Apple will still have to utilize other foundry capacity. The expertise of the IBM process engineers, that would become Apple employees is as valuable, and along with any IC fabrication process IP, is more valuable than the buildings and equipment that IBM will be selling, Apple could use these resources to bring its future ARM custom ISA designs to the laptop. Apple has the device sales to keep that "treadmill" going full tilt, with other fabs still needed, Apple does use lots of fab capacity.

February 7, 2014 | 10:55 PM - Posted by mAxius

Make no mistake GF is going to grab this as the main reason for amd locating its new york fab before the spinoff was its proximity to ibm's fab campus. GF will inherit all of ibm's fab tech and a fully functional 22nm pd soi line to fill with orders. guess who's orders will be filled here?! big hint only one company currently uses PD SOI at GF

February 8, 2014 | 01:28 PM - Posted by Anonymous (not verified)

IBM's fab tech will go to the highest bidder, the buildings and their equipment can be sold, but the process engineers and the production process managers along with any IBM IP for sale, is a very valuable item! The big bucks players, that want to get a leg up on Intel, will be visiting IBM's contracted representatives for this offering, make no mistake about that, companies with more money than GF, some who do business with GF, and others, and could buy GF at the drop of a hat. IBM is keeping its CPU design engineers, along with the IP that goes with it, but the FAB production IP that goes along with the fab business, that is more valuable than brick and mortar, or most of the etching equipment, and the bidding has already begun. IBM should really spin this business of as an indipendent fab company, but the big bucks new players, like Google (buying robotics companys like mad, robots need CPUs), and Apple (Rolling is own custom ARMv8 ISA based chips), are looking at this very closely, and Apple needs the capacity, for more than just CPU ICs, but other specilized ICs as well! Its the IP, that makes this sale valuable.

Zoidberg, to Fry: I thought you were the robot!

February 8, 2014 | 01:19 PM - Posted by Anonymous (not verified)

I keep thinking whether these decisions to sell parts of their business were in any way influenced by some insights Watson has given IBM.
I mean, if I had an intelligent supercomputer, I would definitely be tempted to put it to such use.

February 8, 2014 | 01:42 PM - Posted by Anonymous (not verified)

IBM divests of low margin devisions, and the chip fab business in low margin high volumne business, even Intel is putting a new fab into mothballs, because fabs are very expensive to let remain idle, or underutilized. The Power CPU division is not being sold, same for the IBM core CPU design IP, IBM is keeping that, its just becoming a fabless company! The automakers started out building all of their products in house, but now the auto makers have most of their parts made by third party suppliers.

February 9, 2014 | 12:30 PM - Posted by Anonymous (not verified)

Investors: "IBM. I know we're a $100 Billion Dollar company doing great, but we need MORE MONEY!"

IBM: "What do you want from us?"

Investors: "More profits, higher dividends, and stock that goes to the moon NAOOOOOOOOO!"

IBM: "Sigh, fine we'll sell of some more of our divisions and soon become nothing more than a research company with patent troll enforcers. Thanks."

Investors: "Whatever it takes. You're my boy Big Blue! You're my boy!"

February 9, 2014 | 01:36 PM - Posted by Scott Michaud

... and a service/consulting company. Don't forget that! :p

February 9, 2014 | 04:59 PM - Posted by Anonymous (not verified)

They will still have the Power CPU line, but the money has always been in the services, even when IBM was just a mainframe company, hardware sales are not that profitable, but the services, well that's were the money has been in computers, for business at least! Hardware is sold once, and not replaced until it is fully deprecated, but software services, that is something that enterprises always need year in and year out, programming, hosting, website creation and maintaining, and system analysis(creating the software to run a business for top to bottom, as well as assisting in assembling the needed hardware, and replacment hardware when needed). And most of the business investors screaming for more money are the pension funds, they invest across the market, and the managers have billions to manage, just look at CALPERS' (california-public-employees-retirement-system) pension fund size 270 billion dollars, and if IBM does not pay dividends or increase its stock value, CALPERS will move its money to more profitable companies! Retirement and other funds dominate a good chunk of the stock market shares traded, so its not just a few fat cats smoking on their stogies, its public employee Mom, with that kid living in the basement, that has her retirement fund invested, and the pension fund manager has the state of California breathing down his/her neck to keep that multi-billion dollar fund solvent, and the retirement fund's value ahead of inflation!

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