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U.S.: A Chipmaker's Patent Lawsuits Risk Upending the High-Tech Industry

2 MINS READAug 27, 2019 | 19:07 GMT
The Big Picture

The highly integrated global electronics manufacturing supply chain makes it especially vulnerable to disruptions in key nodes. The Taiwanese company TSMC supplies the lion's share of specialty data chips used in consumer and commercial products. That's why a patent infringement lawsuit filed against it could result in significant industry disruptions.

What Happened

Legal action taken by U.S.-based chipmaker GlobalFoundries has the potential to disrupt supply chains for manufacturers of a variety of consumer electronic devices, including heavy hitters such as Apple Inc. In multiple lawsuits filed Aug. 27 in the United States and Germany and in a complaint filed with the U.S. International Trade Commission (USITC), GlobalFoundries accuses rival Taiwan Semiconductor Manufacturing Co. (TSMC) of infringing on its patents by using its protected methods and equipment to manufacture certain types of semiconductors. It is seeking an import ban of the chips made by TSMC outside the United States using those processes and of any devices containing those chips.

Why It Matters

If GlobalFoundries, which is owned by the Emirati sovereign wealth fund Mubadala, prevails, a wide swath of products, including smartphones, PCs, televisions, routers and switches made outside the United States could be affected. Some companies, such as Apple, source chips for almost all products from the Taiwanese company. TSMC, a chief link in the electronics supply chain, holds a 48 percent share of the market for chips manufactured using its customers' designs. Included as defendants in the suits are 19 other companies, including Apple and other big names such as Nvidia Corp., Qualcomm Inc., Cisco Systems, Google, Lenovo and Motorola. The chances of U.S. courts ordering an outright ban on TSMC products appear slim, but the cases could result in significant monetary damages and fines. The USITC could also issue a ban, but it takes into consideration the best interests of the public when considering such decisions.

Background

In its legal filings and media statements, GlobalFoundries — which operates fabrication facilities in Germany, the United States, Singapore and China — has positioned its case as an example of the broader transition of the tech manufacturing migrating from the United States and Europe to Asia driven by infringement of patents developed in the West. This raises the possibility that the timing of the lawsuits could indicate that the company is trying to take advantage of prevailing U.S. political sentiments.
 

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