Globalfoundries Launches Legal Battle Against Taiwan Semiconductor, Also Targets Manufacturers
August 26 2019 - 6:14PM
Dow Jones News
By Asa Fitch
Chip maker Globalfoundries Inc. has launched a legal attack on
several fronts against larger rival Taiwan Semiconductor
Manufacturing Co., including a request that the U.S. government
impose an import ban that could hit items such as iPhones, Lenovo
laptops and a slew of other electronic devices.
Globalfoundries alleged in 25 complaints filed across courts in
Germany, Texas and Delaware -- and before the U.S. International
Trade Commission -- that TSMC violated more than a dozen patents
covering chips and methods for making them, the U.S. company said
on Monday.
The ITC is an independent, quasi-judicial body that can block
importing of foreign products that are found to infringe U.S.
patents.
"For years, while we have been devoting billions of dollars to
domestic research and development, TSMC has been unlawfully reaping
the benefits of our investments," Globalfoundries Senior Vice
President Gregg Bartlett said in a statement. He added the suit
also sought to protect the American and European manufacturing base
for all companies.
TSMC didn't immediately respond to a request for comment. Apple
Inc. and Lenovo Group Ltd. also didn't immediately respond to
requests for comment.
Globalfoundtries's legal broadside comes as the Trump
administration has pressed companies to increase U.S. production
and relocate jobs that were shifted overseas back to America. An
ITC-import ban could have a significant impact on TSMC and
customers like Apple and Lenovo that do a lot of their
manufacturing abroad.
Globalfoundries -- which is based in Santa Clara, Calif., but
owned by Mubadala Investment Co., an investment arm of the Abu
Dhabi government -- said it has invested $15 billion in the U.S. in
the last decade and more than $6 billion in Europe. "These lawsuits
are aimed at protecting those investments," Mr. Bartlett said.
Despite the spending, Globalfoundries has fallen behind big chip
companies that make their products on contract for others. TSMC,
the world's largest contract chip maker, and Samsung Electronics
Co. have won market share by introducing ever-smaller transistors
that allowed their chips to power faster and smaller computers. It
costs billions of dollars to build factories for smaller chips.
TSMC has more than $10 billion in annual capital spending.
Globalfoundries has shifted focus in recent years to less
cutting-edge chips that were cheaper to make but still profitable.
TSMC had a market share of 48.1% for contract chip makers in the
first quarter of this year, versus 19.1% for Samsung and 8.4% for
Globalfoundries, according to TrendForce, a Taiwanese
market-intelligence firm.
Globalfoundries alleged in the lawsuits that TSMC-made chips
that infringe on U.S. and German patents are used by chip designers
such as Broadcom Inc., Nvidia Corp. and Xilinx Inc., as well as
electronic device makers including Apple, Lenovo, Cisco Systems
Inc. and Alphabet Inc.'s Google.
Patrick Moorhead, the president of analysis and advisory firm
Moor Insights & Strategy, said Globalfoundries was probably
targeting device makers like Apple because they won't likely be its
customers -- they need chips that are faster than the ones
Globalfoundries makes.
"You can bet Globalfoundries was trying to collect royalties
behind the scenes, failed, and will now let the courts decide," he
said. "The end [manufacturers] aren't the main target, but targeted
to put pressure on TSMC."
A Globalfoundries spokeswoman disputed that the company was
trying to collect royalties, saying the suits instead aimed to
protect investments and inventions.
"We are no longer willing to stand by while TSMC unlawfully
violates our patented technology," she said.
The ITC typically decides within about a month after a complaint
is filed whether an investigation is merited. It tries to issue a
final verdict within 15 months. The ITC couldn't immediately be
reached for comment.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
August 26, 2019 17:59 ET (21:59 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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