GlobalFoundries spurns offer to take on IBM factories

Engineers work in one of several clean rooms at GlobalFoundries' Fab 1 in Dresden, Germany. Jeff Topping / The National

Media reported today that Mubadala’s semiconductor unit walked away from talks with IBM over the potential acquisition of its chip operations because the deal did not involve a large enough cash payment to offset losses at the business.

IBM was willing to pay GlobalFoundries to take on the money-losing chip-manufacturing operations, Bloomberg reported, quoting a source familiar with the process.

IBM was offering about US$1 billion to persuade GlobalFoundries to take the unit, said the source, who asked not to be identified because the negotiations were private.

The California-based GlobalFoundries, owned by the technology arm of the Abu Dhabi Government’s strategic investment fund Mubadala, wanted to be paid about $2bn, enough to offset the division’s losses, the source said.

“The first rule of negotiating anything is you need to be able to walk away from a deal,” said Jim McGregor, the founder of Tirias Research in Arizona. “This might just be posturing. You may see this resurrect itself in three to six months.”

Ed Barbini, a spokesman for the New York-based IBM, declined to comment, as did Kevin Kimball, a spokesman for GlobalFoundries.

Bloomberg News reported last month that the talks had broken down after the companies failed to agree on terms.

It was reported in June that GlobalFoundries was primarily interested in acquiring IBM’s engineers and intellectual property rather than manufacturing facilities, according to sources. GlobalFoundries would have acted as a supplier for IBM’s microprocessors, the sources said at the time.

GlobalFoundries had placed little or no value on IBM’s factories because they were too old, a source said two weeks ago.

GlobalFoundries is the world’s second-largest foundry after Taiwan’s TSMC.

In April, it announced a partnership with Samsung to mass produce the fastest, most energy efficient semiconductors that will drive the next generation of mobile devices.

The process, developed by Samsung and licensed to GlobalFoundries, uses a three-dimensional design and results in chips that are 20 per cent faster, 35 per cent more efficient and 15 per cent smaller than those produced with the industry-standard “20nm planar” platform.

GlobalFoundries began life as the manufacturing arm of the chipmaker AMD before being spun off as a separate entity in 2009. AMD fully exited the venture in 2012, leaving Mubadala Technology as the sole shareholder.

* with Bloomberg News

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