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

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One-time AMD fab limb, GlobalFoundries, is laying the litigation down on IBM to escape the $2.5 billion damages Big Blue is trying to squeeze out of it just ahead of its initial public offering (IPO). That, it states, is the prime driver behind IBM's recent demands with the company only looking for "a quick payday." (opens in new tab) 

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 (opens in new tab).

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.

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For its part, Reuters quotes IBM (opens in new tab) 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 (opens in new tab) which is aimed at strengthening semiconductor industry in the United States, making it a newly fertile ground for foundries seeking investment.

Dave has been gaming since the days of Zaxxon and Lady Bug on the Colecovision, and code books for the Commodore Vic 20 (Death Race 2000!). He built his first gaming PC at the tender age of 16, and finally finished bug-fixing the Cyrix-based system around a year later. When he dropped it out of the window. He first started writing for Official PlayStation Magazine and Xbox World many decades ago, then moved onto PC Format full-time, then PC Gamer, TechRadar, and T3 among others. Now he's back, writing about the nightmarish graphics card market, CPUs with more cores than sense, gaming laptops hotter than the sun, and SSDs more capacious than a Cybertruck.