IBM Pays £931m To Offload Semiconductor Business

IBM logo © Tomasz Bidermann Shutterstiock

IBM will pay Globalfoundries $1.5bn to take on chip operations

IBM appears to have finally admitted defeat in its efforts to crack the semiconductor business and has reportedly agreed to pay Globalfoundries $1.5 billion (£931m) to take on the latter’s loss-making chipmaking operation, which makes chips for IBM computers as well as some external customers.

According to the Wall Street Journal, the  deal is set to be completed today as IBM announces its third quarter results.

silicon chip circuit board processor © JNT Visual ShutterstockResurrected

The news comes just three months after it rumours that a deal between IBM and Globalfoundries had fallen through after the two companies reportedly failed to agree a price, with Globalfoundries placing little or no value on IBM’s factories due to their age.

Following this, the likes of Intel and TMSC had also been in contention to purchase the operations, but both baulked at IBM’s initial $2 billion valuation.

The deal is thought to include IBM’s two New England chipmaking plants (in East Fishkill, New York and Burlington, Vermont) which are close to Globalfoundries’ existing facility in Albany, New York.

The news comes as IBM looks to ensure it stays relevant in a highly competitive marketplace. Earlier this year, IBM CEO Ginni Rometty pledged to retain and even extend the company’s chip design expertise. In July she pledged a $3 billion (£1.7bn) investment in chip research over the next five years, aimed at discovering semiconductor breakthroughs and cramming ever more components on a chip.

California-based Globalfoundries is one of the most well-established contract chipmakers on the market today, producing hardware for everything from smartphones to games consoles.

Originally created as a spin-off of AMD, the two companies announced an expansion in their operations earlier this year, a deal which saw AMD pay Globalfoundries $1.2 billion (£721m)to build GPUs and semi-custom products alongside its usual computer offerings.

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