Battle Of Chips: Intel In Talks To Buy GlobalFoundries For $30 billion As CEO Pat Gelsinger Renews Focus On Chip Manufacturing

Battle Of Chips: Intel In Talks To Buy GlobalFoundries For $30 billion As CEO Pat Gelsinger Renews Focus On Chip Manufacturing Intel Arizona
Snapshot
  • Chip manufacturing behemoth Intel said to be is in talks to buy semiconductor manufacturer GlobalFoundries Inc for about $30 billion.

    GlobalFoundries(GF), formed in 2009 when AMD decided to go fabless and spun off a separate entity, is the world’s fourth-largest foundry

    Intel's new CEO Pat Gelsinger has made it clear in his IDM 2.0 strategy that while Intel will continue to use other fabs to make its chips, it will also try to revive 'Intel Foundry Services' (IFS) - that is, offer foundry to fabless companies or even other IDMs which do not have as sophisticated fabs as Intel has, to make chips.

Chip manufacturing behemoth Intel is in talks to buy semiconductor manufacturer GlobalFoundries Inc for about $30 billion, the Wall Street Journal reported.

While Intel and Advanced Micro Devices (AMD) are competitors when it comes to making processors (CPUs, GPUs) for computers, GlobalFoundries was originally a spin-off of AMD. AMD, which initially manufactured its own processors, later outsourced its manufacturing, a practice known as going 'fabless'.

While Intel has operated as an 'Integrated Device Manufacturer' (IDM), so far it did not care much to offer its fabs (foundry) to third parties - typically fabless companies - on contract basis.

On the other hand, its closest rival in the electronics market, namely Samsung - also an IDM - has been investing heavily in its foundry business and now holds 17-18% market share by revenue in a near $90billion foundry market, second only to Taiwanese semiconductor giant Taiwan Semiconductor Manufacturing Co (TSMC) with a 54-56% market share. TSMC however is a pure-play foundry with no products of its own, but focuses entirely on foundry business as a third party offering

While TSMC and Samsung already have 5nm chips in production and plans of getting 3nm chips by end of 2022, Intel has still not been able to get 7nm into production in its own fabs and is said to depend on the other two to fabricate the advance node chips it designs. Intel’s most advanced chips currently use a 14-nanometer or a 10-nanometer process.

TSMC is already setting up a massive state-of-the art manufacturing plant in southern Taiwan to produce 5-nanometer processor. 5-nanometer process are superior because more transistors can fit in the same sized chip, boosting power and efficiency.

Intel's new CEO Pat Gelsinger has made it clear in his IDM 2.0 strategy that while Intel will continue to use other fabs to make its chips, it will also try to revive 'Intel Foundry Services' (IFS) - that is, offer foundry to fabless companies or even other IDMs which do not have as sophisticated fabs as Intel has, to make chips.

Earlier this year, Gelsinger announced expansion of the company’s semiconductor manufacturing capacity through two new fabrication factories in Arizona that will be set up at a cost of $20bn.

The new factories will commence production in 2024 and Intel’s foundry will offer a United States (US) and Europe-based alternative to Asian fab factories.

GlobalFoundries

GlobalFoundries(GF) was formed in 2009 when AMD decided to go fabless and spun off a separate entity with its foundry. GF later acquired Chartered semiconductors and also two fabs from IBM in 2015. It later sold one of its fabs acquired from IBM to ON semiconductors.

During 2015-2018, GF was second to TSMC in foundry business with about 10% market share, but soon Samsung overtook and recently UMC seems to have overtaken as well and GF is reportedly at 4th position with about 7% market share

Abu Dhabi's Mubadala group who owns GF is known to have been wanting to put up the company for IPO, or as the latest news suggests, sell it off.

GF has fabs in US (300mm fab with up to 12nm technology in Malta and 200mm fab running 90nm to 350nm technology, mostly Analog in Burlington), Germany (300mm fab with 22nm technology in Dresden) and Singapore (300mm fab up to 28nm technology and 200mm fabs with mature nodes)

In June, GF announced that it will be establishing new plant in Singapore after pulling out from a plant in the Chinese city of Chengdu last year. It will invest US$4 billion in a new factory in the Lion City to help meet global demand for semiconductors.

GF also has an office in Bengaluru from where it supports IT, fab operations, design to mask as well as characterization and modelling

If the move of Intel buying GF comes true, it may give better direction to Intel's plan to revive IFS, but will not help it in the sub-10nm technology chip manufacturing.

A Wave Of Investments In Chip Foundries

The new wave of chip foundry investment is propelling chip manufacturing. The new investments are driven by the accelerating demand for chips across a wide range of markets including communications, computing, healthcare, online services and automotive. Semiconductor manufacturers worldwide are set to commence construction on 19 new high-volume fabs by the end of this year and break ground on another 10 in 2022

A global shortage of semiconductor microchips is causing havoc, delaying car production and affecting operations at some of the largest consumer electronics manufacturers.

EU, U.S and Japan have embarked on measures to achieve self-sufficiency in semiconductor manufacturing.

U.S President Biden has vowed to take steps to help address the chip shortage, pledging to spend billions of dollars to boost capacity.

On 24 February this year, President Joe Biden signed an executive order mandating a review of supply chains of critical goods, products and services to reduce dependence on China and other rivals.

Japan is currently pursuing an all-out strategy to lure overseas semiconductor companies, including designing generous financial incentives.

European Union aims to double the production of chips on its territory in order to increase its global share to 20%.

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