Qualcomm Adds $4.2bn To GlobalFoundries Semiconductor Deal

Qualcomm has expanded an existing deal to buy chips manufactured at GlobalFoundries’ Malta, New York plant by $4.2 billion (£3.5bn) to a total commitment of $7.4bn of purchases through 2028, the company said in a regulatory filing.

The deal, which was previously valued at $3.2bn, covers chips for use in 5G transceivers, Wi-Fi, automotive and Internet of Things (IoT) connectivity.

It comes as companies look to secure their supplies of semiconductors amidst rising demand and supply chain turmoil.

Manufacturing deal

Qualcomm chief operations officer Roawen Chen said a “robust supply chain” was essential for ensuring the company could compete in areas such as 5G, automotive and IoT chips.

GlobalFoundries, formerly the manufacturing arm of AMD, is majority owned by the sovereign wealth fund of the United Arab Emirates, which held it privately until the company raised $2.6bn in an initial public offering in October of last year on the Nasdaq.

It is the world’s third-biggest contract chipmaker by revenue after Taiwan’s TSMC and Samsung Electronics, but ranks second-largest when discounting the elements of Samsung’s manufacturing business that make chips for other parts of Samsung.

The company said Qualcomm was one of its first customers to sign a long-term agreement last year, covering multiple geographies and technologies.

Subsidies

GlobalFoundries chief executive Thomas Caulfield said that having Qualcomm as a long-term customer of the New York plant would help to expand the company’s US manufacturing base, along with federal and state funding.

The US Senate last month passed the Chips Act providing about $52bn in subsidies aimed at increasing domestic chip production and reducing the country’s reliance on Asian manufacturers in response to a worldwide chip shortage.

“With major new federal incentives for microchip manufacturing in the US, I look forward to many more announcements like this to come,” said Senate majority leader Chuck Schumer.

The EU is also reworking its state funding regulations to boost cutting-edge semiconductor manufacturing in the region.

Expansion plans

As a result Intel and GlobalFoundries have announced expansion plans in both the US and Europe, with GlobalFoundries working with STMicroelectronics to build a $5.7bn semiconductor factory in France.

The deal between GlobalFoundries and Qualcomm also includes capacity at GlobalFoundries’ factories in Dresden, Singapore and the newly announced facility in Crolles, France.

GlobalFoundries, Applied Materials, Ford and General Motors met behind closed doors with US officials on Monday to discuss the administration’s semiconductor investment plans.