IBM makes case for retaining chip fab
In this second of a three-part series, IBM responds to comments from analysts and IBMers about the future of the company as a chipmaker (see IBM reaches pivotal moment in chip fabrication).
IBM declined to comment on reports in February that it is exploring a sale of one or both of its fabs. But a senior executive in IBM's chip group makes the case those fabs remain strategic.
"The latest Power 8 processors have four times more threads and twice the memory bandwidth of the desktop-derived processors [from Intel]. That gives us an advantage for the new workloads coming," says Arvind Krishna, general manager for the development and manufacturing unit in the IBM Systems and Technology Group.
"To get those advantages we have to design our own microprocessors... and to build those processors we have to advance the state of process technology in areas like lithography and [circuit] characteristics."
Unfortunately, Power system sales are in a significant decline. After reaching a plateau in about 2005 of $7.5 billion, sales started to slide and last year dropped more than 30 per cent to $3.9 billion.
In its 2013 annual report, IBM said it "recognises that the size of the Power platform will not return to prior revenue levels. The company will take action by right-sizing the business for the demand characteristics it expects."
IBM has done that "right-sizing," on several fronts, Krishna argues. For example, it is now adopting standard KVM virtualisation software across all its systems rather than developing software unique to each platform.
In addition, it is likely to reduce the variety of models of Power systems it designs. "As opposed to 15 Power models, maybe I can get away with 10," he says.
Its biggest effort came in April when it made the Power processor design open-source, something the former Sun Microsystems tried unsuccessfully with its Sparc processor years ago. Members of the Open Power Foundation may "design and manufacture Power [chips, doing] design iterations and refinements and making wherever they like," says Krishna.
So far, Google has shown board-level designs but not commented on plans to use them in its data centres. A company in China says it will license Power.
In a separate move, IBM announced in January the sale to Lenovo of its related business making x86-based servers.
The efforts have helped IBM keep its chip operations intact. However, the company routinely continues to review all its make-vs-buy decisions, Krishna says. "Our shareholders and customers expect us to."
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