Globalfoundries bets on demand for chip “relocation” before IPO

TAIPEI – Leading U.S. Contract Chipmaker Globalfoundries Bets Semiconductor “Relocation” Trend Will Help It Win Customers and Investors As Loss-Making Company Prepares For IPO on the New York Stock Exchange.

Major economies, including the United States and Japan, are scrambling to grow their domestic semiconductor supply chains while demanding global chipmakers address the unprecedented chip shortage that has forced global manufacturers to automakers around the world to cut production.

In its Nasdaq listing, filed Monday U.S, Globalfoundries announced plans to raise around $ 1 billion. This figure is only preliminary, however, and is expected to change after the IPO is finalized. That’s far less than the $ 6 billion that the chipmaker says it will spend to increase capacity.

Owned by Abu Dhabi’s Mubadala State Fund and headquartered in New York City, Globalfoundries operates production facilities in the United States, Germany and Singapore. It is the world’s fourth largest player in contract chips after Taiwan Semiconductor Manufacturing Co., Samsung Electronics and United Microelectronics Corp.

While its peers are posting strong profits, Globalfoundries has recorded net losses for at least three years since 2018. To differentiate itself, the company has touted itself as the only “large-scale pure-play foundry with a global footprint that doesn ‘is not based in China or Taiwan. ” This could help mitigate geopolitical risks for customers and provide greater supply chain certainty, the company said in its prospectus, adding that 77% of contract chip manufacturing globally in terms of Revenue from 2020 focused on Taiwan and China, citing data from research firm Gartner.

“Those [chipmaking concentration] the trends have not only created trade imbalances and disputes, but have also exposed global supply chains to significant risks, including geopolitical risks, ”Globalfoundries said in the prospectus. “The US and European governments are increasingly focusing on developing a semiconductor supply chain that is less dependent on manufacturing based in Taiwan or China.”

The chipmaker put special emphasis on Taiwan, home to the world’s most valuable chip company TSMC, describing it as “an island of limited resources, susceptible to natural disasters and geopolitical tensions,” exposing ” global supply chains at significant risk “.

The White House said in June that an over-concentration of advanced chip production in Asia poses a threat to global supply chains, and the US Department of Commerce recently required major chipmakers to disclose confidential data, including sales, raw materials, equipment purchase statuses and customer information. , in an effort to address the global chip shortage that has lasted for nearly a year.

Globalfoundries said it has around 200 customers, while its main customers include leading mobile chip developers Qualcomm and MediaTek, as well as NXP, Advanced Micro Devices, Murata and Samsung, according to the prospectus. Its top 10 customers accounted for approximately 61% of the company’s wafer shipments. The company in its current form was founded in 2019 when Mubadala purchased AMD’s manufacturing site in Germany. At the time, its only customer was AMD, the company said.

Globalfoundries’ net revenue for the six-month period ended June 30 was $ 3.04 billion, up nearly 13% from the previous year, but the net loss over the same period was of $ 301 million, although down from $ 534 million a year earlier, according to its prospectus. He also revealed for the first time that he suffered a net loss of more than $ 5 billion from 2018 to 2020.

Industry leader TSMC reported net income of $ 17.6 billion with 2020 revenue of $ 45.51 billion, while China’s leading contract chip maker Semiconductor Manufacturing International Corp. , which was blacklisted by the United States last September, reported a net profit of $ 716 million on revenue of $ 3.91 billion. for 2020.

The IPO request comes after Globalfoundries announced it would spend $ 6 billion to expand its manufacturing capabilities to Singapore, the United States and Germany, although it warned that the new investment would not carry fruit only in 2023. The chipmaker also said it would double automotive chip production for 2021 from a year ago.

In the prospectus, he warned that failure to raise enough capital through the IPO could force the company to scale back expansion plans or delay capital investments, which could “materially and negatively affect our results of operations, financial condition, business and outlook ”.

Globalfoundries CEO Tom Caulfield recently said the industry will need to double its production capacity over the next eight to ten years to cope with the chip shortage and growing government concerns about the safety of the chain. ‘supply.

Globalfoundries abandoned the race against TSMC, Samsung and Intel to develop cutting-edge chip technology in 2018, the same year it canceled plans to build its first production site in China. The company was also forced to sever relations with one of its major customers at the time, Huawei Technologies’ chip design unit, HiSilicon, in 2018, when Washington effectively banned exports of US technology. towards Chinese society, citing national security risks.

TSMC, Samsung and Intel are also increasing their global footprint and manufacturing capacity. The Taiwanese contract chipmaker is building a $ 12 billion advanced chip production plant in Arizona, while Samsung has filed a claim to spend $ 17 billion to build a new production facility in Texas, where the maker South Korean chipmaker already has a manufacturing plant. Intel has also just launched its $ 20 billion chip project in Arizona.

Dale Gai, research director at Counterpoint specializing in the semiconductor industry, told Nikkei Asia that based on financial performance alone, Globalfoundries is not as attractive as its peers. On the other hand, the chipmaker has shown investors that its profits are improving dramatically. Gai also said that the company’s product portfolio stands out from its competitors and that it has good visibility in terms of demand for the next two years thanks to some long-term contracts it has secured.

“It also shows investors that it has diversified production bases and would be safer in terms of geopolitical uncertainties than its Asian counterparts,” Gai said. However, diversification comes at a cost – it also means that Globalfoundries should do more to catch up with these peers in terms of operational and managerial efficiency. Ultimately, if Globalfoundries is to go public, it still needs a better cost structure to attract more investors. “


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