GlobalFoundries this week said that the U.S. authorities had approved its acquisition of IBM’s microelectronics business unit. From now on, GlobalFoundries will make various important semiconductors for the U.S. military and government agencies.

The Committee on Foreign Investment in the United States (CFIUS) has reviewed the proposed transaction between IBM and GlobalFoundries and concluded in favour of the deal, which means that nothing stops GlobalFoundries from taking over microelectronics operations from IBM. The transaction is expected to close in the near future.

Under the terms of the agreement between IBM and GlobalFoundries, the former will get and operate existing IBM fabs in East Fishkill, New York, and Essex Junction, Vermont. IBM will pay GlobalFoundries $1.5 billion over the next three years in order to take the fabs and respect existing contracts. GlobalFoundries will also get intellectual property, world-class semiconductor specialists and technologies related to IBM Microelectronics. In addition, GlobalFoundries will become IBM’s exclusive server processor maker for 22nm, 14nm and 10nm chips for the next 10 years.

The 200mm fab in Essex Junction, Vermont, produces certain high-end radar and other components for the U.S. government using SiGe and SOI processes, according to a media reports. Typically, the U.S. authorities demand that fabs producing such chips belong to the U.S. companies, but it appears that the CFIUS did not block the transaction.

“This acquisition solidifies GlobalFoundries’ leadership position in semiconductor technology development and manufacturing,” said Sanjay Jha, CEO of GlobalFoundries. “We can now offer our customers a broader range of differentiated leading-edge 3D transistor and RF technologies, and we will also improve our design ecosystem to accelerate time-to-revenue for our customers. This acquisition further strengthens advanced manufacturing in the United States, and builds on established relationships in New York and Vermont.”

IBM needed to get rid of its microelectronics business because the latter had generated a lot of losses for the company.

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KitGuru Says: While GlobalFoundries will naturally benefit from IBM’s intellectual property and new customers, it remains to be seen whether the company will manage to operate IBM’s outdated fabs profitably.

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