The latter will be receiving $1.5 billion / €1.18 billion

Oct 20, 2014 11:47 GMT  ·  By

You'd think that when a company passes part of its business to another, the latter would be the one paying the former a sum in cash or bonds, or whatever other means. The latest deal between IBM and Globalfoundries doesn't work like that though.

You may or may not have heard this weekend that IBM would be making a big announcement today (Monday, October 20, 2014).

It has happened, and the news isn't what we would call “hard to swallow.” We aren't emotionally invested in this development, but it does seem a bit strange.

Essentially, IBM is offering Globalfoundries a pretty large sum of money so that the latter may take its microchip business off its hands.

The particulars of the agreement

IBM will pay Globalfoundries around $1.5 billion / €1.18 billion over the course of the next three years. In exchange, Globalfoundries will take over IBM's commercial semiconductor technology business, including intellectual property and employees.

Also, Globalfoundries agrees to become an exclusive server processor semiconductor technology provider for 22nm, 14nm and 10nm processors. This relationship will last for the next 10 years.

Meanwhile, IBM will continue its $3 billion / €2.35 billion investment plan for the next five years. It shouldn't do as much financial damage as before because the corporation won't have to pay wages or whatever else on top of it.

Globalfoundries will work with the Colleges of Nanoscale Science and Engineering (CNSE), SUNY Polytechnic Institute, in Albany, N.Y, on further development in these areas.

Why IBM is making this move

The microelectronics business has been losing money. That's basically all there is to it really. IBM intends to focus on fundamental semiconductor research and development for cloud, mobile, big data analytics and “secure transaction-optimized systems.”

Not having to oversee the activities of its various microelectronics business arms will take a load off its shoulders and will eliminate a source of annual money loss to boot.

Meanwhile, Globalfoundries gets enough technology and intellectual property that it becomes a global leader in semiconductor technology not that far behind TSMC, even matching it in some areas.

Hopefully that will eventually result in some really amazing sub-10nm technologies, even if we have to wait for a decade to see them.

The facilities changing ownership are located in East Fishkill, New York and Essex Junction, USA. Globalfoundries intends to spend around $10 billion / €7.83 billion on all this between 2014 and 2015.

Show Press Release