Several companies have been named as potential buyers including Intel and Taiwan Semiconductor Manufacturing.
However, the Wall Street Journal quoting unidentified sources as saying that GloFo was making Big Blue the best offer it could not refuse.
TSMC dropped out for unspecified reasons, and it is not clear if Chipzilla is serious about buying the outfit.
The sort of money on the table is not good news for IBM. IBM had asked for $2 billion but potential bidders only wanted a little over $1 billion.
GloFo, IBM, TSMC and Intel are not saying anything about the deal, but at this stage we would not expect them to.
A sale of the chip making operations would be IBM's most significant strategic shift since the firm got out of the PC business in 2004.
Chip making was a longtime foundation for IBM hardware that has also helped support the broader semiconductor industry.
IBM factories make computer chips for the company's high-end server systems as well as for external customers.