Fresh out of beating estimates for the Q2 earnings (likely thanks to Apple’s compensatory payment for lower than expected orders for iPhone and iPad displays), and to add to the confusion of Samsung’s rumored involvement in the production of at least some of NVidia’s upcoming Ampere desktop GPUs (traditionally made at rival TSMC), the Korean giant continues to defy the negative outlook for the future of the technology sector with reports from the industry telling us they are negotiating a major investment into U.S. based semiconductor foundry GlobalFoundries.
US & EU vs China
Just yesterday U.S. Senator John Cornyn (R-TX) discussed his amendment to restore semiconductor manufacturing back to American soil, which passed as part of the National Defense Authorization Act. Cornyn remarked:
Following the Senator’s remarks GlobalFoundries CEO Tom Caulfield published the following on the company’s official twitter account:
Although GlobalFoundries is indeed based in the U.S. the nationalistic tone of Caulfield’s remarks is nonetheless suspect given the company is actually owned by the Emirate of Abu Dhabi, but that’s by the by, GloFo would likely benefit greatly if this amendment gets approval from the Senate, being one of the U.S. government’s likely targets for an injection of capital in the nation’s semiconductor industry of up to $25 billion for research and development, including funding for other parts of the manufacturing process, like IC packaging. To add to this GlobalFoundries Dresden recently received certification to manufacture secure products, which allows the German division to produce chips for financial transactions, smart cards, digital IDs as well as other products and applications for the public sector or industries that require an extra level of security and integrity in the production process. That includes of course, the military.
While GloFo’s most advanced plant, Fab 8 located in upstate New York, is where some of the Department of Defense’s chip orders are fulfilled, the plant has long been seen as a vulnerable link in the supply chain for military grade processors in the US Trusted Foundry Program, given GloFo’s lack of investment in the latest nodes, forcing the U.S. military to rely on chips manufactured in Asia for areas where the most advanced technologies are required, like aircraft, satellites, rockets and communications systems.
To address the government’s plans to end the country’s reliance on Asian based foundries for these sensitive areas, and in anticipation of this injection of capital, Globalfoundries and SkyWater Technology have reached a deal to supply chips to the U.S. defense industry and work on new technology. Additionally GloFo is negotiating purchasing land to expand its New York facilities.
We have received information that a similar situation is happening in Europe, with GlobalFoundries Dresden currently in negotiations to expand its Dresden based plant power delivery capacity from 65MW to 100MW to increase production, including of the aforementioned secure chips for European companies who also rely on Asian chip manufacturers.
Given that the U.S. stimulus is aimed at fab expansion on american soil, an unlikely investor has entered the scene to support GloFo’s expansion in Europe. Samsung is reported to be funding most of GlobalFoundries expansion in Germany. The question is, of course, what will Samsung gain from this?
Too close to China
Back in May Samsung’s rival TSMC announced it will be building a 5nm fab in Arizona with support from that state and the U.S. government, with around 20K wafer-per-month capacity (a drop in the ocean compared to their Taiwan fabs by the way) and create 1600 local jobs. The move came as the Taiwanese company faces potential restrictions from the U.S. in providing chips to Chinese giants like Huawei. Samsung seems to be taking a different approach here. Rather than trying to gain favor with Trump’s administration by building a new fab in the United States, the Korean company expects to secure an indirect foothold in the U.S. by investing in GlobalFoundries. Seeing both Europe and the U.S. making efforts to distance themselves from Asia seems to be driving companies in close proximity to China (both geographically and in business ties) to find alternative routes to maintaining a link to the west.
The project being discussed between Samsung and GlobalFoundries would increase power delivery capacity in the Dresden fab from the current 63MW to around 100MW. The construction is expected to begin by 2024.
Samsung has repeatedly said in the past year that it plans to be the world’s largest semiconductor manufacturer by 2030 (a position currently held by TSMC) and investing in GlobalFoundries not only allows it to retain ties to the U.S. but could also help free up room in its home facilities for expanding its advanced nodes, using this partnership with GloFo to fulfill orders that require older technologies, thus helping them achieve this ambitious 2030 goal. It could also free up capacity to capture and retain new high volume customers, like say… NVidia.