The logo of U.S. chipmaker Globalfoundries can be seen at the company’s plant in Dresden, Eastern Germany
Norbert Millauer/DDP/AFP via Getty Images
Days after a report that Intel was in talks for a $30 billion bid to buy contract chip manufacturer GlobalFoundries, the company said Monday it planned a significant expansion to its manufacturing facilities in Malta, New York.
At an event in New York, which included Commerce Secretary Gina Raimondo, and Senate Majority Leader Chuck Schumer, GlobalFoundries executives said it planned to double its output at its Malta site with new fabrication facility and a billion-dollar investment in existing facilities. The investments will boost U.S. domestic chip manufacturing amid a crippling global shortage of semiconductors that has damaged sales of consumer goods ranging from home appliances to videogame consoles.
“Our industry is expected to grow more in the next decade than it did in the past 50 years and GlobalFoundries is stepping up to do its part as we work together to address the growing demand for technology innovation for the betterment of humanity,” GlobalFoundries chief executive Tom Caulfield said.
GlobalFoundries said it plans to fund the new plant through private-public partnerships and will include federal and state investments. The White House has asked Congress for $50 billion to expand domestic semiconductor manufacturing and research.
Separately Monday, GlobalFoundries also said it was revamping its brand, adopting a new logo and rethinking its approach to marketing, among other things, GlobalFoundries vide president and head of global brand and marketing Michelle Leyden Li said in a blog post.
The Wall Street Journal reported late Thursday that Intel (ticker: INTC) was in talks with GlobalFoundries’ owner Mubadala Investment, an investment arm of the Abu Dhabi government. Baird analyst Tristan Gerra told Barron’s last week that Thursday’s report suggest the talks are advanced, since they have been ongoing since at least April.
If the reported deal closes, it would benefit Intel ‘s freshly unveiled Foundry Services unit, which aims to create a contract manufacturing business within the company. Buying GlobalFoundries would give Intel additional manufacturing capacity, more than 250 customers, and the sales and marketing infrastructure necessary to support the new unit. GlobalFoundries customers include the Defense Department, Qualcomm (QCOM), Intel rival Advanced Micro Devices (AMD), and others.
GlobalFoundries is closely held company so there is little public information about its financial performance available. The company generated $5.7 billion in annual revenue in 2020, and aims to grow the figure by 9% to 10% this year. According to Gerra’s estimates, GlobalFoundries generates a 20% margin for earnings before interest, taxes, depreciation, and amortization. According to public filings, the chip maker has a $514.5 million secured loan due in 2026.
Shares of Intel slumped 1.28% to $54.25 amid broad weakness in the tech sector. The PHLX Semiconductor index (SOXX) fell 0.86%.
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