GlobalFoundries Partnership with GM

The Six Five team discusses GlobalFoundries partnership with GM.

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Transcript:.

Daniel Newman: GlobalFoundries made a big announcement with GM. It kind of hits on four or five different things, Pat. I’m going to let you go first, but bunch of angles here.

Patrick Moorhead: So yeah, GF has really been on the move for the past couple years, and quite frankly, they didn’t get the credit they deserved until we saw the chip downturn. People’s brains seem to be fixated on bleeding edge digital with the latest processors and GPUs. But what we learned with the pandemic and the supply chain challenges is, you know, can’t ship that $50,000 car without that $2 analog part to either help drive the RF of that 5G or 4G modem, or power conditioning. Power conditioning is an analog function, and every electric car out there literally has thousands of these power conditioners to be able to have the most effective performance, so-called performance per watt, mile per watt outcome. And those are just a few of the things that GF brings to the table. They’re also industry leader in silicon photonics related to, compared to companies like TSMC.

And then finally, you have the China challenge or the Balkanization of the semiconductor market, where GF clearly plays actually on all continents. So they’re almost a safe bet even for the Chinese. So what’s new? As we saw, we had cars that couldn’t be shipped because people couldn’t get a 50 cent semiconductor, you had car companies that were shipping units without radios, odd little weird types of things. And what we’ve seen, and we’ve seen GF sign up a couple of automakers now, but General Motors signed up a long-term direct supply chain agreement for the US-produced chips for them. And again, not to say we’ve seen this before, but no, we’ve seen this before, and it’s just smart and I think it’s a testament to GlobalFoundries that they didn’t pick either Tower or TSMC.

Daniel Newman: Yeah, so I think there’s some really interesting things that this also insinuates. The timing of this announcement with CHIPS Act money at stake has to be considered right now. I’ve written a few pieces, as have you, Pat, I wrote a MarketWatch piece saying, “Where’s the CHIPS Act money going to go?” And I believe it’s going to disproportionately go to Intel. Intel’s stepped up, raised its hand, and they’re building the massive Columbus superfab. They’re going to win on the, “We’re going to be the leading edge.” But let’s be candid, you said this really well, a lot of the delays, a lot of the problems, and by the way, one of the parts of the market that has not caught up even still has been the automotive space, meaning where we have a glut of chips to build PCs and smartphones and data center servers, we’re still catching up from what’s gone on in the automotive space. Inventory supplies are still down.

The second thing, Pat, was the streamlining of parts, where they’re going to basically work with GM so that a single part bin can handle more of the needs, so different sensors or different controllers can be basically multifaceted and used for different purposes in a vehicle. So instead of having to have, say, you have 100 semis in a vehicle and having 17 different parts to do it, now they have 100 semis and maybe they’ll have 5 parts. And so if they can manufacture more volume, they would be able to deliver more successfully for the customers. A third of this is being done in Upstate New York. In fact, that’s why I really point out the CHIPS Act thing, was the commitment is to do with the manufacturing in Upstate New York, which means it’s good for the US.

So with GlobalFoundries always being one of these companies that’s like, are they US based or are they not US-based? They were backed by a sovereign fund in the Middle East and there’s always a little bit of question as to where do they stand? They are US-listed company with a US-based CEO that runs the company here in the US, and they are bringing more manufacturing and more jobs to the US. So I think this could be a real plus for their sort of positioning to get additional funds in the CHIPS Act as well. I mean, what’s more apple pie than GM, in terms of a US-based company that’s making a bigger commitment to using this US manufacturing to try to sway the policymaker? So was that intentional? I can’t speak to that, but what I can say is very good timing given where we’re at with appropriations. And of course, a very good strategic move to streamline the parts, streamline the manufacturing and bring more of it home.

US has always been better on the lagging than the leading. So our problems longer term, to solve leading edge manufacturing, are still a real challenge. But GlobalFoundries fills a really important need with these, Pat, what’d you call them? 50 cent part bin, that are the difference between cars being manufactured and cars not being manufactured. So good partnership, good announcement for GlobalFoundries. And by the way, GM is a winner here too.