IBM eyes sale of semiconductor arm
A pedestrian walks past International Business Machines Corp. (IBM) offices in New York©Bloomberg
IBM is exploring a sale of its semiconductor business in what would be its most significant strategic move since it faced a financial crisis in the early 1990s.
The US technology giant has appointed Goldman Sachs to sound out possible buyers for the business, according to people familiar with the matter. IBM is not wedded to the idea of selling and could also seek a partner with which to create a joint venture for its semiconductor operations, these people said. A value for the business could not be learnt.
“It is a step away from their heritage,” said Patrick Moorhead, an analyst at Moor Insights and Strategy. “This is probably their biggest strategic realignment for 20 years.”
News of the process comes just a fortnight after IBM announced the sale of its low-end server business to Lenovo for $2.3bn.
However, unlike the server sale and disposals of other commodity businesses in recent years, a sale of the chip division would involve an exit from one of the most technology-intensive parts of its business.
IBM is one of a handful of companies around the world that have invested the billions of dollars needed to be on the cutting edge of the latest generation of silicon technology.
It is credited by analysts with having stolen a lead over US rival Intel in some advanced technologies.
The most likely buyers would be semiconductor manufacturing groups Global Foundries and TSMC, Mr Moorhead added. Along with Samsung and Intel, these would be the only companies left in a field that has narrowed as the cost of building new generations of advanced fabrication plants, or “fabs”, has risen into billions of dollars.
The prospect of a disposal surprised some analysts, who said that having the most powerful chips at the heart of its IT systems had given IBM an edge in developing some of its most advanced computing applications, such as the Watson question-and-answer system.
“I’d be shocked – there would be no Watson without [IBM’s] Power chips,” said Rick Doherty, an analyst at Evisioneering in New York. “Take away the Silicon part, and IBM may not be the tech giant it is 10 years from now.”
Take away the Silicon part, and IBM may not be the tech giant it is 10 years from now
- Rick Doherty, Evisioneering analyst
He added that much of IBM’s most important intellectual property was tied up with its semiconductor business.
However, despite the huge investments and advanced technology needed to be in chips, the business has become an increasingly less important part of IBM’s operations in recent years as it has expanded in software and services.
Any disposal or joint venture would have to ensure that IBM still had access to advanced chipmaking facilities so that it had a guaranteed supply of the chips for its most advanced applications, Mr Doherty said.
IBM and its advisers declined to comment.