Now that the dust has settled on the whether or not regulatory approval would be granted to Globalfoundries’ takeover of IBM’s struggling semiconductor manufacturing division, will the foundry be able to accomplish what Big Blue was unable to do and make a successful business out of what it gained?
Under the deal, completed this week after U.S. regulatory bodies approved the transaction, IBM is not only handing over its 300mm wafer fab at East Fishkill, NY and its 200mm wafer fab at Burlington, Vermont, but is paying Globalfoundries to do so (Read: IBM To Pay Globalfoundries $1.5 Billion to Take Chip Business). Globalfoundries gains capacity cheaply, adds technology, strengthens its R&D between the two companies and secures its position as the No. 2 pure play foundry supplier.
That said, IBM paid Globalfoundries to take its chip business for a reason—it was losing billions on its chip business and wanted a way out. However, that does not mean Globalfoundries will suffer a similar fate, says Len Jelinek, senior director of semiconductor manufacturing at IHS.
IBM’s foundry business was not targeted at specific technology that had developed. Instead, it was more of an integrated device manufacturer (IDM) building products and technology for internal use. “IBM was not in the business of being a foundry or multi-technology provider,” Jelinek says. “If it had the technology and you as a client could use it then great. They were not going to go and develop a technology as a ‘common shelf’ for multiple people to use.”
Furthermore, IBM’s capacity constraints limited the company in its ability to create such a widely used product and be able to support it. Globalfoundries will not have that problem, Jelinek says, as it will be able to qualify additional processes in the IBM fabs and add clients to fill the capacity.
Adding IBM’s specialty technologies that the pure-play foundry did not already have will also give Globalfoundries the ability to make these technologies available to other clients and have the capacity in order to support the demand. Plus, keeping IBM as a client in a 10-year exclusive agreement as part of the acquisition, Globalfoundries already has a built-in revenue stream at the very start, Jelinek says.
Long Term Issues
However, Globalfoundries will have some longer term issues to deal with. Specifically, with the cost of operating the 8-inch fabs in Vermont that currently manufacture RF devices using silicon-germanium and BiCMOS SOI processes. While that fab is mostly customer-driven, Globalfoundries says it will attempt to make it more of a global business.
Jelinek says that if the Vermont fab proves to be an issue, Globalfoundries can simply shut it down and move the equipment for minimal risk.
And while the foundry is gaining specialty technology, it is gaining capacity in technologies it does not need, meaning Globalfoundries will need to get additional clients in order to make these technologies become profitable, he says.
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