GlobalFoundries seeks ruling in IBM contract dispute

GlobalFoundries has received accusations from IBM, stating that it did not keep its contract as it failed to continue making chips for IBM.

GlobalFoundries seeks ruling in IBM contract dispute

On Monday, GlobalFoundries, the Semiconductor Manufacturer sued International Business Machines Corp (IBM) and asked the judge to rule that the former, did not violate a contract with the U.S. company, which is now claiming $2.5 billion for damages. 

According to a filing by GlobalFoundries with the state court in New York, GlobalFoundries, owned by Abu Dhabi’s state-owned fund Mubadala, has received accusations from IBM, stating that it did not keep its contract as it failed to continue making chips for IBM.

In 2014, GlobalFoundries had purchased IBM’s semiconductor plants, the same time around which  IBM had decided to exit its own business of manufacturing its chips for itself. But it is was in 2018 that IBM had stopped making advanced chipmaking technology, owing to its high cost of development, and had instead turned to Samsung Electronics Co Ltd (005930.KS) to make its chips.

IBM “went silent for nearly two-and-a-half years” after the changes in 2018, but then in April of this year sent GlobalFoundries a letter alleging that the chipmaker had violated its contract,” the filing said.

“Other than threatening to sue unless it capitulated to its demands, IBM has yet to provide any substantive explanation as to its claims,” GlobalFoundries wrote in the suit.

In a statement, IBM said that it believes that GlobalFoundries had not fulfiled its obligations that were required under the contract.

“IBM contributed $1.5B to Global Foundries to supply the next generation of chips, and Global Foundries utterly abandoned IBM as soon as the final payment was received and sold off assets from the deal for its own enrichment,” IBM said.

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