The CEO of the most important U.S. chip foundry explains why the semiconductor scarcity may proceed till 2022

GlobalFoundries campus in Malta, NY

Mary Thompson CNBC

GlobalFoundries, the third largest foundry, plans to invest $ 1.4 billion in its chip factories this year and is likely to double that investment next year, CEO Tom Caulfield told CNBC in an interview.

Caufield said the company’s manufacturing capacity is fully booked and industry-wide semiconductor supply could lag behind demand through 2022 or later.

“Right now, not only are all of our factories operating at over 100% capacity, we’re expanding capacity as soon as possible,” said Caulfield.

A shortage of semiconductor microchips is wreaking havoc around the world, delaying automobile production and affecting the operations of some of the largest consumer electronics manufacturers.

The shortage has underscored the role played by a handful of foundries, which are factories hired by semiconductor companies to build chips. Many, like GlobalFoundries, are investing billions in new production lines and improved equipment to keep pace with rising demand and lack of supply.

GlobalFoundries is the largest “pure” foundry with headquarters in the US and factories in the US, Germany and Singapore. The company manufactures semiconductors developed by companies such as AMD, Qualcomm, and Broadcom. It is currently a private company owned by the Abu Dhabi government. The company is considering an IPO in the first half of 2022 or earlier, Caulfield said.

Large investments and increasing demand

GlobalFoundries is still a relatively small supplier with a share of only 7% of the foundry market, according to Trendforce. Other foundries also invest a lot of money.

Taiwan-based TSMC, the largest company with a 54% market share, announced Thursday that it plans to invest $ 100 billion over the next three years to increase its capacity to meet demand.

Intel, which designs and manufactures its chips, announced on March 23 that it plans to become a foundry and manufacture chips for other companies. It is investing $ 20 billion in chip manufacturing equipment.

Caulfield said he welcomed Intel’s move and didn’t see the company as a new competitor. One key difference is that Intel is able to manufacture or manufacture chips with the smallest and densest transistors required for powerful CPU chips at the heart of a computer or smartphone.

However, Caulfield says the industry scarcity, especially for the automotive world, is not due to demand for leading node chips. The bottlenecks affect other parts that cars need, such as radar chips, which don’t necessarily require the most advanced manufacturing available today.

“The auto industry doesn’t run out of chips because it doesn’t have CPUs. Nobody says I can’t build enough computers, it’s all the other chips,” said Caulfield.

GlobalFoundries specializes in chips that enable certain functions.

GlobalFoundries makes secure chips for contactless payment, battery power management and touch display drivers. These chips were initially used in large quantities for smartphones, but are now found in a wide range of products from cars to devices, which has led to a surge in demand.

Most of the investments in the foundry, however, have been made in building cutting-edge, high-speed chips. That changed last year when the pandemic broke out and sales of electronics including laptops, monitors, and game consoles soared as people bought gadgets to work from home or go to school.

These products require many additional chips on top of the CPU, triggering the onset of the chip shortage and highlighting the need for greater capacity to build chips, which Caulfield calls “feature rich” chips. Smartphones and computers also increasingly require non-leading node chips to connect to 5G networks or add additional cameras.

GlobalFoundries warned that it will be months before the number of chips in the market can be increased, but that the increase in capacity makes sense for long-term investments. “The moment you say I want to add capacity, it’s a 12 month cycle,” said Caulfield.

“The half-industry active in Covid forecast an annual growth rate of 5% for five years. We assume that this will now almost double,” said Caulfield. “It is not a one-time thing. It is a structural change that the ubiquitous need for semiconductors is accelerating.”

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