Tag: chip

Berkshire Hathaway Says Blue Chip Law Firm Aided Fraud

FRANKFURT — Berkshire Hathaway may have found a way to get back some of the hundreds of millions of dollars it lost after buying a seemingly solid German pipe maker that turned out to be on the verge of going bust.

The conglomerate, led by Warren E. Buffett, is suing Jones Day, the law firm that represented the owners of the pipe maker when it was sold to a Berkshire Hathaway subsidiary in 2017. The lawsuit, filed late last month, accuses Jones Day of helping to trick Berkshire Hathaway into paying five times what the German company was worth.

There is not much chance that Berkshire Hathaway will recover any money from the sellers of the pipe maker, Wilhelm Schulz, which was named for its founder. The shareholders have declared bankruptcy and are facing a criminal investigation in Germany. But Jones Day is a prominent international law firm with deeper pockets.

The attempt to collect damages from Jones Day is an unexpected twist in the saga of Wilhelm Schulz, which is based in Krefeld, a city north of Düsseldorf. If the suit is successful, it will be at least a small consolation to Berkshire Hathaway shareholders after the company lost $23.3 billion in the first half of 2020. (Profits rebounded in the later part of the period, however.)

“The fraudulent transaction would never have occurred without Jones Day’s substantial assistance,” according to the lawsuit, filed in U.S. District Court in Houston on behalf of Precision Castparts, a Berkshire Hathaway subsidiary that makes components for aircraft. The lawsuit accuses Jones Day of withholding documents that would have exposed Wilhelm Schulz’s perilous financial state and calls the firm a “co-conspirator” in a “massive fraud.”

Ulrich Brauer, the partner in charge of Jones Day’s office in Düsseldorf, said the firm would not comment on a pending case.

Jones Day lawyers in Houston and Düsseldorf handled the sale of Wilhelm Schulz, which specializes in pipes for the oil and gas industries. Jones Day also represented the owners, who included Wolfgang Schulz, the son of the founder, when the case went before an arbitration panel in New York.

The panel found in April that Mr. Schulz and other managers had used false sales invoices, computer hacks and phantom customers to make Wilhelm Schulz look healthier than it was and hoodwink Precision Castparts into paying a grossly inflated price. The deal was a rare misstep for the organization run by Mr. Buffett, who is considered one of the savviest investors in the world.

The arbitrators awarded 643 million euros ($756 million) in damages to Precision Castparts, which is based in Portland, Ore. That is the difference between the €800 million that Precision Castparts paid for Wilhelm Schulz and its estimated true value of €157 million. The arbitrators’ decision was upheld in July by the U.S. District Court for the Southern District of New York.

Because the holding company controlled by Mr. Schulz is in insolvency proceedings, “it is unclear if it will pay even a fraction

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As SkyWater expansion shows, government’s role in U.S. chip industry is rising

The U.S. semiconductor industry may need to rely more heavily on government investment to build new plants in coming years, executives and officials said Monday at an event marking the expansion of Minnesota’s largest chip factory.

The growing cost of new chip factories — the most advanced of which exceed $10 billion — and the need to keep up with chipmakers in countries where government help is common are pushing the U.S. chip industry and government together in a way not seen since the 1980s.

The U.S. Department of Defense paid $170 million to fund SkyWater Technology Inc.’s third clean room at its factory near the Mall of America in Bloomington.

The company will use the room, which is bigger than the size of a football field and about four stories in height, in part to build radiation-hardened chips. Such chips, known as rad-hard and a relatively small portion of the chip business, are used in weapons, medical devices and in space.

For SkyWater, a contract manufacturer for other chipmakers and design firms, the clean room expansion will allow it to enter the rad-hard market.

“We’re all standing here today because of a very successful private-public partnership,” Tom Sonderman, SkyWater’s chief executive, said at an opening ceremony. “When done right, these partnerships represent a tremendous opportunity to help domestic manufacturing take a leap forward.”

The expansion was announced last October and construction proceeded even after the coronavirus outbreak. After equipment installation and testing, production will begin a year from now. SkyWater will continue to produce chips in its two existing clean rooms, built in the 1980s and 1990s.

While the U.S. is producing more chips from more factories than ever, it has been far outpaced by the growth of chip production in Asian countries, particularly in South Korea and Taiwan.

But it is China, where chip factories are rising after it came to dominate the making of finished electronics goods, that has alarmed U.S. officials like nothing since Japan’s rise in the chip business in the 1980s.

The U.S. now accounts for 12% of global chip manufacturing, down from 37% in 1990.

“Our manufacturing has continued to rise. The rest of the world has exploded,” John Neuffer, chief executive of the Semiconductor Industry Association, said after the SkyWater event. “We’re not talking about bringing all the supply back. We’re talking about rebalancing.”

He said the trade group would like Congress to back an effort to stop the declining U.S. role in global chip manufacturing, in part through more partnerships like the one between the Pentagon and SkyWater and in part by boosting funding for chip-related research and development.

“If we stay on the trajectory we’re on right now, in the next 10 years we’ll go from 12% to 10%,” Neuffer said. “At a minimum, we want to arrest the fall and then build back.”

Jeb Nadaner, deputy assistant secretary of defense for industrial policy, said the coronavirus pandemic has revealed the risk to the U.S. of relying too heavily on

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