Abu Dhabi sovereign fund, Mubadala Investment Co controlled GlobalFoundries Inc., will build a $4 billion chip-making plant in Singapore slated to start in 2023 to address the global semiconductor chip crisis, Bloomberg reports.
What Happened: The company joined the likes of Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) and Samsung Electronics Co Ltd (OTC:SSNLF), which expanded capacity to address the chip crisis for everything from cars to smartphones.
GlobalFoundries is prepping for a U.S. initial public offering that could value the chipmaker at $30 billion.
The company will also devote $1 billion apiece to building out its Dresden, Germany, and U.S. sites. GlobalFoundries will fund the lion’s share of that $6 billion global expansion with contributions from pre-payments for its capacity and government partnerships.
CEO Tom Caulfield acknowledged the global economic risk associated with 70% of all foundry manufacturing taking place in Taiwan, a couple of hundred miles away from China, from one company.
GlobalFoundries aims to expand its global footprint for supply chain flexibility and security.
Why It Matters: The Biden government proposed to spend $52 billion to fund chip production and research at home to counter the Asian countries’ growing semiconductor industry dominance. Beijing has appointed a top deputy of Xi Jinping to supervise the creation of their domestic semiconductor industry.
It has previously committed to expanding production in Singapore, Europe, and the U.S. Chipmaking facilities typically start producing chips 18 months to two years after breaking ground.
GlobalFoundries’s Singapore facility, which will be a few generations behind the cutting-edge post-completion, should primarily cater to the smartphone and auto demand.
Mubadala had acquired Advanced Micro Devices Inc’s (NASDAQ:AMD) manufacturing facilities in 2009 and later combined them with Singapore’s Chartered Semiconductor Manufacturing Ltd to create GlobalFoundries. Contract chipmakers like GlobalFoundries, TSM, and Samsung fabricate chips for large technology companies like Apple Inc (NASDAQ:AAPL), NVIDIA Corp (NASDAQ:NVDA), and Amazon.com Inc (NASDAQ:AMZN) that design their silicon.
Caulfield expects the chip demand to outpace supply over the next five to eight years. As a result, GlobalFoundries has sold out the capacity for the new Singapore fab and is now planning a second phase.