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IBM jettisons IC-packaging units, sells plants to Amkor

Posted: 21 May 2004 ?? ?Print Version ?Bookmark and Share

Keywords:ibm? amkor technology? chip assembly? packaging?

IBM Corp. has moved to jettison its chip assembly and packaging operations, announcing a major deal with Amkor Technology Inc.

As part of the complex, four-part deal, Amkor will acquire IBM's Singapore test operations, including testers, assets and employees. Amkor will also buy the land and a 950,000 square-foot manufacturing complex built for IBM in Shanghai, China.

In addition, Amkor will receive the substantial majority of IBM's subcontract wire bond and flip-chip assembly and final test business. Amkor said agreement could generate in excess of $1.5 billion in assembly and test revenue through 2010.

Finally, Amkor will enter into a cross-licensing agreement covering select IBM and Amkor assembly and test technology.

The transaction is valued at about $145 million, consisting of $114 million for land, buildings and fixtures, and $31 million for equipment and intangibles.

Amkor will pay IBM a total of $63 million for fixtures, equipment, intangibles and intellectual property, with payments of $20 million at closing, which is expected by May 31, and $43 million in the fourth quarter of 2004. Amkor will pay $82 million to the China building developer in the fourth quarter.

The moves represent the latest efforts by IBM to cut costs within its loss-ridden semiconductor unit. IBM has been selling off select standard chip products to various companies.

Last month, IBM disclosed it lost $150 million alone within its struggling semiconductor unit due to ongoing chip yield problems and a drop in intellectual property revenues. One problem is ongoing yield issues within its 300mm fab here.

However, IBM's struggling Microelectronics Division may be at a turning point. IBM Microelectronics is currently running at full capacity within its 200- and 300mm fabs amid strong and sudden demand for its ASIC and silicon foundry businesses, according to executives from the unit. The chip unit continues to wrestle with its chip yields, but claims it is close to resolving these nagging issues.

IBM's move to jettison its chip-packaging operations also underscores a recent trend. Many integrated device manufacturers (IDMs) have begun outsourcing more of their internal IC-packaging production to independent subcontractors. Many IDMs have simply sold off their chip-packaging units to subcontractors.

Amkor has been especially active in this arena. "We expect the incremental revenue associated with this supply agreement will be modest in 2004, with most of the effort this year focused on qualifying a number of new products," said Oleg Khaykin, Amkor's executive VP for corporate development. "However, based on preliminary volume estimates, we anticipate the revenue associated with this supply agreement could exceed $150 million in 2005."

James Kim, Amkor's chairman and CEO, said the deal expands the company's presence in Asia. "In addition, acquiring IBM's test operation in Singapore broadens Amkor's operational footprint with immediate advanced test capability in this important center for microelectronics manufacturing," Kim said.

- Mark LaPedus

Silicon Strategies

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