IBM's $1.5bn chip deal with GlobalFoundries is finally signed

After months of speculation, Big Blue has confirmed its server processor business is off to a new home.
Written by Jo Best, Contributor

An on-off deal between IBM and GlobalFoundries over the future of Big Blue's chipmaking business is definitely on.

The pair announced on Monday that GlobalFoundries will takeover IBM Microelectronics for a payment of $1.5bn over three years. The unit is thought to be loss-making, and GlobalFoundries is promising investment in order to grow the business.

As well as walking off with a sizeable chunk of IBM's cash, GlobalFoundries will become IBM's exclusive server chip tech provider for 22nm, 14nm and 10nm processors for the next 10 years. 

Under the deal, GlobalFoundries gets all of IBM's manufacturing, foundries, sales and technology operations, as well as its patent portfolio, which IBM says is one of largest semiconductor-related portfolios in the world. While the vast majority of IBM Microelectronics' thousands of staff, based in locations including Vermont and New York, will move to GlobalFoundries, one server team will stay with Big Blue.

IBM said the sale will lead to a $4.7bn charge in its third quarter results, covering the $1.5bn payment to GlobalFoundries, as well as an "asset impairment" and the costs of the sale.

The path to new ownership appears not to have run anything but smooth: after rumours of the deal for some months, in July it was reportedly called off as GlobalFoundries was reportedly not keen to acquire the manufacturing side of the business. The size of the deal has also risen: it was initially reported as being in the region of $1bn.

IBM, meanwhile, is still interested in the chip business. "This acquisition enables IBM to focus on fundamental semiconductor and material science research, development capabilities and expertise in high-value systems, with GlobalFoundries leadership in advanced technology manufacturing at scale and commitment to delivering future semiconductor technologies," said IBM SVP and director of research Dr John E Kelly III.

The company has plans to spend $3bn on research into "fundamental semiconductor research and development" over the next three years, in areas including cloud, mobile, and big data analytics.

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