IBM exits semiconductor business and re-creates itself

IBM to focus on research, software and advanced systems

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With its decision today to sell its semiconductor business, IBM is shifting from manufacturing to a company that focuses on research, software and advanced systems development.

In announcing the $1.5 billion sale of its microelectronics manufacturing unit to GlobalFoundries, IBM emphasized several important things about its business, research and jobs direction.

Microelectronics manufacturing is not a big slice of IBM, which generated $100 billion in revenue last year. However, it directly tied its semiconductor research to its manufacturing capability.

With this deal, IBM's chip development is being compared to an ARM-like system, where chip technology is licensed to manufacturers.

IBM also underscored its intent to continue its semiconductor research and development. It said the sale has no impact on a previously announced $3 billion, five-year investment in semiconductor research. It said the sale will help the company improve its focus on cloud computing, big data analytics and security.

By selling its microelectronics business, IBM may have felt it couldn't act aggressively enough to meet both consumer and industrial demand in the emerging Internet of Things market. IoT devices are expected drive demand for radio technologies and ASIC (application-specific integrated circuits) components.

IBM said the sale "opens up business opportunities" in radio frequency (RF) and specialty technologies and ASIC design capabilities.

If IBM sees a technology becoming a commodity, the company will shed it, as it did hard disk drives, PCs and recently the x86 server business to Lenovo.

IBM still makes mainframes and high-end servers, but the company has seen most of the growth opportunity in areas such as cognitive computing, illustrated by its Watson computing technologies, and Smarter Planet initiatives that couple data, mobile, social and cloud technologies to improve efficiencies.

From a job perspective, IBM said that GlobalFoundries will acquire and operate IBM manufacturing operations in East Fishkill, New York, and Essex Junction, Vermont.

There has been significant concern in the Northeast about the impact on jobs and IBM's future in semiconductor manufacturing. But the announcement said IBM "plans to provide employment opportunities for substantially all IBM employees at the two facilities."

GlobalFoundries was created in 2008 through an agreement with the AMD and Advanced Technology Investment Company (ATIC) of Abu Dhabi, its majority owner.

Copyright © 2014 IDG Communications, Inc.

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