GlobalFoundries Seeks To Dismiss IBM Claim For $2.5 Billion

US chipmaker GlobalFoundries has asked a US court to dismiss a claim by IBM that it is owed billions of dollars.

To this end GlobalFoundries on Monday sued IBM, and asked a US judge to rule that it did not violate a contract with Big Blue, which is claiming $2.5 billion in damages.

Big Blue is essentially alleging that GlobalFoundries violated a manufacturing agreement that was reached seven years ago between the two parties.

IBM fight

In October 2014 IBM admitted defeat in its efforts to crack the semiconductor business, and actually paid Globalfoundries $1.5 billion to take over IBM’s loss-making chipmaking operation.

As part of that deal, Globalfoundries agreed to supply Power processors in return for access to IBM manufacturing process intellectual property, as well as the physical assets of IBM Microelectronics.

It should be noted that back in 2014, Globalfoundries placed little or no value on IBM’s factories due to their age.

Santa-Clara-based GlobalFoundries, is now a unit of Abu Dhabi’s state-owned fund Mubadala.

The firm is a contract chip maker that has grown into the world’s second-largest semiconductor manufacturer, after it was spun out of AMD’s former microprocessor business back in 2009.

It competes directly with Taiwan-based TSMC, the largest independent semiconductor foundry.

According to Reuters, IBM is alleging that GlobalFoundries failed to comply with the terms of the 2014 manufacturing contract, and is therefore seeking $2.5 billion in damages.

IBM told Reuters it “contributed $1.5 billion to GlobalFoundries to supply the next generation of chips, and GlobalFoundries utterly abandoned IBM as soon as the final payment was received and sold off assets from the deal for its own enrichment.”

In 2018, IBM opted for Samsung Electronics as its foundry for advanced computer chips.

IPO sabotage?

GlobalFoundries in its court filing on Monday however stated that since IBM signed that deal with Samsung, IBM “went silent for nearly two-and-a-half years.”

In April, IBM asserted in a letter to GlobalFoundries that it was in violation of its contract, according to the filing with a New York state court.

GlobalFoundries alleges that the IBM lawsuit surfaced as it prepares an initial public offering (IPO) that could value the company at about $30 billion.

The IPO is slated for late 2021 or the first half of next year, from a previous target of late 2022 or early 2023.

“This action arises out of what seems to be a misguided and ill-conceived effort by IBM’s law department to try to extract an outlandish payment,” GlobalFoundries reportedly said its complaint.

In March 2021, GlobalFoundries said it would to invest $1.4 billion in 2021 in an effort to ramp up production at three factories in the United States (Malta and New York), Germany (Dresden) and Singapore.