[Peace&Chips] Why GlobalFoundries in the US Received Subsidies Before Intel

Third Company Receiving Semiconductor Support Act Subsidy
First US Foundry Case...Linked to Manufacturing Promotion
Major Customers Include GE, Lockheed Martin, and Other US Defense Companies

The United States is ramping up subsidy payments under the CHIPS Act to strengthen its domestic semiconductor supply chain. Starting with the British defense contractor 'BAE Systems' in December last year, followed by the domestic company 'Microchip Technology,' the U.S. announced on the 19th (local time) that it will provide subsidies to 'GlobalFoundries.'

The semiconductor industry has taken note of GlobalFoundries being selected as the third subsidy recipient. Unlike other companies that received subsidies around $100 million, GlobalFoundries' subsidy is relatively large at $1.5 billion. This is also the first time the U.S. has provided subsidies to a domestic foundry company.

GlobalFoundries headquarters in Malta, New York, USA
[Photo by GlobalFoundries]

The U.S. is currently focused on expanding its domestic semiconductor supply chain through various policies, including the CHIPS Act. Unlike semiconductor design (fabless) and equipment sectors, which are prominent in the global market, the manufacturing sector has lagged behind, prompting efforts to develop this area.

In this regard, GlobalFoundries is an indispensable company in the U.S.'s semiconductor manufacturing development efforts. It is one of the few U.S. semiconductor manufacturing companies and ranks highly in the global foundry market.

GlobalFoundries is the third-largest company in the foundry market, following Taiwan's TSMC and Samsung Electronics. Although its market share is in the single digits (6.2% as of Q3 2023), it is the number one company domestically. Its headquarters are in New York, USA, and it has production facilities not only in the U.S. but also in Germany and Singapore.

Notably, it has roots in AMD, another U.S. semiconductor company competing with Intel and Nvidia. AMD is a fabless company known for processors such as CPUs under the 'Ryzen' brand. Although it once had manufacturing facilities, as business difficulties increased in the 2000s, it separated and sold off its manufacturing division. This process led to the founding of GlobalFoundries in 2009. Currently, the majority of the company's shares are held by Mubadala, the sovereign wealth fund of the United Arab Emirates (UAE).

Although GlobalFoundries is the third-largest foundry company, unlike TSMC and Samsung Electronics, it does not operate advanced process businesses below 5 nanometers (nm; 1 nm = one billionth of a meter). It focuses on processes above the 10 nm range. Currently, it generates main revenue from smart mobile devices, the Internet of Things (IoT), and the automotive sector. As of last year, its revenue was $7.392 billion, a 9% decrease compared to the previous year.

Its major clients include U.S. companies General Electric (GE) and Lockheed Martin. Since it serves leading companies in the U.S. electronics and defense industries, the U.S. government naturally considers GlobalFoundries important.

Based on the subsidies received from the government, GlobalFoundries plans to build and expand factories in Malta, New York, and Burlington, Vermont. As it aligns with the U.S. government's initiatives, it is likely to receive various forms of support going forward.

The next expected recipient is Intel. Locally, there are forecasts that the U.S. government will soon provide large-scale subsidies under the CHIPS Act to Intel. Having announced its re-entry into the foundry market in 2021, Intel is expected to aggressively expand its business with government support. As before, competition in the semiconductor market is increasingly becoming a contest between nations.

Editor's NoteSemiconductors, often called the rice of modern industry. Although we hear the term daily, it’s hard to explain. Peace & Chips will make the complex concepts and overall industry trends easy to understand. Just bring your spoon.

This content was produced with the assistance of AI translation services.