Globalfoundries to take on Taiwan chipmakers

The head of a new US-based chip foundry company that is set to launch on Thursday said it would take on Taiwan’s traditional dominance of the industry.

Doug Grose, chief executive of Globalfoundries, said its plants in Europe and the US would give it an edge over its Asian rivals.

”We think we have an advantage in being able to tap into the best talent in the world [in Europe and the US] and having this diversity of supply,” he said.

But the creation of Globalfoundries, a joint venture between the microprocessor maker Advanced Micro Devices and Abu Dhabi investors, has been born more out of necessity than ambition.

AMD has reported nine consecutive quarterly losses and amassed more than $4bn in debt as it tries to keep up with the manufacturing advances of its much bigger rival Intel.

The spinning off of its manufacturing capacity with an immediate cash injection of $1.4bn from an investment arm of the Abu Dhabi government is aimed at giving AMD a fresh start as a “fab-less” chip designer and Globalfoundries a fighting chance of competing with other contract manufacturers.

Mr Grose, former head of manufacturing operations at AMD, said the new company would become the number three contract manufacturer behind Taiwan Semiconductor Manufacturing and UMC of Taiwan.

The company will be based next to AMD’s headquarters in Silicon Valley but has no production facilities there. It employs 2,800 people, mainly at its plant in Dresden, Germany, which is being renamed Fab 1. Another 1,400 jobs are expected to be created by the building of Fab 2, due to break ground in New York state in the summer and begin production in 2012.

Globalfoundries will depend on AMD as a customer initially, but Mr Grose, in an FT interview, said it planned to expand its customer base and products. He said the company would benefit from other chip companies also quitting their own manufacturing and turning to foundries.

Intel has warned that only a handful of manufacturers will be able to afford to take the next re-tooling step of moving up from silicon wafers of 300mm in diameter to 450mm. It reached an agreement with Samsung and TSMC last year on managing that transition.

“Today there’s so much more to get out of 300mm ... [450mm] is not in our critical path for the next three to five years,” responded Mr Grose.

AMD last spun off a company in order to focus on its core competencies in 2005, when its flash memory joint venture with Fujitsu was renamed Spansion and floated in New York.

Spansion filed for bankruptcy on Sunday, a victim of falling prices and a sharp decline in demand for memory chips.

“I think [Globalfoundries] is quite different from Spansion,” said Mr Grose. “It was in a flash memory market which had huge, multiple competitors and I don’t think Spansion had the investor backing and commitment that we have.”

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