IBM to invest $3 billion in chip innovation

International Business Machines Corp. plans to spend $3 billion on semiconductor research and development in the next five years, even as the company is said to be selling its chip-manufacturing arm.

The company will fund two programs to create smaller, more powerful chips that can be used in systems like IBM's Watson technology -- which analyzes data in plain English -- and to develop semiconductor parts out of materials other than silicon, the company said in a statement.

The investment underscores IBM's plans to continue developing semiconductor technology at the same time it's parting ways with its chip factories. The Armonk, N.Y.-based company is nearing a deal to sell the chip-manufacturing business to Globalfoundries Inc., which is primarily interested in acquiring the unit's engineers and intellectual property, people with knowledge of the matter said last month.

IBM wants to maintain control of the design and intellectual property of the chips it uses, a person familiar with the matter said in February.

"We fundamentally believe that no other company can do this level of innovation for the chip," Tom Rosamilia, senior vice president of IBM's systems and technology division, said in an interview, discussing the research spending plans. "Our clients are driving us to continue to innovate to this high-performance world. It's all about the breakthroughs that are on the horizon that we see need to be done."

He declined to comment on whether the move would sweeten a potential sale of the manufacturing unit, saying the investment is to advance research for IBM and the technology industry.

The spending -- about $600 million a year, or 10 percent of IBM's annual research and development budget -- also illustrates the company's commitment to designing specialty semiconductors to run its mainframe, Power and Watson systems, Rosamilia said. He said he couldn't provide figures for IBM's semiconductor research and development over the past five years.

Business on 07/10/2014

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