CEO of GlobalFoundries on Semiconductor Shortage and IPO

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

Caufield said the company’s manufacturing capacity is completely booked and industry-wide semiconductor supply may be below demand until 2022 or later.

“Right now all of our plants are not just over 100% utilized, we are adding capacity as quickly as possible,” said Caulfield.

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

The shortage has highlighted the role of a handful of foundries, which are the factories hired by semiconductor companies to make chips. Many, like GlobalFoundries, are investing billions in new production lines and improved equipment to cope with surging demand and supply shortages.

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

GlobalFoundries is still a relatively small player, with just 7% of the foundry market according to Trendforce. Other foundries are also investing a lot of money.

Taiwanese company TSMC, the industry’s largest company with 54% market share, said Thursday it plans to invest $ 100 billion over the next three years to increase its ability 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 invests US $ 20 billion in chip manufacturing plants.

Caulfield said he welcomes Intel’s change and doesn’t see the company as a new competitor. One of the main differences is that Intel is good at “cutting edge” manufacturing or making chips with the smallest and densest transistors, which are needed for the powerful CPU chips in a computer’s core or core. of a smartphone.

But Caulfield says industry shortages, especially for the automotive world, are not due to demand for top-tier node chips. The shortages relate to other parts that cars need, like radar chips, that don’t necessarily require the most advanced manufacturing available at the time.

“The auto industry doesn’t have a shortage of chips because it doesn’t have a CPU. No one is saying I can’t build enough computers, it’s all the other chips,” Caulfield said.

GlobalFoundries specializes in chips designed to activate specific functionality.

GlobalFoundries manufactures secure chips for contactless payments, battery power management and touch screen drivers. These chips were first used in large quantities for smartphones, but are now included in a wide range of products from cars to household appliances, which has created an increase in demand.

However, most of the investment in the foundry world has gone into building ultramodern, high-speed chips. Everything changed last year when the pandemic hit, and sales of electronic devices, including laptops, monitors, and game consoles, increased as people bought equipment to work or go to school. school from their home.

These products require a lot of additional chips beyond the processor, initiating the onset of the chip shortage and underscoring the need for more capacity to build what Caulfield calls “feature rich” chips. Smartphones and computers also increasingly need chips from non-leader nodes to connect to 5G networks or add additional cameras.

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

“The semi-industrial industry entering Covid was forecasting an annual growth rate of 5% for five years. We expect that will almost double now, ”said Caulfield. “It’s not a one-time thing. It’s a structural change, that the pervasive need for semiconductors is accelerating.”