IBM sues GlobalFoundries over dropping 7nm, demands $2.5bn

IBM is suing chipmaker GlobalFoundries over its decision to drop the development of 7nm process node technologies back in 2018. Home News ITHardware IBMsuesGlobalFoundriesoverdropping7nm,demands$2.5bn GlobalFoundriessays"outlandishdemands"are"incrediblyinconsiderate" June11,2021 By SebastianMoss Comment IBMissuingchipmakerGlobalFoundriesoveritsdecisiontodropthedevelopmentof7nmprocessnodetechnologiesbackin2018.Thecompanyseeks$2.5bnindamages.GlobalFoundries-whichispreparingtolaunchanIPO-hitback,sayingthatIBMwasjustinsearchofa"quickpayday."IBMandGFgothroughabadbreakup –GlobalFoundries In2015,IBMandGlobalFoundriessignedalong-termpartnershiptoresearch,develop,andmanufacturesemiconductorchipsforIBM'smainframesandserverline.Aspartofthedeal,IBMpaidGlobalFoundries$1.5bntotakeoveritsloss-makingchipbusiness.Inreturn,GFsaidthatitwouldbecomeIBM'ssolechipsupplierforthenextdecade.Inredactedcourtfilings,IBMclaimsthatGFagreedtousethe$1.5bntodevelophighperformance14nmand10nmchips,anareaithadpreviouslylittleexperiencein."GF,inturn,investedfarmorethanthisamount,"thechipmakercounteredinaresponsefiledtocourt.Atthispoint,thetwocompanies'narrativesdiverge.IBMclaimsthatwithinmonthsGF"intentionallybetrayed"thispartnership,andannounceditwouldnotdeveloporsupply10nmchipsforIBM(oranyoneelse).GFclaimsthatthetwocompanies"mutuallyagreed"toskip10nminfavorof7nm.Thecompanyadds:"However,despitethebillionsofdollarsthatGFinvestedintheBusinessandthe7nmtechnology,giventhetechnicalcomplexityandenormousfinancialcost,GFwasunabletocompletethe7nmtechnologyaccordingtotheParties’desiredtimeline.Giventhedelay,theavailabilityof7nmtechnologyfromothersuppliers,andthebillionsofdollarsinadditionalinvestmentthatwouldhavebeenrequiredtobringthe7nmtechnologyintoproduction,GFoptednottoplaceitselfinseriousfinancialstressthroughthecontinuedpursuitofafailingstrategyandaccordinglyceaseddeveloping7nmtechnology."GFsaysittoldIBMthatitwoulddrop7nmdevelopmentinAugust2018,andthatIBMquicklymovedtoSamsung.ThisprovedcheaperandmeantIBMcouldsell7nmfasterthanifGFhadcontinuedtotrytodevelopit."IBMactuallybenefittedfromGF’sdecisiontoceaseworkingon7nmtechnology,"GFsaid.IBMhasadifferenttakeonthesituation.ItclaimsthatGFwaiteduntilthefinaltrancheofthe$1.5bnwashandedoverinDecember2017untilitsuddenlydropped7nmefforts."Onceagain,GlobalFoundrieshadnoexplanationfordeliberatelybacktrackingonitsrepresentationsandbreachingtheparties’agreements-otherthanitsownarroganceandgreed,"IBMlawyerssaid."Havingtakenthe$1.5billionandextractedthebenefitsofthebest-in-classtechnology,engineers,andintellectualpropertyfromIBM,GlobalFoundriesrevealedthatitsrepresentationsaboutbeingcommittedtoHigh-Performancetechnologywerefalse.GlobalFoundriesmisledIBMinordertoacquireIBM’ssemiconductorbusinessandformanostensiblymutuallybeneficialalliance,whichGlobalFoundriesthendeliberatelyanddishonorablydiscardedwhenitsuitedGlobalFoundries’purposes."GFalsomadeaprofitfromsellingoffbitsithadacquiredfromIBM,including300acresoflandandtwomillionsquarefeetofbuildingforanunknownamount,aswellasitsEastFishkillfabtoONSemiconductorfor$430million.In2019,itsolditsASICbusinesstoMarvellfor$650m,andotherIPandoperationsatitsEssexJunctionfabforanundisclosedsum.Thesuitadds:"NowthatGlobalFoundrieshasbeencaughtinitsliesanddeceptions,itistimeforittomakeamends."Thecompanywantsits$1.5bnback,plusdamages.Thisisallverysuspicioustiming,GlobalFoundriesretorted.Afteryearsofnocomplaints,thelawsuitcomesjustafteritwasrevealedGFisplanninganinitialpublicoffering."IBMsensedanopportunitytointerferewiththerumoredGFIPOtransactionbysendingtheletterwithanamountoutrageouslyhighenoughthat,byIBM’scalculations,wouldcertainlyneedtobedisclosedinGF’sprospectusunless,asIBMhoped,themattercouldberesolvedquicklyviaasettlementpaymentmadebyGF."GFsaidthatIBMwasjustlookingfora"quickpayday"with"amisguidedandill-conceivedeffort"thatwas"incrediblyinconsiderateofcurrentevents,namelyaglobalchipshortagefueledbyapandemicthathasimpactedimportantdomesticindustries,includingtheautomotivesector."ThelawsuitwasfiledthisweekwiththeNewYorkSupremeCourt. Furtherreading 20Nov2020 IBMreportedlyplanstolayoff8,000staffinEurope 27Apr2021 GlobalFoundriesmovesheadquarterstoitsfabinNewYork 20Apr2021 TSMC,Intel,andNvidiawarnofyearsofchipshortages Tags IBM GlobalFoundries ResourcesMore What’snextforenterprisedecisionmakinginahybridworld? 15Dec2021 WhyDataCentersMustPrioritizeEnvironmentalSustainability:FourKeyDrivers 15Dec2021 GuidetoEnvironmentalSustainabilityMetricsforDataCenters 15Dec2021 TheSustainabilityChallenge 07Dec2021 More Designingmulti-MWbuilds:howtoscalefastbutstaygreen Thankyou!Youwillreceiveaconfirmationemailshortly.