TAIPEI -- Struggling U.S. chipmaker Globalfoundries has filed lawsuits against bigger rival Taiwan Semiconductor Manufacturing Co. in what analysts describe as an attempt to gain political support amid the escalating trade war with China.
Globalfoundries has filed suits in the U.S. and Germany alleging 16 cases of patent infringement and seeking to block imports of TSMC products into those countries. The company said in a statement that it has suffered "significant damages from TSMC based on TSMC's unlawful use of GF's proprietary technology in its tens of billions of dollars of sales."
Hsinchu, Taiwan-based TSMC is the world's largest contract chipmaker, controlling nearly half the global market and supplying all major chip developers including Apple, Huawei Technologies and Qualcomm, as well as at least 460 others. Meanwhile Globalfoundries, the only U.S.-registered contract chipmaker, has faced numerous headwinds recently, particularly in China, and has been forced to scale back its business since last year.
Elizabeth Sun, a spokesperson for TSMC, told the Nikkei Asian Review on Tuesday morning that "TSMC always respects intellectual properties and TSMC develops and owns all of its chip technologies."
TSMC later issued a statement calling GlobalFoundries' allegations "baseless" and saying it "will fight vigorously, using any and all options, to protect our proprietary technologies."
Given the trade tensions between Washington and Beijing and the Trump administration's blacklisting of Chinese tech company Huawei, analysts say Globalfoundries' legal action is likely aimed at gaining sympathy -- and protection -- from the U.S. government.
"Globalfoundries hopes to take the opportunity of the trade tension between the U.S. and China to see if the American government could offer more support to the only major contract chipmaker that is registered in the U.S.," said Arisa Liu, a semiconductor analyst at Taiwan Institute of Economic Research. "After all, the Trump administration is always hoping for more products to be made in the U.S."
Mark Li, a veteran semiconductor analyst at Bernstein Research, offered a similar view.
"Globalfoundries tries to portray this politically as Asia profiting off the technologies developed by Western countries," Li said in a research note. "This is just another desperate act of GF to get the salvage value of their technologies as the company lost the battle in advanced nodes and announced to exit from the advanced chip manufacturing business a year ago. ... We also won't be surprised if TSMC countersues for a similar patent infringement in the technologies that GF still has business in to facilitate a faster and more favorable settlement."
Globalfoundries is asking the U.S. International Trade Commission to block imports of TSMC products, including devices that contain chips made by the company. This would affect consumer items like iPhones, iPads and Google devices, as well as products by other semiconductor designers, such as Qualcomm and Nvidia. The ITC is an independent agency with the authority to restrict imports of foreign products that are found to infringe on U.S. patents. The court complaint is still at the preliminary stage but if a ban is imposed, it could cause massive supply chain disruption, market watchers said.
According to Liu, however, the likelihood of this happening is not high.
"It's really not that likely from a legal point of view that there will be a ban on TSMC and TSMC's customers, including Apple, shipping products to the U.S. The Taiwanese chip titan has a reputation for its large amount of patents, including some 19,300 patents that it filed in the U.S. last year."
This is not the first time that GlobalFoundries has taken complaints about its rival to government agencies. In the second half of 2017, it lodged a complaint with the European Commission accusing TSMC of unfairly using rebates and even penalties to prevent customers from defecting to other suppliers. It also asked Chinese regulators to probe TSMC for allegedly violating antitrust laws, the Nikkei Asian Review first reported last March. So far, there has been no significant development in either case.
The most recent legal wrangling comes as Globalfoundries struggles to stay afloat amid escalating competition. Big players such as Samsung Electronics, the world's biggest memory chipmaker, has switched from making chips mostly for its own uses to manufacturing for others in its search for new sources of growth. Meanwhile, the global economic outlook is weakening due to uncertainties brought by the prolonged trade tension between the U.S. and China.
Globalfoundries has been helping Huawei's chip unit HiSilicon Technologies build chips, but was forced to abandon a big part of that business following Washington's blacklisting of the Chinese company, sources familiar with the matter said. Globalfoundries did not respond to Nikkei's request for comment on whether the Huawei crackdown is impacting its business.
The company has faced other headwinds in China, as well as its own financial woes. Last year, it partially suspended construction of its first Chinese factory in Chengdu, and this year it sold several facilities to rival companies, including U.S. chipmaker ON Semiconductor and Vanguard International Semiconductor, a TSMC affiliate.
Globalfoundries -- which is controlled by Mubadala Investment, an Abu Dhabi state-owned fund -- also announced last year that it was abandoning development of its next-generation advanced 7-nanometer process technology.
At the same time, smaller Chinese rival Semiconductor Manufacturing International Co. is attempting to catch up in chip production technologies as part of Beijing's push for self-sufficiency in chips.
Globalfoundries controlled some 8.7% of the global market for foundry services, or making chips for others, in April-June, while TSMC's market share was about 49.2%, according to market research company TrendForce. Samsung's foundry controlled some 18%, but that also includes businesses making chips for its own parent company, Samsung Electronics. China’s SMIC has a 5.1% global market share.
"These lawsuits are aimed at protecting those investments and the US and European-based innovation that powers them," said Gregg Bartlett, senior vice president, engineering and technology at Globalfoundries in a statement. "TSMC has been unlawfully reaping the benefits of our investments. This action is critical to halt Taiwan Semiconductor’s unlawful use of our vital assets and to safeguard the American and European manufacturing base."