How GlobalFoundries goals to stay world’s third-biggest chip foundry

In its brief 14-year historical past, GlobalFoundries has risen to develop into the world’s third-largest chip foundry. Based mostly in upstate New York, GlobalFoundries isn’t a family identify as a result of it’s manufacturing semiconductors which can be designed and bought by different corporations.

Nevertheless it’s quietly serving to energy practically each linked system. 

“Have a look at each digital system in your own home, and I might guess you cash that each a kind of units has a minimum of one GlobalFoundries chip in it,” Thomas Caulfield, GlobalFoundries CEO, advised CNBC.

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

Inside generative AI, GlobalFoundries isn’t targeted on making the highly effective graphics processing items (GPUs) used to coach giant language fashions like ChatGPT. As a substitute, the corporate is manufacturing chips that carry out capabilities like energy administration, connecting to shows, or enabling wi-fi connections.

Caulfield says AI is “the catalyst for our trade to double within the subsequent eight years and GF could have its justifiable share, if no more, of that chance.”

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

Now, as tensions with China increase issues 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 outdoors the geopolitical crosshairs. The corporate has spent about $7 billion to develop manufacturing in Singapore, Germany, France and upstate New York.

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

‘It labored out for everyone’

The story started in 2009, when Superior Micro Gadgets determined to interrupt off its manufacturing operations right into a separate firm and focus solely on designing chips. The newly fashioned GlobalFoundries took over AMD’s chip fabrication plant, or fab, in Dresden, Germany. On 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 stated, ‘actual males have fabs.’ So the considered spinning out the fab from AMD into its personal firm was a extremely large deal,” Moorhead stated. AMD “needed to do it,” he added, as a result of “the bills for a forefront fab have been doubling each two or three years. And proper now we’re investments of campuses upwards of $100 billion.”

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

“I believe it labored out for everyone,” Moorhead stated.

GlobalFoundries began constructing its new fab, and future headquarters, in Malta in 2009. The subsequent 12 months, it expanded into Singapore with the acquisition of Chartered Semiconductor. By 2015, it had acquired IBM’s in-house semiconductor division, taking on manufacturing websites in Vermont and New York. By 2018, GlobalFoundries was a $6 billion enterprise.

“Sadly, it had a technique that was not in a position to produce profitability or free money circulate,” stated Caulfield. “So in 2018, once I grew to become the CEO of GlobalFoundries, we determined to make a strategic pivot to focus all our power, all our R&D, all of our capital deployment to go be the perfect at these important chips. And that started a journey to turning our firm round to profitability.”

To this present day, GlobalFoundries solely makes 12-nanometer chips and above, or what it calls “important” chips. 

GlobalFoundries CEO Thomas Caulfield exhibits a 300mm wafer to CNBC’s Katie Tarasov at Fab 8 in Malta, New York, on September 5, 2023.

Carlos Waters

“For those who do safe pay transactions, whether or not it’s in your bank card or in your good cellular system, we make the chip that does that,” Caulfield stated. “Do you want the pictures your digicam takes? Properly, we make picture sensor processors that drive that digicam. Do you just like the battery life in your cellphone? We make the PMICs, the facility administration ICs that be sure that energy is managed on these units.”

Throughout the 2021 chip scarcity, GlobalFoundries advised CNBC it bought out solely. That very same 12 months, the corporate went public on the Nasdaq.

“In the end, we actually want these chips,” stated Daniel Newman, CEO of analysis agency Futurum Group. “We discovered that out as a result of we had parking tons filled with pickup vans that couldn’t be shipped as a result of they couldn’t put the ECU in or they couldn’t set up energy seats. So GlobalFoundries had a extremely robust market requirement.”

World development

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

“Not solely do we’ve got a excessive focus of semiconductor manufacturing in Taiwan between TSMC and UMC, however TSMC is twice the dimensions of the opposite 4 corporations mixed,” 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 completely going after TSMC.

“Not solely do we’ve got aspirations, we predict in sure areas we’ve gained,” Caulfield stated. He pointed to his firm’s radio frequency chips and silicon on insulator expertise.

“Silicon on insulator is a big differentiator in terms of energy, 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 danger.

In Singapore, the corporate simply accomplished a $4 billion enlargement 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 enlargement endeavors have gone easily, nevertheless. In 2017, GlobalFoundries made large plans for a fab in Chengdu, China. In 2020, it backed out.

“It turned out we had three comparatively giant amenities all over the world already that have been severely underloaded,” Caulfield stated. “Including extra capability at a time after we couldn’t fill our current capability was simply going to create an even bigger financial gap for us.”

The U.S. has not too long ago enacted a sequence of export bans on chip corporations sending superior tech to China. By solely producing older nodes, GlobalFoundries says it’s been “very minimally” impacted.

Making chips within the U.S.

Though GlobalFoundries’ chips are thought-about legacy nodes, the method and sources wanted are nonetheless extremely advanced. Caulfield stated every silicon wafer goes by means of a minimum of 1,000 steps over 90 days within the Malta fab. The method requires intensive cleansing, cooling and chemical remedy, which makes use of loads 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 an excellent place for entry to high-quality and ample water,” Caulfield stated.

All of 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’s sufficient energy to “run a small metropolis.”

“I might say our lowest-cost energy is within the U.S.,” Caulfield stated. “Lots of our energy in upstate New York, the place this facility is at, comes from hydroelectric, so it’s a greener energy. In each Europe and Singapore, a lot of that energy comes off of pure fuel.”

Then there’s the manpower. GlobalFoundries has 13,000 workers worldwide. About 1,500 individuals report back to Koh in Malta. She advised CNBC it’s “difficult to draw expertise to this a part of the world.”

GlobalFoundries not too long ago established the primary apprenticeship program that’s 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 inbuilt Arizona.

The excessive value of supplies and development 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 corporate additionally utilized for funds from the $52 billion nationwide CHIPS and Science Act. Specializing in 12-nanometer and above additionally helps the corporate hold prices down.

GlobalFoundries’ Fab 8 in Malta, New York, the place Tools Engineering Supervisor Chris Belfi led CNBC’s Katie Tarasov on a tour on September 5, 2023.

GlobalFoundries stated it’s placing out 400,000 wafers per 12 months from its Malta fab. Whereas Caulfield wouldn’t put a greenback determine on the wafers, he stated at any given time, there’s “a couple of half-billion {dollars} price of stock that’s working over these 90 days to create product.”

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

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

GlobalFoundries is thought for making “specialty chips” in large, 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. Division of Protection.

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

“Successfully they’re saying, ‘We are going to create a secure margin dedication capability and if the market shifts, we’re going to face by the letter of our settlement,’” he stated.

For corporations hit hardest by the chip scarcity, a cope with GlobalFoundries is a hedge towards it occurring once more. In February, Normal Motors put aside unique manufacturing capability on the Malta fab.

“GM, their traces acquired held up for very low-cost elements as a result of they couldn’t get sufficient,” Moorhead stated. “What GM determined is that that is an excessive amount of provide chain danger. We’re going to go on to GF.”

GlobalFoundries says automotive is one among 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.

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

“Good cellular units final 12 months represented 46% of our income,” Caulfield stated. “Whereas it grew final 12 months, it was 50% the 12 months earlier than. So we’ve been attempting to construct our different enterprise and to get extra balanced, fairly than having such a excessive publicity to good cellular units.”