The legal tiff that GlobalFoundries (GF) initiated with TSMC yesterday is yet another factor likely to impede growth and profitability in the semiconductor industry during the foreseeable future, according to analysts.

“The big impact will be if GF gets an injunction that stops customer imports into the EU and U.S.,” VLSI Research CEO Dan Hutcheson told EE Times. “This alone would prevent the industry’s recovery in 2020.”

GlobalFoundries filed 25 lawsuits in the U.S. and Germany against 20 major companies alleging patent infringement of 16 of its semiconductor device and manufacturing technologies used by TSMC.

GF seeks orders that will prevent semiconductors made by TSMC from being imported into the U.S. and Germany. The lawsuits require GF to name customers of TSMC who import products that incorporate the allegedly infringing technology. GF is also seeking damages from TSMC for patent infringement. Defendants named in the cases include Apple, Asus, Broadcom, Cisco, Google, HiSense, Lenovo, Mediatek, Motorola, Nvidia, Qualcomm and Xilinx.

GF’s suit could slow orders for TSMC, Hutcheson said.

The company has a “greater than 50%” chance of winning, in Hutcheson's estimation.

The difficulty will be that GF will be facing a wall of some of the world’s most lawyered-up companies, he said. “You can expect countersuits from TSMC. There’s a high likelihood that TSMC has intellectual property that’s being infringed on. This is going to be a long legal battle.”

The legal dispute comes at a time when other issues are dragging the electronics industry down. The U.S. is escalating a trade war with China that has hurt sales of iPhones and other electronic gadgets, most of which are assembled in China with chips imported from the rest of the world. There are also Japan’s restrictions on exports of key chemical materials to South Korea, aftershocks of which are impacting the global electronics industry.

Bucking the Asian trend

GF said it has bucked the shift of the semiconductor industry to Asia by investing heavily in America and Europe, spending more than $15 billion dollars in the last decade in the U.S. and more than $6 billion in Europe's largest chip fab. GF said the lawsuits are aimed at protecting its investments and the U.S. and European-based innovation that powers them.

The company may be attempting to tip the scales in its favor, according to IC Insights Research VP Brian Matas.

GF

“It’s hoping to sway courts in Europe and the U.S. by emphasizing investments being made in Germany and the United States,” Matas told EE Times. “These types of patent suits and attempts to stop imports of products hardly ever work, and the lawsuits drag on for years before they are settled out of court.

TSMC weighs in

For its part, TSMC is confident that GlobalFoundries’ allegations are “baseless”, the company said in a statement to the press. As a leading innovator, TSMC invests billions of dollars each year to independently develop its world-class, leading-edge semiconductor manufacturing technologies, according to the company.

“We are disappointed to see a foundry peer resort to meritless lawsuits instead of competing in the marketplace with technology,” TSMC said. “We will fight vigorously, using any and all options, to protect our proprietary technologies.”

TSMC added that it has established one of the largest semiconductor portfolios with more than 37,000 patents worldwide and a top-10 ranking for U.S. patent grants for three consecutive years since 2016.

GF’s infringement claims appear to be very common and generic, like “semiconductor device with transistor local interconnects,” according to Mike Demler, a senior analyst with The Linley Group.

“It’s almost impossible to support a patent for something as basic as building a transistor, since everybody pretty much does it the same way,” Demler says. “They might mix the recipe a bit, but if it’s obvious to ‘one skilled in the art’, it’s hard to claim uniqueness. It’s just another waste of money that will mostly go to the lawyers,” he said. 

A victory for GlobalFoundries will bring the world’s electronics companies to greater recognition on how dependent they are on TSMC, a single Taiwanese company, VLSI’s Hutcheson said.

“If GF wins against TSMC, other leading-edge foundries will be liable and likely to fall in line,” according to Hutcheson.