Globalfoundries Launches Legal Battle Against Taiwan Semiconductor -- Update

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 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 on 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 respond to a request for comment. Apple Inc. declined to comment, and Lenovo Group Ltd. didn't respond to a request for comment.

Globalfoundries' legal broadside comes as the Trump administration has pressed companies to increase U.S. production and relocate jobs that had been 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 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.

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 19:10 ET (23:10 GMT)

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