Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, and rival GlobalFoundries have resolved a patent dispute that risked entangling their customer Apple and several other of the world’s largest technology companies.

The two agreed to cross-license each other’s existing worldwide semiconductor patents as well as those filed within the next 10 years, TSMC said in a joint statement with California-based GlobalFoundries.

In August, GlobalFoundries filed 25 patent infringement lawsuits against TSMC seeking an injunction to ban the import of iPhones and some other Apple products into the US and Germany.

Earlier this month, TSMC responded by filing complaints in three countries against GlobalFoundries, claiming it was “ready for battle in the courts”.

Their clash highlighted the dependence of the global technology industry on TSMC, which controls half of the world’s market for made-to-order chips. TSMC’s position has grown even more crucial after GlobalFoundries dropped out of the race to develop the technology for producing 7-nanometre chips, the most advanced processors, over the prohibitive investment cost.

The truce comes after TSMC reported a stronger-than-expected 13.5 per cent rise in net profit for the third quarter and drastically increased its capital spending budget for this year by 40 per cent to $14bn-$15bn, citing expected demand for 5G. TSMC now competes only with Samsung on 7-nanometre chips, which accounted for more than one quarter of TSMC’s shipments in the third quarter.

Apart from Apple, GlobalFoundries had also named as defendants Broadcom, Nvidia, Qualcomm and Xilinx — leading US chip design houses — as well as Google, Motorola, Taiwanese tech gadget maker Asus and Chinese PC company Lenovo.

TSMC and GlobalFoundries did not disclose financial conditions or any other detail of their settlement, which resolves all current disputes.

Beyond the patent litigation, the fierce competition between GlobalFoundries and TSMC was visible in recent weeks in discussions over the security of the semiconductor supply chain in the face of China’s growing power. A US chip industry executive said there were concerns in Silicon Valley about whether US chip designs were safe with TSMC if China attacked Taiwan.

Elizabeth Sun, a TSMC spokeswoman, said there was “misleading propaganda” from GlobalFoundries about “the semiconductor industry’s heavy reliance on TSMC [being] somehow ‘insecure’ or ‘unsafe’”.

Thomas Caulfield, chief executive of GlobalFoundries, said the company was “pleased to have quickly reached this settlement”.

Sylvia Fang, TSMC’s general counsel, said: “The resolution is a positive development that keeps our focus on advancing the needs of our customers.”

https://www.ft.com/content/08558a7e-f9e6-11e9-a354-36acbbb0d9b6