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IBM Sues GlobalFoundries for $2.5B Over Wrecked Process Node Transitions

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IBM has sued GlobalFoundries for its failure to ship a perform 10nm node or the 7nm node that was supposed to exchange it. The small print within the case date again to 2014, when the 2 corporations signed a deal for GlobalFoundries to construct 10nm chips and POWER9 CPUs for IBM. IBM gave GlobalFoundries its Microelectronics division, and GlobalFoundries promised to help IBM for a decade. It was anticipated that GF would ship 14nm on time, adopted by a transition to 10nm.

Issues didn’t go as deliberate. GlobalFoundries was late delivering 14nm and ultimately canceled 10nm improvement altogether. IBM was apparently prepared to work with GlobalFoundries on that difficulty, and would have accepted the corporate’s 7nm course of as an alternative, had that node come to market. It didn’t. As a substitute, GlobalFoundries declared it will go away the forefront and turn into a second-tier foundry, competing extra with corporations like UMC and SMIC versus TSMC, Samsung, or Intel.

There’s an amusing quote in IBM’s courtroom submitting:

These representations had been an important precondition to IBM coming into into any relationship with GlobalFoundries, as GlobalFoundries had not been a big participant within the Excessive Efficiency semiconductor enterprise. Solely by buying IBM’s know-how, workers and mental property, would GlobalFoundries have the ability to increase into making Excessive Efficiency semiconductor chips for IBM and for others.

That’s a bit a lot. The foundries GF purchased — Fabs 9 and 10 — had been outdated by the point it bought them. Fab 9 is a 200mm facility that constructed 90nm and above chips. Fab 10 is newer, and presently builds 14nm chips with 300mm wafers, nevertheless it’s a lot smaller than the so-called “gigafabs” now deployed by Intel, TSMC, and Samsung. The concept shopping for these two buildings was going to someway rocket GlobalFoundries right into a extra aggressive place doesn’t stand up to the sniff take a look at.


Aerial view of GlobalFoundries Malta campus, the place its most superior chips are constructed.11

What GlobalFoundries wanted wasn’t IBM know-how. It wanted IBM’s enterprise. One of many causes given for why the corporate left the forefront was its incapability to land main clients. Ramping up a brand new node for 1-2 clients isn’t actually possible, particularly if the chip volumes are comparatively small. AMD had beforehand acknowledged that it will now not pay for customized, AMD-specific nodes. This left GlobalFoundries scrambling for purchasers. Had the corporate continued engaged on 7nm it will have benefited from the present semiconductor increase, however rumors on the time prompt GlobalFoundries’ homeowners weren’t prepared to proceed pouring cash right into a enterprise that had by no means turned a revenue.

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Timothy Prickett Morgan at Subsequent Platform has written an excellent story on the case, with a dialogue of how the delay impacted the event of POWER9 and POWER10. He additionally supplied a replica of IBM’s filing that wasn’t publicly obtainable. GlobalFoundries’ response will be learn here.

IBM’s criticism is simple: It signed a deal for 14nm and 10nm CPUs with GlobalFoundries again in 2015. Months later, GlobalFoundries declared it was canceling 10nm, however would provide IBM a 7nm course of as an alternative. It failed to take action. IBM declares:

Having taken the 1.5 billion and extracted the advantages of the best-in-class know-how, engineers, and mental property from IBM, GlobalFoundries revealed that its representations about being dedicated to Excessive Efficiency know-how had been false. GlobalFoundries misled IBM to be able to acTuire IBM’s semiconductor enterprise and type an ostensibly mutually useful alliance, which GlobalFoundries then intentionally and dishonorably discarded when it suited GlobalFoundries’ functions.

GlobalFoundries Response

GlobalFoundries’ response to IBM’s accusations of greed boil right down to “no u” with a aspect order of suspicious timing. GF argues that go well with has been introduced at a time when it’s getting ready for an IPO. An organization with a big lawsuit hanging over its head from IBM won’t be valued as extremely as it will be in any other case. GF notes that it stopped creating 10nm roughly 6 years in the past and stopped creating 7nm roughly three years in the past. It writes:

IBM watched GF’s success and the information of the IPO, then searching for a fast payday within the hopes that GF wouldn’t defend itself, IBM despatched a authorized dispute letter from a high tier, costly white-shoe New York regulation agency to GF, demanding that it pay an outlandish $2.5 billion in unspecified damages for alleged breaches that, till April 2021, had by no means been asserted, and with none actual rationalization as to the premise of its claims… IBM additionally has a status of creating licensing requests, at or close to, quarter finish to satisfy Wall Avenue analyst incomes expectations and this aggressive transfer is in step with that playbook.

GF additionally claims that it sought to treatment this drawback by means of an agreed-upon, 60-day dispute course of, however obtained no response from IBM. The corporate seeks a declaration that it didn’t violate the letter of its settlement with IBM and that the corporate’s lawsuits will not be primarily based on any damaged contract. It additionally argues that IBM is upset that semiconductor demand has spiked some years after it bought its fabs.

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There may be one seeming level of settlement between the 2 corporations. IBM notes in its go well with that GF by no means supposed to turn into a number one producer of 7nm chips by way of whole quantity. GlobalFoundries acknowledges this tacitly when it writes:

IBM shortly discovered a brand new, and cheaper, 7nm know-how provider in Samsung. Certainly, the association labored out higher for IBM as Samsung, upon data and perception, was capable of provide the know-how extra shortly than GF would have been capable of and at considerably much less price to IBM. IBM truly benefitted from GF’s resolution to stop engaged on 7nm know-how.

Arguing that your companion benefited from your individual incapability to construct microprocessors is a daring transfer. We’ll see if it pays off for them.

Function picture exhibits GlobalFoundries’ Dresden facility from the air. Image by Fensterblick, CC BY-SA

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