IBM accused of chasing 'a quick payday' with $2.5B damages against AMD's OG chip maker

IBM accused of chasing 'a quick payday' with $2.5B damages against AMD's OG chip maker

GlobalFoundries claims IBM is only now stalking it for damages over an alleged contract violation because it's going public.


IBM accused of chasing 'a quick payday' with $2.5B damages against AMD's OG chip maker - image1
(Image credit: Jason Richards/ORNL, CC BY 2.0)

One-tiᴍᴇ AMD fab limb, GlobalFoundries, ɪs ʟᴀʏɪɴg tʜᴇ lɪᴛigᴀᴛiᴏɴ ᴅᴏwn ᴏɴ IBM ᴛᴏ escape tʜᴇ $2.5 billiᴏɴ damᴀɢᴇs Big Blue ɪs ᴛʀʏɪɴg ᴛᴏ squeeze ᴏᴜᴛ ᴏꜰ ɪᴛ ᴊᴜsᴛ aʜᴇad ᴏꜰ ɪᴛs ɪɴɪᴛial public ᴏꜰferɪɴg (IPO). Thᴀᴛ, ɪᴛ stᴀᴛes, ɪs tʜᴇ priᴍᴇ ᴅʀɪᴠᴇr ʙᴇhɪɴd IBM's reᴄᴇɴᴛ demᴀɴds wɪᴛh tʜᴇ compᴀɴy ᴏɴly ʟᴏᴏᴋɪɴg ꜰᴏʀ "a ǫᴜɪᴄᴋ ᴘᴀʏᴅᴀʏ." 

It's all about a deal between the GlobalFoundries and IBM from back in 2014 where the contract chip manufacturer agreed to take over some of IBM's old, unprofitable fabs for the sum of $1.5 billion and some return manufacturing. GlobalFoundries was then going to become IBM's exclusive chip maker for some of its parts in exchange for a sneaky peek at the other company's extensive silicon IP.

But then GlobalFoundries gave up chasing the likes of Samsung and TSMC down the advanced production process rabbit hole, "decided not to pursue IBM's 'failing strategy,' and notified IBM in 2018."

This year, however, IBM has decided that it needs to recoup some of that $1.5 billion investment (and evidently add a little more sugar on top) and wants some recompense from GlobalFoundries who it claims violated the contract. Given that GlobalFoundries, the company spun out of AMD's old chip manufacturing arm, is about to enter into an IPO potentially valued at some $30 billion, there is some feeling that it is little more than a cynical attempt to squeeze out some cash.

"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 is quoted as stating in its complaint.

Your next upgrade

IBM accused of chasing 'a quick payday' with $2.5B damages against AMD's OG chip maker - image2

(Image credit: Future)

Best CPU for gaming: the top chips from Intel and AMD
Best graphics card: your perfect pixel-pusher awaits
Best SSD for gaming: get into the game ahead of the rest

For its part, Reuters quotes IBM stating that "IBM contributed $1.5B 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."

This sounds messy, and doesn't look like anyone's going to back down anytime soon. But there's a lot of money on the table, not least from the damages in this potential lawsuit between IBM and GlobalFoundries, but also with expanded chip manufacturing being such a vital topic of conversation right now there are subsidies likely to be on the table for whoever can take advantage of them. 

A huge $52 billion package has been passed by the US senate which is aimed at strengthening semiconductor industry in the United States, making it a newly fertile ground for foundries seeking investment.

Author's other posts