GF Closes On IBM Chip Business Purchase

Updated. GlobalFoundries today announced the completion of its acquisition of IBM’s Microelectronics business, fortifying its path to advanced manufacturing process nodes.


By Ann Steffora Mutschler, Ed Sperling and Mark LaPedus

GlobalFoundries completed its acquisition of IBM’s Microelectronics Group today, creating a behemoth that is expected to extend well beyond the combined footprint of the existing companies.

To begin with, GlobalFoundries will get two additional fabs, one of which makes RF SOI chips. But while IBM was hesitant to expand that business by adding new fab capacity, GlobalFoundries already has the extra capacity in Singapore that it can turn on as needed.

“We will have more capacity, and more supply for customers,” said Brian Harrison, senior vice president of integration and factory management, who will head the fabs in Essex Junction, Vt., East Fishkill, N.Y., and Singapore. “As demand increases beyond a full Burlington, capacity can grow.”

RF SOI is used to make key RF chips, such as the switches and other components, in smart phones and tablets. In fact, Apple, Samsung and other OEMs are using an increasing number of RF SOI-based switches and other components in their smart phones.

IBM, the world’s leading supplier of RF SOI, has been sold out of RF SOI foundry capacity for some time. This, in turn, has opened the door for other foundries, such as TowerJazz and STMicroelectronics, to supply RF SOI to the mobile market.

Now, as part of GlobalFoundries, the combined GlobalFoundries-IBM entity can expand its capacity in RF SOI as well as other processes. “The handcuffs are off,” said Mike Cadigan, who will lead GlobalFoundries’ product management group.

Cadigan also noted that GlobalFoundries has obtained government approval to continue serving as a trusted foundry for the defense industry. “We have won support for the transition and the transaction. There will be a continued relationship with the government as part of the GlobalFoundries portfolio,” he said.

Perhaps the most far-reaching opportunity, though, is on the ASIC side. GlobalFoundries has taken over IBM’s ASIC business, meaning it can create custom ASICs or even mass-produced ASICs for a much broader market than IBM. Cadigan said there will be a full suite of offerings, ranging from ASICs to licensing of the IBM IP portfolio. At the very least, GlobalFolundries will manufacture IBM’s server chips for at least the next 10 years, at 14nm, 10nm and 7nm. And it will take advantage of the $3 billion investment in advanced technology that IBM had previously announced.

In addition, IBM brings wired communications expertise to the party. So, GlobalFoundries can provide the design capabilities and IP necessary to develop high-performance customized products and solutions. With increased investments, the foundry said it plans to develop additional ASIC solutions in areas of storage, printers and networking.

And if that isn’t enough, GlobalFoundries has begun to ramp up its own 14nm finFET process within its fab in New York. That technology was licensed from Samsung. Samsung is also ramping up the 14nm finFET process within its own fabs.

Under the terms of the deal, GlobalFoundries will pick up more than 5,000 new employees with the closing of the deal, for a combined total of about 18,000, as well as about 10,000 patents. It also gets IBM’s advanced process technology, which includes air gap technology, as well as its advanced packaging technology for 3D-ICs.

In addition, the combined GlobalFoundries-IBM entity will become the world’s 13th largest semiconductor vendor in terms of total sales in 2014. The combined entities had sales of $6 billion in 2014. Previously, GlobalFoundries itself was ranked as the world’s 19th largest chipmaker in terms of sales last year, according to IC Insights. Even with IBM, though, GlobalFoundries will remain the world’s second largest foundry vendor, behind TSMC.

Still, this deal gives GlobalFoundries differentiated technologies in areas including mobility, IoT, Big Data and high-performance computing, with deep process technology skills and history, a much broader IP portfolio, and a swath of EDA tools used to develop those chips. In a sharp historical twist, it also turns IBM into a fabless company.

In total, the combined entities will have a fab capacity of 200,000 300mm wafers a month and 133,000 200mm wafers a month. In a recent interview, Thomas Caulfield, senior vice president and general manager of Fab 8 at GlobalFoundries, discussed the company’s fab strategy.

Sanjay Jha, CEO of GlobalFoundries said in a statement, “Today we have significantly enhanced our technology development capabilities and reinforce our long-term commitment to investing in R&D for technology leadership. We have added world-class technologists and differentiated technologies, such as RF and ASIC, to meet our customers’ needs and accelerate our progress toward becoming a foundry powerhouse.”

As previously reported, IBM will pay GlobalFoundries $1.5 billion to acquire its semiconductor business—handing over a huge sum to take the business off its hands and even more to liquidate redundancies internally. In addition, IBM will continue with its $3 billion advanced semiconductor research, to which GlobalFoundries will have access. The dollars changing hands in this deal are somewhat deceptive, though. It requires an investment by GlobalFoundries over the next decade—the time during which GlobalFoundries will continue to be the sole source for IBM’s processors down to 10nm.

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