Exclusive: Chipmaker GlobalFoundries asks EU to investigate bigger rival TSMC -

[Daniel Nenni]

WAFER WARS!

A serious shot across the bow... A very interesting time in semiconductor history, absolutely!

According to Reuters:

(Reuters) - U.S. electronic chipmaker GlobalFoundries has asked European antitrust regulators to investigate market leader TSMC accusing the Taiwanese firm of unfair competition, an industry source said on Monday.

Exclusive: Chipmaker GlobalFoundries asks EU to investigate bigger rival TSMC - source | Reuters

GlobalFoundries has told the European Commission that TSMC is unfairly using loyalty rebates, exclusivity clauses and bundled rebates and even penalties to discourage customers from switching to rivals, the source said.

The practices, which go back several years, have affected GlobalFoundries’ ability to compete, the source said, adding that the tactics escalated after a key GlobalFoundries product started to win new customers.

And TSMC responds:

“Our customers always have the freedom to choose, which we respect greatly, and they choose us because of the value we deliver toward their long-term success,” a spokeswoman said.“Any accusation that TSMC threatens or harms customers is absolutely baseless, and we will vigorously defend our hard-earned trust and our most valued reputation.”

 

[raghu78]

Wow. Big news. What could be the "key GF product which has started to win new customers" in their statement . 22FDX ? Daniel your thoughts.

 

[Daniel Nenni]

Wow. Big news. What could be the "key GF product which has started to win new customers" in their statement . 22FDX ? Daniel your thoughts.

Could be but my guess would be the FinFET processes. 22FDX has 15 confirmed tape-outs thus far but that number is growing. This really is Deja Vue QCOM vs APPL. First you start with the regulatory agencies then once you get a favorable ruling go after the company itself. China was the sweet spot for getting a favorable ruling against QCOM and EU is definitely the place for TSMC.

GF itself is no match for TSMC legally but let's not forget who owns GF....... Samsung may jump in as well....

 

[raghu78]

Could be but my guess would be the FinFET processes. 22FDX has 15 confirmed tape-outs thus far but that number is growing. This really is Deja Vue QCOM vs APPL. First you start with the regulatory agencies then once you get a favorable ruling go after the company itself. China was the sweet spot for getting a favorable ruling against QCOM and EU is definitely the place for TSMC.

GF itself is no match for TSMC legally but let's not forget who owns GF.......

By FINFET processes do you mean upcoming processes like 7LP / 12LP or processes in production like 14LPP. Looking forward to semiwiki's article on Globalfoundries Technology conference 2017.

 

[Daniel Nenni]

By FINFET processes do you mean upcoming processes like 7LP / 12LP or processes in production like 14LPP. Looking forward to semiwiki's article on Globalfoundries Technology conference 2017.

The FinFET processes since that is where the big money is (14nm, 12nm, 7nm...). Just my opinion of course. I have no first hand knowledge here.

 

[name99]

I wouldn't bet on TSMC in this case. Look at their press release --- it's classic non-denial denial. TSMC are happy to claim that they do all sorts of wonderful things for their customers, but aren't willing to actually state for the record that the concrete claims GloFo is making ("using loyalty rebates, exclusivity clauses and bundled rebates and even penalties to discourage customers from switching to rival") are false. Which is really all you need to know...

The only question, then, is whether the PRECISE tactics TSMC is using are illegal or not. And in many ways, that's less important. Even if TSMC wins on that technicality, they'll lose in the court of public opinion, and they'll be forced to stop using those tactics in future.

 

[count]

Even if TSMC loses I doubt it will be significant long term. AMD won it's case against Intel, Intel was forced to pay a fine and change some of it's practices, but in the end Intel continued it's dominance over AMD (although perhaps those winds are finally starting to shift with Ryzen and with AMD embracing the fabless model). Similarly, if TSMC loses it will likely pay a fine, be forced to change some business practice, but it will almost certainly maintain it's fabless leadership. Not knowing the specifics, I doubt GFs case is as airtight as AMDs either. Volume discounts and bundling are not illegal, neither are exclusivity clauses if there is a good reason for that exclusivity clause. For example, if you are building a process specifically for a customers product, you can probably justify it. Probably the customer will have exclusivity on the process as well, Apple likely doesn't want Samsung building chips on their custom process. If there are penalties specifically designed to discourage customers from using competitors, there might be a case, but there needs to be some proof that those penalties exist and that they were specifically designed to be anticompetitive.

 

[name99]

It all depends what you are interested in!

What generally happens with these consent decrees (think IBM, ATT, MS, even Intel), is that the company becomes forced to second guess itself and behave much less aggressively. This does not result in immediate "punishment", but it does mean that the competitive landscape over the next ten or twenty years becomes a lot flatter. All things considered, this is probably healthiest for society as a whole.

So, yes, consequences may be minor if your measure is something like "is TSMC forced to shut down", but if your measure is more something like "in fifteen years do we still have four viable leading edge manufacturers, rather than at least one of GloFo and/or Samsung being forced into irrelevance" then we're (IMHO) looking at a positive outcome.

 

[prime007]

Am I missing something here?!

GlobalFoundries says TSMC has unfairly used loyalty and bundled rebates, exclusivity clauses, and penalties to prevent customers from switching to the competition
Talk about the pot calling the kettle black! Did GlobalFoundries forgot it currently has a wafer agreement with AMD featuring exclusivity clauses and penalties that severely limits AMD from switching to TSMC?
AMD Amends GlobalFoundries Wafer Supply Agreement Through 2020, Gaining New Flexibility & New Costs
Examples:

1. AMD paying $100M for the ability to work with other foundries
2. AMD has to PAY GlobalFoundries for wafers purchased from third-party foundries
3. AMD had to issue a stock warrent allowing GlobalFoundries' parent company (Mubadala Development Company) to purchase shares below-market price

Is this the same Globalfoundries that FAILED to deliver on its 14XM process & was FORCED to PAY Samsung to get access to its 14 nm technology in 2014? I imagine that Globalfoundries' customers weren't too thrilled having to go back to the drawing board on their designs OR having their products delayed while their TSMC-supplied competitors ate their lunch.

Mark Papermaster (AMD's CTO) said that going fab-less helped AMD focus on chip-design without worrying about manufacturing. Production is no longer a bottleneck for AMD, as it can now put out manufacturing contracts to a wider variety of foundry partners. (Source) Does THAT sound like a ringing endorsement from your BIGGEST client (who your parent company happens to own close to 20% of)?!

Now compare what Papermaster said to what Moshe Gavrielov (Xilinx's CEO) said in his company's Q4 2017 conference call:

Well, we're delighted to be with TSMC. It's one of the best decisions I've ever made. Maybe professionally, it's the best decision I've ever made. We don't regret it for one minute. They are great. You know, look at everyone who has tried someone else, including Intel. Great company, great manufacturing technology, great CPU provider. The foundry business is a service business. It requires technology leadership. It requires support. It requires an ecosystem. TSMC is second to none, absolutely second to none.

Or let's put it another way...GlobalFoundries should be EMBARRASSED that their biggest client (and former owner) is paying them to NOT to fab their products. Can it be AMD doesn't have faith GlobalFoundries can deliver on-time? Or maybe AMD feels their (GlobalFoundries') ecosystem to be lacking? Whatever it is...the optics of having your biggest customer pay you over $100M for the right to use someone else's fabs is NOT GOOD!!

Here's a couple thoughts GlobalFoundries (Mubadala Development Company)....START EXECUTING AND DELIVERING ON YOUR PROMISES! STOP OVER-PROMISING & UNDER-DELIVERING. I have no idea if TSMC has ever engaged in any "unfair" competition. But from an outsider's perspective, GlobalFoundries certainly sounds like a company that's unable to compete technologically & views litigation as its own means to "win".

 

[lefty]

AMD's agreement with Globalfoundries is different though, because at one point Globalfoundries was part of AMD. Mubadala would have never agreed to buy Globalfoundries in the first place without that agreement being in place.

On another note: Wouldn't loyalty rebates make it impossible to have a second source?
Assumably, the loyalty rebates only apply to small customers, otherwise Nvidia wouldn't be manufacturing some of its GPUs with Samsung.

 

[astilo]

Am I missing something here?!

GlobalFoundries says TSMC has unfairly used loyalty and bundled rebates, exclusivity clauses, and penalties to prevent customers from switching to the competition
Talk about the pot calling the kettle black! Did GlobalFoundries forgot it currently has a wafer agreement with AMD featuring exclusivity clauses and penalties that severely limits AMD from switching to TSMC?
AMD Amends GlobalFoundries Wafer Supply Agreement Through 2020, Gaining New Flexibility & New Costs
Examples:

1. AMD paying $100M for the ability to work with other foundries
2. AMD has to PAY GlobalFoundries for wafers purchased from third-party foundries
3. AMD had to issue a stock warrent allowing GlobalFoundries' parent company (Mubadala Development Company) to purchase shares below-market price

Is this the same Globalfoundries that FAILED to deliver on its 14XM process & was FORCED to PAY Samsung to get access to its 14 nm technology in 2014? I imagine that Globalfoundries' customers weren't too thrilled having to go back to the drawing board on their designs OR having their products delayed while their TSMC-supplied competitors ate their lunch.

Well, first of all, as lefty said, it is quite different (GF was a kind of AMD spinoff and the first agreement was in place since day 1). Moreover it is crystal clear, official, public, there is nothing hidden there. This makes already all the difference of this world.
Your point about the 14nm is absolutely silly and irrelevant, sorry to have to say that. "Forced to pay"??? It is called licensing a technology. Moreover they also worked together on the LPP variant and useless to say it was also convenient for Samsung, they got a second source option for their main original customer and were able to reduce the following development costs. Samsung, GF and IBM are also partners in the Research Alliance, so there is no surprise here as well. But as I said, this part has really nothing to do with this topic.

 

[Arthur Hanson]

A great lawyer can make white black and black white. When it comes to the law, the person that can twist logic many times, not all, wins. I have spent much time in law libraries and have had a judge kicked off one of my cases. Also, I exposed gross misconduct by the government in another with interesting results. I literally read to live and the law is one very interesting area where logic can get really strange and twisted. So in the law right and wrong and logic can get twisted beyond recognition.

 

[prime007]

astilo - "Forced to pay"...maybe that sounded a bit harsh to you but Samsung wasn't going to give GF their technology for free & GF wasn't able to deliver.

Companies also have confidential agreements with all other companies. An agreement being "crystal clear, official, public" versus the same one that made in private has no legal difference. It all comes down to the terms of the agreement.

My point was to provide an alternative reason for why GF does not have a bigger share of the fabless market now as opposed to TSMC's "unfair" legal agreements. In this case, GF failing to deliver on their 14XM promise.

 

[raghu78]

astilo - "Forced to pay"...maybe that sounded a bit harsh to you but Samsung wasn't going to give GF their technology for free & GF wasn't able to deliver.

Companies also have confidential agreements with all other companies. An agreement being "crystal clear, official, public" versus the same one that made in private has no legal difference. It all comes down to the terms of the agreement.

My point was to provide an alternative reason for why GF does not have a bigger share of the fabless market now as opposed to TSMC's "unfair" legal agreements. In this case, GF failing to deliver on their 14XM promise.

GF has raised the issue now because they seem to be gaining traction with 22FDX, 12LP and 7LP. 14XM is about the past. GF did not have the technical know how to develop a leading edge process. With the IBM acquisition and their significant RF and high performance expertise GF are now showing that they can develop and ramp very competitive processe nodes and compete for fabless customers business. GF has done the right thing by raising a voice against business practices it deems unfair. The regulatory authorities like EU and the courts will decide if they have a fair case. Thats not for you to decide. The big benefit of what GF has done is brought a lot of attention to TSMC's business practices. In the long term a fair competitive environment is what benefits the fabless industry and fabless companies and GF has done the right thing in making sure the playing field is fair.

 

[Daniel Nenni]

GF has done the right thing by raising a voice against business practices it deems unfair. The regulatory authorities like EU and the courts will decide if they have a fair case. Thats not for you to decide. The big benefit of what GF has done is brought a lot of attention to TSMC's business practices. In the long term a fair competitive environment is what benefits the fabless industry and fabless companies and GF has done the right thing in making sure the playing field is fair.

In my opinion this is all about the wafer agreements. For example, TSMC and Samsung both have increased the security terms in the FinFET era and that could preclude design teams from using other foundries at the same node for X amount of time. Intel (paranoid central) also has a similar practice which is one reason why their foundry business is floundering.

While this can be considered an unfair business practice, if I was a TSMC lawyer I would show how TSMC IP was misappropriated (SMIC and Samsung) at other nodes to support the need for such security measures. They could also show that other foundries do the same.

My guess is that, worst case, a slap on the wrist. It is a business distraction though so good move on GF's part. Business really is a chess game at times and maybe GF is thinking 10 moves ahead here. If not they may have awoken a sleeping dragon and will get burned. Just my opinion of course.

 

[Daniel Nenni]

Peter Clarke did a nice write-up:

Report: GlobalFoundries accuses TSMC of unfair selling | eeNews Europe

 

[astilo]

Peter Clarke did a nice write-up:

Report: GlobalFoundries accuses TSMC of unfair selling | eeNews Europe

Interesting, thanks Daniel.

[FONT=&quot]The source said that certain aggressive sales behaviours are not legal when practiced by a dominant player and used to maintain dominance of a market. TSMC's behaviour had extended to the broader ecosystem for supporting foundry manufacturing of ICs with discrimination against companies that had supported foundry design flows other than TSMCs, the source said.[/FONT]

 

[raghu78]

Peter Clarke did a nice write-up:

Report: GlobalFoundries accuses TSMC of unfair selling | eeNews Europe

"The time period referenced coincides with the introduction of the fully-depleted silicon-on-insulator (FDSOI) manufacturing process by GlobalFoundries and by Samsung. This is a technology for which benefits have been claimed in terms of low-power and ease of manufacture, but also a manufacturing process that has struggled to find traction in the market place. In the past some observers have put that down to a 'chicken-and-egg' impasse where third parties might be reluctant to support the novel process without a clear and obvious market demand. However, an allegation of anti-competitive practices would raise the possibility that TSMC may have applied additional pressure on potential users of FDSOI to not take up the innovative process."

GF 22 FDX might be the process they are talking about here. 22FDX is earlier to market than TSMC 22ULP and Intel 22FL and has power, perf, area and mask count/cost advantage over competition.

http://www.eetimes.com/document.asp?doc_id=1332328&page_number=2
https://m.eet.com/content/images/eetimes/22nm%20nodes%20x%20800_1505974563.jpg

 

[Eric Esteve]

You're right Dan! There is an article from IC Insight analyzing the foundry business:
- processes above 40nm are hardly growing ($32.1 to $32.3B in 2017)
- the big growth (18%) and big profit comes from nodes < 40nm

from IC Insight: "Illustrating how dominant TSMC is in the leading-edge pure-play foundry market, the company is expected to have almost 7x the dollar volume sales at <40nm as compared to GlobalFoundries, UMC, and SMIC combined this year ($18.5 billion for TSMC and $2.7 billion for combined total of GlobalFoundries, UMC, and SMIC). In fact, 10% of TSMC’s total sales this year are forecast to be for its 10nm process technology."

TSMC volume sales at <40 nm = 7X sales of GF + SMIC + UMC !!

Maybe that's the explanation why GF is fighting on legal, being unable to catch-up with TSMC (other comments tend to confirm)

 

[JeffreyHF]

Could be but my guess would be the FinFET processes. 22FDX has 15 confirmed tape-outs thus far but that number is growing. This really is Deja Vue QCOM vs APPL. First you start with the regulatory agencies then once you get a favorable ruling go after the company itself. China was the sweet spot for getting a favorable ruling against QCOM and EU is definitely the place for TSMC.

GF itself is no match for TSMC legally but let's not forget who owns GF....... Samsung may jump in as well....

It's interesting that you suggest "Samsung may jump in as well". Bruce Sewell recently confirmed to Bloomberg that it was Tim Cook, at a tech conference in Idaho, who prevailed upon Samsung scion Lee Jae Young (known as Jay Y. Lee in the West), to get the KFTC to ramp up a dormant investigation into Qualcomm royalties. That's the same Samsung billionaire, and only son of Samsung's chairman, who was convicted of bribing Korean officials, sentenced to 5 years in prison, and caused the impeachment of the Korean president, because of pro-Samsung corruption.

Your Freudian slip notwithstanding, of referring to the Apple/Samsung regulatory then litigation attacks against Qualcomm, as "Qualcomm v Apple", the modern abusive tactic of enlisting competition regulators in what's really commercial disputes between sophisticated companies, is an abuse of governmental power.

My personal opinion is that Bruce Sewell was shown the door after the Bloomberg interview was published, because he corroborated the conspiracy between Apple and Samsung to instigate regulatory action against Qualcomm, so follow-on litigation could be filed. His second blunder, that will likewise come back to haunt in Federal court, was disclosing that Apple's goal is to reduce Qualcomm's estimated $10-12 royalty on iPhones, to $4/device. (That's a lot more than 3% of the $18 modem price.)