Tech giant IBM (NYSE:IBM) has partnered with Rapidus Corporation to make advanced chips, with the aim to start mass production in the second half of the decade. Rapidus is a newly formed chip foundry backed by the Japanese government. The deal comes at a time when the U.S. has restricted the export of advanced semiconductor technology to China and has urged its allies, including Japan, to do the same.
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As part of this strategic partnership, IBM and Rapidus will further develop IBM’s 2 nanometer (nm) node technology. IBM’s 2 nm chip technology, first unveiled in May 2021, is expected to achieve 45% better performance or 75% more energy efficiency than 7 nm chips. Rapidus scientists and engineers will collaborate with IBM Japan and IBM researchers at the Albany NanoTech Complex in New York, one of the world’s most leading semiconductor research facilities.
Last month, the Japanese government announced an initial investment of 70 billion yen (about $500 million) in Rapidus, a semiconductor venture led by a consortium of eight companies, including Sony Group (SONY) and Toyota Motor (TM). The venture is expected to help Japan revive its semiconductor industry. Moreover, the growing tensions between the U.S. and China and the COVID-led supply chain disruptions have reinforced the need to reduce the reliance on China for semiconductors.
Darío Gil, IBM’s senior vice president and director of research, said, “This collaboration is critical to ensure a geographically balanced global supply chain of advanced semiconductors, built through a vibrant ecosystem of like-minded companies and nations.”
Is IBM a Buy, Sell, or Hold?
IBM scores Wall Street’s Moderate Buy consensus rating based on five Buys, two Holds, and one Sell rating. The average IBM stock price target of $140.63 suggests a possible downside of 5.8%. Shares have advanced nearly 12% year-to-date. IBM is currently trading at a forward Price/Earnings (P/E based on adjusted earnings estimates) multiple of 16.3x, which is 15.4% lower than the sector median.
