IBM hits setback in bid to sell chip making unit

IBM's plans to sell its money-losing chip-manufacturing operations to Globalfoundries hit a snag when the two firms couldn't agree on a price, according to Bloomberg.

Citing sources familiar with the process, Bloomberg said Globalfoundries made an offer that IBM felt was too low. Globalfoundries, the spin-off that used to be AMD's manufacturing arm and largely owned by an investment group for the government of Abu Dhabi, reportedly placed little or no value on IBM's factories because they are too old.

Fabs are a really expensive proposition, they get out of date fast and cost a fortune to keep up to date. Globalfoundries wasn't really interested in IBM's fabs, which are located in New York state along with GF's own massive facility. It wanted the IBM engineers and intellectual property that came with the fabs. Had the deal gone through, GF would be the supplier of chips to IBM.

It's a setback for IBM CEO Virginia "Ginni" Rometty, who is trying to get rid of less profitable business units and right the financial ship of IBM. The company has experienced two years of declining revenues, all on her watch as CEO. Both sides have something of an incentive to make the deal, more so for IBM, and neither side said talks were dead. They may come back and start over any time.

While Rometty has sought to get rid of the manufacturing side, IBM remains committed to chip design and development. It recently announced a $3 billion initiative over the next five years into semiconductor research and development to create smaller, more powerful chips for its mainframe, System P and Watson systems.

IBM wasn't just intending to make smaller, faster chips, it was also looking at new materials beyond silicon dioxide. After years of breakthroughs, chip designers have reached something of a limit in how small they can make silicon products.

IBM is looking at materials like graphene and carbon nanotubes, among others, to replace silicon in semiconductors and scale those down even below the 14nm and 10nm Intel is talking about now, down to the atomic level.

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