How GlobalFoundries aims to remain worldās third-biggest semiconductor foundry
PUBLISHED SUN, OCT 1 2023 9:00 AM EDT
Katie Tarasov@KATIETARASOV
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How GlobalFoundries rose to be the worldās third-biggest chip foundry
In its short 14-year history,
GlobalFoundries has risen to become the worldās third-largest chip foundry. Based in upstate New York, GlobalFoundries isnāt a household name because itās manufacturing semiconductors that are designed and sold by other companies.
But itās quietly helping power nearly every connected device.
āLook 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,ā Thomas Caulfield, GlobalFoundries CEO, told CNBC.
GlobalFoundries chips are inside everything from smartphones and cars to smart speakers and Bluetooth-enabled dishwashers. Theyāre also in the servers running generative artificial intelligence models, a market thatās booming so quickly that chipmaker Nvidia has surpassed a $1 trillion market cap and is forecasting 170% sales growth this quarter.
Within generative AI, GlobalFoundries isnāt focused on making the powerful graphics processing units (GPUs) used to train large language models like ChatGPT. Instead, the company is manufacturing chips that perform functions like power management, connecting to displays, or enabling wireless connections.
Caulfield says AI is āthe catalyst for our industry to double in the next eight years and GF will have its fair share, if not more, of that opportunity.ā
Five years ago, GlobalFoundries made a bold move
away from leading-edge chips, exiting a race that was won by
Taiwan Semiconductor Manufacturing Company.
Now, as tensions with China raise concerns over the
worldās reliance on TSMC, and the U.S. and China play technological tug-of-war with
export controls, GlobalFoundries finds itself positioned well outside the geopolitical crosshairs. The company has spent about $7 billion to expand production in
Singapore,
Germany,
France and upstate
New York.
CNBC went to Malta, New York, for a firsthand look at the fabrication plant where GlobalFoundries is adding 800 acres, to ask how the company plans to stay ahead while developing the older chips still essential for everyday devices.
āIt worked out for everybodyā
The story began in 2009, when
Advanced Micro Devices decided to break off its manufacturing operations into a separate company and focus entirely on designing chips. The newly formed GlobalFoundries took over AMDās chip fabrication plant, or fab, in Dresden, Germany. At the time, it was a joint venture between AMD and the government of Abu Dhabiās tech investment arm. Moorhead was
working at AMD.
āOur founder, Jerry Sanders, at AMD said, āreal men have fabs.ā So the thought of spinning out the fab from AMD into its own company was a really big deal,ā Moorhead said. AMD āhad to do it,ā he added, because āthe expenses for a leading edge fab were doubling every two or three years. And right now weāre looking at investments of
campuses upwards of $100 billion.ā
For the first few years, AMD was GlobalFoundriesā only major customer.
AMD has since grown to become Nvidiaās main rival for designing GPUs.
āI think it worked out for everybody,ā Moorhead said.
GlobalFoundries started building its new fab, and future headquarters, in Malta in 2009. The next year, it expanded into Singapore with the purchase of Chartered Semiconductor. By 2015, it had acquired
IBMās in-house semiconductor division, taking over production sites in Vermont and New York. By 2018, GlobalFoundries was a $6 billion business.
āUnfortunately, it had a strategy that was not able to produce profitability or free cash flow,ā said Caulfield. āSo 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.ā
To this day, GlobalFoundries only makes 12-nanometer chips and above, or what it calls āessentialā chips.
GlobalFoundries CEO Thomas Caulfield shows a 300mm wafer to CNBCās Katie Tarasov at Fab 8 in Malta, New York, on September 5, 2023.
Carlos Waters
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If you do secure pay transactions, whether itās on your credit card or on your smart mobile device, we make the chip that does that,ā Caulfield said. āDo 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.ā
During the 2021 chip shortage, GlobalFoundries told CNBC it
sold out entirely. That same year, the company
went public on the Nasdaq.
āUltimately, we really need these chips,ā said Daniel Newman, CEO of research firm Futurum Group. āWe found that out because we had parking lots full of pickup trucks that couldnāt be shipped because they couldnāt put the ECU in or they couldnāt install power seats. So GlobalFoundries had a really strong market requirement.ā
Global growth
GlobalFoundries is the only one of the worldās top five chip foundries based in the U.S. The other four are
Semiconductor Manufacturing International in China,
Samsung with fabs in South Korea and the U.S., and
United Microelectronics and TSMC, which are both in Taiwan.
āNot 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,ā Caulfield said.
TSMC makes
more than 90% of the worldās most-advanced microchips, creating vulnerability during supply chain backlogs as well as risks tied to Chinaās continued threats to invade Taiwan. Like GlobalFoundries, TSMC also makes older nodes. Caulfield said GlobalFoundries is absolutely going after TSMC.
āNot only do we have aspirations, we think in certain areas weāve won,ā Caulfield said. He pointed to his companyās radio frequency chips and silicon on insulator technology.
āSilicon on insulator is a huge differentiator when it comes to power, and TSMC doesnāt use that,ā Moorhead said.
At a time of geopolitical turmoil, GlobalFoundries is investing about $7 billion to add capacity in parts of the world with lower risk.
In Singapore, the company just completed a
$4 billion expansion that it says makes it the countryās most-advanced fab. In June, it
finalized a deal with
STMicroelectronics to build a jointly owned fab in Crolles, France.
Not all global expansion endeavors have gone smoothly, however. In 2017, GlobalFoundries made big plans for a fab in Chengdu, China. In 2020, it
backed out.
āIt turned out we had three relatively large facilities around the world already that were severely underloaded,ā Caulfield said. āAdding more capacity at a time when we couldnāt fill our existing capacity was just going to create a bigger economic hole for us.ā
The U.S. has recently enacted a series of export bans on chip companies sending advanced tech to China. By only producing older nodes, GlobalFoundries says itās been āvery minimallyā impacted.
Making chips in the U.S.
Although GlobalFoundriesā chips are considered legacy nodes, the process and resources needed are still incredibly complex. Caulfield said each silicon wafer goes through at least 1,000 steps over 90 days in the Malta fab. The process requires extensive cleaning, cooling and chemical treatment, which uses a lot of water. GlobalFoundries says Fab 8 uses about 4 million gallons of water a day, reclaiming 65% of that.
āUpstate New York is a very good place for access to high-quality and abundant water,ā Caulfield said.
All the heavy machinery also requires about 2 gigawatts of power per day, according to Hui Peng Koh, who heads up the Malta fab. She said itās enough power to ārun a small city.ā
āI would say our lowest-cost power is in the U.S.,ā Caulfield said. āA lot of our power in upstate New York, where this facility is at, comes from hydroelectric, so itās a greener power. In both Europe and Singapore, much of that power comes off of natural gas.ā
Then thereās the manpower. GlobalFoundries has 13,000 employees worldwide. About 1,500 people report to Koh in Malta. She told CNBC itās āchallenging to attract talent to this part of the world.ā
GlobalFoundries recently established the
first apprenticeship program thatās registered in the U.S. to help develop a semiconductor workforce in Vermont and New York. In July, TSMC
blamed a shortage of skilled labor for delays to its fab being built in Arizona.
The high cost of materials and construction work also make
building a fab in the U.S. more expensive than in much of Asia, so public subsidies have been key for reshoring production. GlobalFoundries said New York pitched in more than $2 billion for the Malta fab. The company also
applied for funds from the $52 billion national CHIPS and Science Act. Focusing on 12-nanometer and above also helps the company keep costs down.
GlobalFoundriesā Fab 8 in Malta, New York, where Equipment Engineering Manager Chris Belfi led CNBCās Katie Tarasov on a tour on September 5, 2023.
GlobalFoundries said itās putting out 400,000 wafers per year from its Malta fab. While Caulfield wouldnāt put a dollar figure on the wafers, he said at any given time, thereās āabout a half-billion dollars worth of inventory thatās running over those 90 days to create product.ā
GlobalFoundriesā main customers for this massive output of essential chips are the worldās largest fabless chip companies, including 
Qualcomm, AMD, NXP and 
Infineon.
Eventually, many of its chips end up in the auto, aerospace, and U.S. defense industries.
GlobalFoundries is known for making āspecialty chipsā in big, exclusive deals, like one with Lockheed Martin in June for onshoring production of certain chips, and a recent $3 billion agreement with the U.S. Department of Defense.
Newman said GlobalFoundries has around 50 such long-term agreements.
āEffectively theyāre saying, āWe will create a stable margin commitment capacity and if the market shifts, weāre going to stand by the letter of our agreement,āā he said.
For companies hit hardest by the chip shortage, a deal with GlobalFoundries is a hedge against it happening again. In February,
General Motors set aside exclusive production capacity at the Malta fab.
āGM, their lines got held up for very low-cost components because they couldnāt get enough,ā Moorhead said. āWhat GM decided is that this is too much supply chain risk. Weāre going to go directly to GF.ā
GlobalFoundries says automotive is one of its fastest-growing segments. It makes many different kinds of chips for cars: the microcontrollers for power seats, airbags and braking; the sensing chips for cameras and Lidar; and battery management chips for electric vehicles.
Meanwhile, the growth of GlobalFoundriesā smartphone business is decelerating, alongside an
industrywide slowdown. GlobalFoundries laid off 800 employees in December and January, and issued
weaker-than-expected revenue guidance for the third quarter.
āSmart mobile devices last year represented 46% of our revenue,ā Caulfield said. āWhile it grew last year, it was 50% the year before. So weāve been trying to build our other business and to get more balanced, rather than having such a high exposure to smart mobile devices.ā
GlobalFoundries is manufacturing more of the world's critical chips, gaining significance with U.S.-China tension and big deals like one with General Motors
www.cnbc.com
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