GlobalFoundries $1.4bn Investment To Address Silicon Shortage

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US chipmaker pledges $1.4bn to ramp up production at its US, Germany and Singapore factories to tackle global chip shortages

GlobalFoundries is to invest $1.4 billion in 2021 in an effort to ramp up production at three factories in the United States, Germany and Singapore.

The move by the US-based chipmaker comes amid a global silicon shortage during the Coronavirus pandemic, that has increased demand for semiconductors, raised prices of graphic cards, and caused car factories to scale back production.

GlobalFoundries is a contract chip maker that grew into one of the world’s second-largest semiconductor manufacturer, after it spun out of AMD’s former microprocessor business back in 2009.


Pandemic growth

It competes directly with Taiwan-based TSMC, the largest independent semiconductor foundry.

But Reuters reported that Santa-Clara-based GlobalFoundries, is a unit of Abu Dhabi’s state-owned fund Mubadala.

And in an effort to raise extra funds, the firm may reportedly bring forward its initial public offering to late 2021 or the first half of next year, from a previous target of late 2022 or early 2023.

It is aiming for revenue growth of 9 to 10 percent from just over $5.7 billion last year, Reuters reported.

“The adoption of technology that would normally have taken a decade happened in one year in 2020 because of Covid-19,” GlobalFoundries CEO Thomas Caulfield told Reuters.

Before the pandemic, the chip industry was projected to grow 5 percent over a five-year horizon and now it has accelerated to grow at twice that rate, he said.

Production increase

GlobalFoundries said the $1.4 billion, which will be divided evenly among its fabs in Dresden, Germany, Malta, New York and Singapore, and will begin to ramp up output through 2022 to produce chips from 12 to 90 nanometers.

About a third of the investment will come from clients seeking to lock in supply over several years, Caulfield said, forecasting a 20 percent rise in production next year following an expected 13 percent increase in 2021.

If demand continues to rise GlobalFoundries could build a new plant adjacent to its Malta, New York, plant after securing a purchase option agreement for about 66 acres of undeveloped land last year.

But a decision to break ground there would be dependante on the US Congress funding a set of measures to incentivise chip manufacturing in the United States known as the Chips Act, which was approved last year.

“It’s not a question of ‘if,’ it’s just a question of ‘when,’… And a key element of going forward will be the funding of the Chips Act,” Caulfield said.

Executive order

Earlier this week a US national security commission recommended the US Congress tighten up “choke points” on chip-making technology.

It comes after US President Joe Biden signed an executive order on 24 February to tackle a number of pressing shortages for four critical products, including computer chips.

The US is alarmed at the global chip shortages that has forced car makers and other manufacturers to limit production.