IBM continues to evolve: Semiconductor business up for sale; moving into the cloud

By Dr. Phil Garrou, Contributing Editor

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The Financial Times (FT) is reporting that IBM Corp is exploring the sale of its semiconductor business and has hired Goldman Sachs to find potential buyers. [link] The FT report continues that another financial option may be to find a partner for a JV to jointly run its semiconductor business.

FT projects that the most likely buyers would be Global Foundries or TSMC  since it is likely that these two foundry giants along with Samsung and Intel will be the only players left in advanced chip manufacturing as the cost of 20nm and lower fabs now exceeds $6B.

This should not come as a shock to readers of SST’s IFTLE blog (Insights From the Leading Edge) which reported early rumors of such a sale back in the summer of 2010. [ see IFTLE 8 “3D Infrastructure Announcements and Rumors” July 2010]

While the semiconductor business has become an increasingly less important part of IBM’s operations in recent years as it has expanded in IT software and services, any sale or joint venture would surely have to ensure that IBM still had a guaranteed supply of the advanced chips required for its mainframe and high end server businesses.

GlobalFoundries is the most likely candidate for sale or JV since they are a member of the IBM common platform, have been working with IBM for over a decade [link] and have placed their latest fab (Fab 8) in IBMs back yard in upstate NY [link] .

This report comes two weeks after the announcement that, pending government approval, IBM will sell its low-end server business for $2.3 billion to Chinese PC maker Lenovo.  Some may recall that  a  decade ago Lenovo bought IBM’s ThinkPad PC business for $1.75B [link].

This low end server decision was likely driven by the trend for many major corporations to move their IT requirements to “the cloud” with companies such as Amazon web services. With customers having more choices for handling their IT, they will be reluctant to get locked into client-server service contracts with IBM.

In fact IBM has just announced [link] plans to commit  over $1.2B to significantly expand its global cloud footprint. IBM plans to deliver cloud services from 40 data centers worldwide in 15 countries and five continents globally, including North America, South America, Europe, Asia and Australia.  IBM will open 15 new centers worldwide adding to the existing global footprint of 13 global data centers from SoftLayer, which it acquired in July of 2013, and 12 from IBM.

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4 thoughts on “IBM continues to evolve: Semiconductor business up for sale; moving into the cloud

  1. Barbara Kalkis

    Owning manufacturing has concrete advantages: product and market differentiation, design-to-delivery timeframe; brand appeal, and — yes — sales & revenue results. However, success depends on both the executives who manage the fab, as well as those who operate it. When the CEO has a software, sales or marketing background, manufacturing — a ‘hardware’ business — is going to suffer. We’ve seen this happen before, most recently at HP. Software and hardware business experience don’t mesh.

    Reply
  2. Alan

    this is ridiculous! The executives have no sense of that the hardware part means to IBM.. Without hardware, there will be no mainframe, no IBM servers…. No brainers…

    Reply

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