Globalfoundries recently launched a patent infringement suit against rival semiconductor foundry and industry leader TSMC. The lawsuit pits two leading foundries, which provide semiconductor manufacturing services, against one another. TSMC being the largest foundry in the world and heavily investing in the bleeding-edge process technology and Globalfoundries being the smaller foundry focused more specialized process technology. Because the lawsuit is about patent infringement, however, it also pulls in many of TSMC’s customers that import the finished chips into the U.S. and Germany. As a result, this is yet another lawsuit that has huge implications for the entire technology industry.
Globalfoundries filed two suits with the U.S. International Trade commission and corresponding suits civil suits in Delaware and Texas in the U.S. and Dusseldorf and Mannheim in Germany. According to the company, the civil suits had to be filed in locations where the defendants have a business presence. The suit involves sixteen process technology patents involving five process nodes from 28nm to 7nm, which amounts to about a decade of process development in the tech industry. Because of the complexity of the case, the ITC has broken the complaint into two cases, which is not unusual in complex technology cases. If Globalfoundries wins the ITC case, they will seek an injunction against the importation of infringing products, much like what Qualcomm did against Apple. If Globalfoundries wins the corresponding civil cases, it can seek damages against TSMC.
The basis of the case is the contention that TSMC has been infringing on Globalfoundries semiconductor process technology patents for years without seeking any form of partnership, licensing agreement or cross licensing agreement. The case involves patents develop by both Globalfoundries and dating back to prior to the spinoff from AMD and from patents acquired from IBM, which was a leader in process technology development. IBM even leads an industry consortium on process technology development.
The implications of the case for the tech industry are huge. TSMC is the world’s largest semiconductor foundry and is used by a high percentage of entities developing chips and not just semiconductor companies. Many universities, government labs, and even system OEMs developing custom chips using TSMC for foundry services. If Global Foundries wins the ITC case and gets an injunction, many tech products ranging from smartphones to cars could be blocked for entering the US. This would impact everyone in the high-tech value chain from semiconductor intellectual property (IP) companies to consumers.
This also pits a Taiwanese company, with all of its manufacturing in Taiwan, against a U.S.-based company with manufacturing in Germany, Singapore, and the U.S. While not directly related to the trade war with China, several Chinese companies are listed in the lawsuit and the Chinese government is not going to appreciate that move against a Taiwanese company as it seeks the reunification of Taiwan with mainland China.
While Globalfoundries indicated that the other companies listed in the lawsuit were not the target of the suit, Globalfoundries was required to include the other companies because they are importers of the infringing products. The list of other companies includes semiconductor companies, distributors, and device OEMs from around the world, including Avnet/EBV, Apple, Arista, ASUS, BLU, Broadcom, Cisco, Digi-key, Google, HiSense, Lenovo, MediaTek, Motorola, Mouser, Nvidia, OnePlus, Qualcomm, and Xilinx. Ironically some of the semiconductor companies are customers of both Globalfoundries and TSMC.
At this point, the lawsuit appears to be targeted solely at TSMC. Globalfoundries has a close partnership with Samsung, the other leading-edge foundry, and Globalfoundries did not mention anything about other foundries like UMC in Taiwan or SMIC in China. However, if Globalfoundries is successful, it is possible the company will seek additional license agreements from other foundries in the future.
According to the ITC guidelines, the ITC cases could take up to eighteen months. So, there little concern that a decision would have an impact in 2019. And there is a strong possibility that the two sides will settle out of court with a cross-licensing agreement, which would prevent ether party from suing in the future. These broad cross-licensing agreements are also common in the tech industry.
This lawsuit is unique in that it is uncommon to see semiconductor foundries suing each other. However, as with the ITC and FTC (still pending) cases against Qualcomm, this case highlights the global value and growing importance of intellectual property. Unfortunately, it also demonstrates how the regulatory and legal systems continue to shape the high-tech industry.
The author and members of the TIRIAS Research staff do not hold equity positions in any of the companies mentioned. TIRIAS Research tracks and consults for companies throughout the electronics ecosystem from semiconductors to systems and sensors to the cloud. Members of the TIRIAS Research team have not consulted for Globalfoundries, TSMC, and other semiconductor foundries.