U.S. Markets closed

IBM puts $3B toward chip research

Hot Stock Minute

IBM (IBM) said it would commit $3 billion over five years to semiconductor research. The company said Wednesday that it plans to make microchips with smaller circuitry and more components that are faster and more energy-efficient. The company already spends about $6 billion a year on research and development.

IBM hopes to shrink the size of the tiny circuits from 22 nanometers to 7 nanometers, about a thousandth of the width of a human hair. Researchers will also experiment designing chips using some unproven techniques that use quantum physics and that are inspired by the brain.

While IBM plans to continue researching and licensing chips, the company signaled its intention to get out of the chip manufacturing business. It's reportedly looking to sell its chip manufacturing plants in East Fishkill, NY and Burlington, VT to GlobalFoundries.

Yahoo Senior Columnist Mike Santoli finds the messaging around the announcement interesting. He said that $3 billion over five years – or $600 million annualized - isn’t very much money, and that IBM has arguably underinvested in R&D in the last decade. By comparison, he said the ten companies that spent the most on R&D in the world invested $27 billion last year alone.

He said revenue growth has been an issue for IBM for more than a decade, but the company and its CEO Virginia Rometty are on the right track to turn that around. Santoli said IBM has been shrinking strategically by doing things like selling off some of its less-profitable hardware businesses and buying back stock. So while Rometty’s on the right track, Santoli said, “she has a pretty tough job and nobody’s opening the door for IBM in this, at this point in the market.”