In connection: The difficulties facing the semiconductor industry have become so well known of late that mainstream news about chip shortages and the related problems they cause has become commonplace. Along the way, a much wider audience has started to learn some of the quirks and structural challenges that the chip business is facing.
Chip scarcity triggers important plans at large semiconductor companies. The most recent example is GlobalFoundries’ announcement that it will greatly expand the capacity of its existing chip factory in Singapore. The company announced a $ 4 billion investment, in partnership with Singapore’s government officials and dedicated customers, to build a 250,000 square foot extension, which is expected to open for production in 2023.
The investment will allow the company to increase its overall performance by 33% and increase its 300mm wafer capacity from approximately 720,000 / year to just under 1.2 million / year, in addition to the nearly 700,000 200mm wafers that are made there every year. (It is noteworthy that the message was conveyed to me by an all-female contingent of executives at GlobalFoundries – a first in more than 20 years of experience in the semiconductor business.)
The need for additional chip manufacturing capacity has become painfully apparent during the pandemic, so it is clearly great to see the investment made by GlobalFoundries (GF). The news of this expansion is important to both the company and the semiconductor industry at large for a number of reasons.
First, it gives the industry the attention it deserves that, frankly, has been overlooked in the past few decades. For those watching developments in the chip industry, most of the press and attention is focused on the so-called leading process nodes. In English, this means ever smaller chip sizes – for example 7 nm (nanometers), 5 nm, 3 nm, etc. While these state-of-the-art chips provide power to smartphones and many other sexy, essential devices, they only make up about 30% of the total revenue of the chip industry and about 10% of the units manufactured.
More importantly, they are extremely difficult and expensive to develop. For this reason, GF made the – at the time rather controversial – decision to stop playing the nanometer game and instead concentrate on finding new capabilities and chips for chips built with larger transistor sizes (12 nm and more) a few years ago Add features. . Not only do these types of chips make up the bulk of the supplies and revenues for the semiconductor industry, but there are a number of uses for which they are the best technology. For example, applications like RF (radio frequency), analog power, and non-volatile memory, which are critical to things like 5G, automotive, IoT, and many other industries, work best for the chip sizes GlobalFoundries is focused on.
Unfortunately, much of the industry believed that anything chip-related was only better when it was smaller. As a result, adequate investments have not been made in these less “sexy” types of chips, leading the entire industry into the critical scarcity it is in. GlobalFoundries’ investment is clearly a step in the right direction in starting to address the problem around less cutting edge nodes. The fact that the company also referred to similar types of investments that it plans to make in both the US and Europe underscores the increasing importance attached to these types of components.
Unfortunately, the GF news also highlight how expensive and slow changes are in the chip industry. While many large manufacturers, especially automakers, are asking for as many chips as possible as soon as they can get them, the sobering truth is that there is no easy answer to this problem and it will take several years to get there can.
As long-time chip industry observers know, the semiconductor business has always been very cyclical, with many different phases of bottlenecks and surpluses, due to the time it takes to fill the void. With some predictions that semiconductor shipments and sales will more than double this decade, this time around could be different and potential oversupply problems seem a long way off.
Another factor is that the chip industry environment is very different today than it was before the pandemic. For one thing, the concentration of chip manufacturing facilities in a few regions of the world has become an enormous geopolitical issue. In fact, major governments around the world are now calling for policies that encourage local chip production.
Here in the United States, the Senate recently passed the CHIPs for America Act, a $ 52 billion tax incentive for US chip manufacturing. Government leaders are realizing the importance of a geographically diverse group of semiconductor suppliers, and even the chipmakers themselves are starting to put more effort into expanding their global reach – something GlobalFoundries has been doing for more than 10 years.
The fact that GF’s announcement was made in collaboration with the Singapore Economic Development Board is a clear expression of these principles, as many future chip manufacturing contracts are likely to reflect these public-private partnerships as well. The 1,000 or so highly qualified jobs that are expected in the course of the factory expansion are another reason for the government’s strong interest. The GF deal is also interesting because of the involvement of so-called “committed customers”. It is clear that billions of dollars in manufacturing investments cannot be wisely made without firm, long-term financial commitments from key customers – it is no longer a “build it and they will come” environment. As a result, I expect other new factory news, from both GlobalFoundries and other industry players, to include a customer element.
The pandemic has made our societal dependence on digital, chip-powered devices and services clear. Therefore, providing the right policy environment and financial incentives to ensure a steady, safe, and diverse supply of the critical chips that power them will undoubtedly be a top priority for businesses and governments for some time. As a US based company, it’s great to see GlobalFoundries set the tone in how these types of global semiconductor problems and businesses are being implemented.
Bob O’Donnell is the founder and chief analyst of TECHnalysis Research, LLC, a technology consulting firm that provides strategic advisory and market research services to the technology and professional finance industries. You can follow him on Twitter @bobodtech.
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