How GlobalFoundries aims to remain world’s third-biggest semiconductor foundry

In its quick 14-year historical past, GlobalFoundries has risen to turn into the world’s third-largest chip foundry. Based in upstate New York, GlobalFoundries is not a family title as a result of it is manufacturing semiconductors which are designed and offered by different firms.

But it is quietly serving to energy practically each linked gadget. 

“Look at every electronic device in your house, and I would bet you money that every one of those devices has at least one GlobalFoundries chip in it,” Thomas Caulfield, GlobalFoundries CEO, instructed CNBC.

GlobalFoundries chips are inside all the things from smartphones and automobiles to good audio system and Bluetooth-enabled dishwashers. They’re additionally within the servers operating generative synthetic intelligence fashions, a market that is booming so rapidly that chipmaker Nvidia has surpassed a $1 trillion market cap and is forecasting 170% gross sales development this quarter.

Within generative AI, GlobalFoundries is not centered on making the highly effective graphics processing items (GPUs) used to coach massive language fashions like ChatGPT. Instead, the corporate is manufacturing chips that carry out features like energy administration, connecting to shows, or enabling wi-fi connections.

Caulfield says AI is “the catalyst for our industry to double in the next eight years and GF will have its fair share, if not more, of that opportunity.”

Five years in the past, GlobalFoundries made a daring transfer away from modern chips, exiting a race that was gained by Taiwan Semiconductor Manufacturing Company. 

Now, as tensions with China increase considerations over the world’s reliance on TSMC, and the U.S. and China play technological tug-of-war with export controls, GlobalFoundries finds itself positioned nicely exterior the geopolitical crosshairs. The firm has spent about $7 billion to increase manufacturing in Singapore, Germany, France and upstate New York.

CNBC went to Malta, New York, for a firsthand take a look at the fabrication plant the place GlobalFoundries is including 800 acres, to ask how the corporate plans to remain forward whereas growing the older chips nonetheless important for on a regular basis gadgets.

The story started in 2009, when Advanced Micro Devices determined to interrupt off its manufacturing operations right into a separate firm and focus completely on designing chips. The newly fashioned GlobalFoundries took over AMD’s chip fabrication plant, or fab, in Dresden, Germany. At the time, it was a three way partnership between AMD and the federal government of Abu Dhabi’s tech funding arm. Moorhead was working at AMD.

“Our founder, Jerry Sanders, at AMD said, ‘real men have fabs.’ So the thought of spinning out the fab from AMD into its own company was a really big deal,” Moorhead stated. AMD “had to do it,” he added, as a result of “the expenses for a leading edge fab were doubling every two or three years. And right now we’re looking at investments of campuses upwards of $100 billion.”

For the primary few years, AMD was GlobalFoundries’ solely main buyer. AMD has since grown to turn into Nvidia’s most important rival for designing GPUs.

“I think it worked out for everybody,” Moorhead stated.

GlobalFoundries began constructing its new fab, and future headquarters, in Malta in 2009. The subsequent yr, it expanded into Singapore with the acquisition of Chartered Semiconductor. By 2015, it had acquired IBM’s in-house semiconductor division, taking up manufacturing websites in Vermont and New York. By 2018, GlobalFoundries was a $6 billion business.

“Unfortunately, it had a strategy that was not able to produce profitability or free cash flow,” stated Caulfield. “So in 2018, when I became the CEO of GlobalFoundries, we decided to make a strategic pivot to focus all our energy, all our R&D, all of our capital deployment to go be the very best at these essential chips. And that began a journey to turning our company around to profitability.”

To at the present time, GlobalFoundries solely makes 12-nanometer chips and above, or what it calls “essential” chips. 

“If you do secure pay transactions, whether it’s on your credit card or on your smart mobile device, we make the chip that does that,” Caulfield stated. “Do you like the photographs your camera takes? Well, we make image sensor processors that drive that camera. Do you like the battery life on your phone? We make the PMICs, the power management ICs that make sure that power is managed on these devices.”

During the 2021 chip scarcity, GlobalFoundries instructed CNBC it offered out completely. That identical yr, the corporate went public on the Nasdaq.

“Ultimately, we really need these chips,” stated Daniel Newman, CEO of analysis agency Futurum Group. “We found that out because we had parking lots full of pickup trucks that couldn’t be shipped because they couldn’t put the ECU in or they couldn’t install power seats. So GlobalFoundries had a really strong market requirement.”

GlobalFoundries is the one one of many world’s prime 5 chip foundries based mostly within the U.S. The different 4 are Semiconductor Manufacturing International in China, Samsung with fabs in South Korea and the U.S., and United Microelectronics and TSMC, that are each in Taiwan.

“Not only do we have a high concentration of semiconductor manufacturing in Taiwan between TSMC and UMC, but TSMC is twice the size of the other four companies combined,” Caulfield stated.

TSMC makes greater than 90% of the world’s most-advanced microchips, creating vulnerability throughout provide chain backlogs in addition to dangers tied to China’s continued threats to invade Taiwan. Like GlobalFoundries, TSMC additionally makes older nodes. Caulfield stated GlobalFoundries is totally going after TSMC.

“Not only do we have aspirations, we think in certain areas we’ve won,” Caulfield stated. He pointed to his firm’s radio frequency chips and silicon on insulator know-how.

“Silicon on insulator is a huge differentiator when it comes to power, and TSMC doesn’t use that,” Moorhead stated.

At a time of geopolitical turmoil, GlobalFoundries is investing about $7 billion so as to add capability in components of the world with decrease threat.

In Singapore, the corporate simply accomplished a $4 billion growth that it says makes it the nation’s most-advanced fab. In June, it finalized a cope with STMicroelectronics to construct a collectively owned fab in Crolles, France. 

Not all international growth endeavors have gone easily, nonetheless. In 2017, GlobalFoundries made massive plans for a fab in Chengdu, China. In 2020, it backed out.

“It turned out we had three relatively large facilities around the world already that were severely underloaded,” Caulfield stated. “Adding more capacity at a time when we couldn’t fill our existing capacity was just going to create a bigger economic hole for us.”

The U.S. has lately enacted a collection of export bans on chip firms sending superior tech to China. By solely producing older nodes, GlobalFoundries says it has been “very minimally” impacted.

Although GlobalFoundries’ chips are thought-about legacy nodes, the method and sources wanted are nonetheless extremely advanced. Caulfield stated every silicon wafer goes by a minimum of 1,000 steps over 90 days within the Malta fab. The course of requires in depth cleansing, cooling and chemical remedy, which makes use of plenty of water. GlobalFoundries says Fab 8 makes use of about 4 million gallons of water a day, reclaiming 65% of that.

“Upstate New York is a very good place for access to high-quality and abundant water,” Caulfield stated.

All the heavy equipment additionally requires about 2 gigawatts of energy per day, in accordance with Hui Peng Koh, who heads up the Malta fab. She stated it is sufficient energy to “run a small city.”

“I would say our lowest-cost power is in the U.S.,” Caulfield stated. “A lot of our power in upstate New York, where this facility is at, comes from hydroelectric, so it’s a greener power. In both Europe and Singapore, much of that power comes off of natural gas.”

Then there’s the manpower. GlobalFoundries has 13,000 workers worldwide. About 1,500 individuals report back to Koh in Malta. She instructed CNBC it is “challenging to attract talent to this part of the world.”

GlobalFoundries lately established the primary apprenticeship program that is registered within the U.S. to assist develop a semiconductor workforce in Vermont and New York. In July, TSMC blamed a scarcity of expert labor for delays to its fab being in-built Arizona.

The excessive value of supplies and building work additionally make constructing a fab within the U.S. costlier than in a lot of Asia, so public subsidies have been key for reshoring manufacturing. GlobalFoundries stated New York pitched in additional than $2 billion for the Malta fab. The firm additionally utilized for funds from the $52 billion nationwide CHIPS and Science Act. Focusing on 12-nanometer and above additionally helps the corporate preserve prices down.

GlobalFoundries stated it is placing out 400,000 wafers per yr from its Malta fab. While Caulfield would not put a greenback determine on the wafers, he stated at any given time, there’s “about a half-billion dollars worth of inventory that’s running over those 90 days to create product.”

GlobalFoundries’ most important prospects for this huge output of important chips are the world’s largest fabless chip firms, together with Qualcomm, AMD, NXP and Infineon. 

Eventually, lots of its chips find yourself within the auto, aerospace, and U.S. protection industries.

GlobalFoundries is thought for making “specialty chips” in massive, unique offers, like one with Lockheed Martin in June for onshoring manufacturing of sure chips, and a current $3 billion settlement with the U.S. Department of Defense.

Newman stated GlobalFoundries has round 50 such long-term agreements.

“Effectively they’re saying, ‘We will create a stable margin commitment capacity and if the market shifts, we’re going to stand by the letter of our agreement,'” he stated.

For firms hit hardest by the chip scarcity, a cope with GlobalFoundries is a hedge in opposition to it occurring once more. In February, General Motors put aside unique manufacturing capability on the Malta fab.

“GM, their lines got held up for very low-cost components because they couldn’t get enough,” Moorhead stated. “What GM decided is that this is too much supply chain risk. We’re going to go directly to GF.”

GlobalFoundries says automotive is one in every of its fastest-growing segments. It makes many alternative sorts of chips for automobiles: the microcontrollers for energy seats, airbags and braking; the sensing chips for cameras and Lidar; and battery administration chips for electrical autos.

Meanwhile, the expansion of GlobalFoundries’ smartphone business is decelerating, alongside an industrywide slowdown. GlobalFoundries laid off 800 workers in December and January, and issued weaker-than-expected income steering for the third quarter.

“Smart mobile devices last year represented 46% of our revenue,” Caulfield stated. “While it grew last year, it was 50% the year before. So we’ve been trying to build our other business and to get more balanced, rather than having such a high exposure to smart mobile devices.”