« Previously: GlobalFoundries to boost chip capacity worldwide  

In China, GlobalFoundries and the local government of Chengdu have formed a partnership to build a fab in Chengdu. The partners plan to establish a 300mm fab to support the growth of the Chinese semiconductor market and to meet accelerating global customer demand for 22FDX.

The fab will begin production of mainstream process technologies in 2018 and then focus on manufacturing GF’s 22FDX process technology, with volume production expected to start in 2019.

GlobalFoundries revamps China deal

GF indicated it is putting on the back burner a separate joint venture in Chongqing announced last year, according to EE Times Silicon Valley Bureau Chief Rick Merritt. It has a memorandum of understanding in that deal but it is focusing on Chengdu which appears to be a significantly larger, more promising deal valued at roughly $10 billion.

The news comes at a time when China federal and provincial officials are competing in a race to build up a domestic semiconductor industry. Ironically the new joint venture comes one day after Intel announced at the White House it will spend $7 billion to restart its Fab 42 in Arizona.

GlobalFoundries will be the majority owner and will operate the Chengdu fab. Additional terms are confidential, according to a spokeswoman.

Under the earlier deal, the Chongqing government would have provided the land and built a fab to company’s specifications. That plan initially included bringing an existing China fab up to a 300mm capability, according to the press release, and transferring 180-130nm processes from Singapore, according to an interview with a foundry executive in January.

Now, “Chengdu is our only focus in China,” said the spokeswoman. “We decided to combine mainstream and 22FDX capabilities into a single facility in Chengdu to benefit from the advantages of scale.”

 
global expansion graph (cr) Figure 1: Major 2016 foundries diagram  

GLOBALFOUNDRIES China strategy

“With TSMC, UMC, and SMIC expanding their foundry capacity in China, I believe that GlobalFoundries believes that they need to do something as well,” said Bill McClean, president of market watcher IC Insights, in an email exchange.

While Intel, Samsung and SK Hynix have been making chips in wholly owned fabs in China for some time, TSMC pioneered the way for a foundry with its 16nm fab in Nanjing. “Morris Chang specifically cited the need to have continued access to the Chinese market as the reason for constructing TSMC's new 300mm fab in China,” McClean said, calling such deals “an insurance policy for IC producers.”

“China’s electronics industry and fabless community is growing leaps and bounds, so having a fab brings scale to an area where you must be close to your customers,” said G. Dan Hutcheson, president of VLSI Research.

McClean of IC Insights characterised the other moves as more technology upgrades than expansions. He estimates GlobalFoundries, which is privately held, lost nearly $2 billion in 2016 on sales of $5.5 billion, making it a distant second to TSMC with profits of about $10 billion on sales of about $30 billion in 2016.

“Currently, GlobalFoundries is losing money and is working at low utilisation levels, somewhere in the high 70% range,” he said. “They don't need a lot of capacity but some of their older capacity is unlikely to be able to produce the devices they need, so I think a lot of this expansion is really being driven by technology upgrades,” he said.

The Abu Dhabi investment group backing the foundry from its creation as a spin out from AMD has “been very patient…and it looks like that patience will continue for at least another few years,” he added.

“My sense is that [the foundry] definitely has a positive free cash flow to justify the investment—plus, their customer base is expanding,” said Hutcheson of VLSI Research. “I take the announcement to be a positive sign that they are growing,” he said.

 
« Previously: GlobalFoundries to boost chip capacity worldwide