The GF IBM Deal Explained!

I have it on pretty good authority that IBM has in fact come to terms with GlobalFoundries on the sale of their semiconductor business, or so I blogged last month. Did I mention that my grandparents and their many siblings settled in Upstate NY in the early 1900s from Italy via Ellis Island? So yes, I do qualify as an insider:

Insider says IBM and GlobalFoundries reach deal
Posted on September 17, 2014 | By Larry Rulison
A post to SemiWiki.com by industry author and blogger Dan Nenni says that IBM and GlobalFoundries have a “handshake deal” in place to take over IBM’s chip manufacturing.

The official announcement was last week and the slide deck is HERE in case you are interested. Since I was in Taiwan at the time and missed the official briefing I was afforded a quick one-on-one with Sr VP Gregg Bartlett at the beautiful new GF HQ. Rather than regurgitate what everyone else has been feeding you I will try and offer an insider’s view:

• The IBM ASIC business is exactly what GF needed to get into the system houses
• The IBM IP portfolio is exactly what GF needed to differentiate in the fabless semiconductor ecosystem
• The IBM talent (5,000+ employees) is exactly what GF needed to create an East Coast semiconductor dynasty
• The IBM patents (10,000+) is exactly what GF needed to secure their semiconductor legacy
• The IBM acquisition is exactly what GF needed to secure a nice investor exit (IPO)

Growing up in Silicon Valley I have always viewed IBM as third world company. It was not just an East Coast versus West Coast thing, IBM was the status quo versus the entrepreneurs of Silicon Valley. Clearly Silicon Valley won but now IBM Semiconductor is in the hands of some very capable entrepreneurs which should turn out to be a very powerful combination.

Also Read:GlobalFoundries and IBM

Final approval on this will probably take the better part of a year but let’s talk about that for a minute. GF will be making a filing with the Committee on Foreign Investment in the United States (CFIUS) which consists of 16 departments and agencies including Homeland Security. The majority of the cases submitted proceed without investigation which is what I believe will happen here. Remember, IBM sold their PC business to Lenovo and GF bought AMD’s manufacturing business so this is not their first CFIUS rodeo. In the meantime the integration plans have already begun which will be like integrating peas and carrots at a family dinner.

The final and probably most important point is that GF will now own the IBM semiconductor process recipes moving forward. In the past, the process architecture was done in Albany and the implementation in Fishkill. At 28nm it was a “copy exact” type of deal out of Fishkill. At 14nm it is an architectural licensing deal out of Albany which is why Samsung has a different 14nm implementation than the other ex-Common Platform members. Moving forward 10nm will also be an architectural licensing arrangement. 7nm is unknown at this time.

Bottom line: This is an accretive deal for GF and puts them into the same league as Intel and TSMC, absolutely!