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Date: 09-02-14

Report on IBM selling its semiconductor biz; who are the potential buyers?

IBM is comparable to Pacific Ocean in electronics and computer technology. In semiconductor area, IBM is the leader by depth and breadth of the field. Not just in most advancements in silicon chips but also in the most of the hot areas such as Graphene, nanotube, III-IV compound semiconductor, 3D chip packaging, IBM is at top. You name the semiconductor tech, IBM leads mostly the best in many sub-domains of chip technology, and a 2nd position if it missed numer one position.

With that level lead and huge IP reserves, IBM has in semiconductor technology. The weak point IBM finding is, it may not be making proportional money out of it. Along with technology challenges, running a foundry is becoming more of business, operational, maintenance challenges. IBM is also competing with its own technology partners such as GlobalFoundries, Samsung and other fab partners. The semiconductor fab owned by IBM is one of the most advanced, if it can be converted to a full fledged foundry, IBM can make more money. Intel is already offering foundry services.

If the reported news stories about IBM selling its semiconductor factory to be believed, they may not want to manage the foundry business on their own. They may wish to have a partner to own and manage the semiconductor fab, a partner who has experience in foundry or has extreme interest in foundry services business. So IBM can concentrate on research and create more IP.

The idea may be to disrupt the present foundry business model to IBM's benefit, otherwise take the advantage of emerging fab-business model. In semiconductor fabs around the world, there is also geo-political interest and they are strategic in nature. China's leading fab SMIC is into 28nm mass production. Taiwan, with most advanced foundries in the world is making much of the chips for the world with huge market share and India is also on the fast path to make chips locally. Amid all these trends, IBM might be trying to take the best business decision.

Natural choice for IBM is to sell its semiconductor manufacturing business (but not the patents) to its technology alliance partners such as Globalfoundries and Samsung. The 2nd chance is, since Lenovo is buying its server biz, there are some chances the buyer is mostly from China or Taiwan, or Lenovo itself may buy. TSMC, UMC and SMIC all have chances but TSMC is cash-rich.

No semiconductor chip maker headquartered in U.S. or Japan are going to be interested in buying semiconductor manufacturing, they are already shedding the fab load and will be very happy to become IBM's foundry customer. European companies least interested in owning a fab, for what so ever reason.

If any American company interested in this business, it should be a leader in mobile device space, whose chips now currently consuming maximum capacity of leading foundries. Apple is there, but less chances of Apple venturing into chip production. Apple business model itself is full of innovation, but it is least possible of Apple carrying a burden of running a fab. One probable company comes to mind! Microsoft! If somebody say why should a software company like Microsoft buy a semiconductor manufacturing facility, then why did they buy Nokia. To give you one more clue Intel owns a real time software OS vendor Wind River. Though Microsoft is the last in the guesses, but still stands a good chance. There is also a better chance of team of investors from U.S. owning the IBM chip factory to offer foundry services to local fables companies, this looks to be the most possible and potential enough for high profits. IBM may provide the technology for the fab but the factory owner going to do the operations and commerce. Even for one of the planned India-fab, IBM is the technology partner.

Is IBM completely getting away from semiconductor domain? A 'yes' answer is a wrong guess at this time, they are leveraging the present market situation and changing the business model accordingly.

In technology domain, it is not just disruptive technologies alone working, there is also a trend of disruptive business innovations. IBM is trying to innovative everywhere.

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