Semiconductor Foundry King TSMC Faces Serious Challenge from Abu Dhabi Globalfoundries

Introduction to Semiconductor Foundry Model

Semiconductor Foundry Leader Taiwan Semiconductor Manufacturing Co.(TSMC) is facing a serious challenge for the No. 1 position from Abu Dhabi company Global Foundries.TSMC is a pioneer of the “Fabless” model in which  Chip production is outsourced to specialized chip manufacturing companies like TSMC,UMC leaving companies to focus on the Design and Marketing of those chips. Semiconductor companies like Qualcomm,Nvidia,AMD design the chips while leaving the manufacturing to Foundries like  TSMC.This allows companies to focus on their respective strengths leading to a win-win situation for both the Fabless and Foundry companies.Note big semiconductor companies like Samsung and Intel still have a vertically integrated model from design to manufacturing to marketing.GlobalFoundries is Abu Dhabi’s vehicle for its ambition of becoming a semiconductor powerhouse as it intends to spend almost $9 billion to garner a 30% global marketshare .

Globalfoundries to Spend More Than $3 Billion to Boost Output – Bloomberg

Globalfoundries Inc., seeking to challenge Taiwan Semiconductor Manufacturing Co. in the made-to- order chip market, will spend more than $3 billion to boost production at its factories in New York and Germany.The company will increase the size of a new plant in upstate New York and add a production line to existing factories in Dresden, Germany, said Chief Executive Officer Doug Grose. The investment is in addition to the $6 billion already promised by the company’s owners, he said.

Advanced Technology also said that it has chosen the site of a technology park in Abu Dhabi. When the investment firm announced its original deal with AMD, it said it would eventually build a factory in the Middle Eastern emirate. The timing of that project has yet to be determined, said Ibrahim Ajami, chief executive officer of Advanced Technology.“We are very committed to bringing this industry to Abu Dhabi,” said Ajami. The increased investment in Dresden and New York show that “we entered this business because we wanted to win.”Globalfoundries intends to capture 30 percent of the chip contract-making market. That would vault it past United Microelectronics Corp. Taiwan Semiconductor Manufacturing, known as TSMC, leads the market.

TSMC facing the first serious challenge in its history

TSMC has been the numero-uno in this industry with other foundries like UMC , Singapore based Chartered and China SMIC never really posing a major threat.However Abu Dhabi based GlobalFoundries backed by the massive Abu Dhabi sovereign fund is making strong moves to usurp market dominance in this semiconductor segment.The company started by buying the “Fabs” ( billion dollar semiconductor chip production plants) of struggling AMD which was a “near death” situation .It has been steadily expanding ever since,recently buying up the struggling Chartered Semiconductor.There have also been rumors of it buying UMC the world’s second largest foundry company .  GlobalFoundries has managed to win new customers in Qualcomm and looking to snare ARM as well.Though the company has denied that it was buying UMC,it would make a lot of sense to do so.UMC has been also been battered by the Global Financial Crisis and would be a cheap takeover candidate.TSMC has its task cut out in warding off the challenge from this rich upstart.However TSMC’s strong Management and track record would make it foolish for anyone to bet against its easy fall from the No. 1 position.

Globalfoundries’ Owner Says Company Is Unable to Acquire UMC – Bloomberg

Globalfoundries Inc.’s majority shareholder, Advanced Technology Investment Co., said it doesn’t currently have the budget to acquire Taiwanese chipmaker United Microelectronics Corp., quashing takeover speculation.

“ATIC is not in a position to do this in this stage of our capital deployment,” Ibrahim Ajami, chief executive officer of Advanced Technology, said today in an interview in Shanghai. “There are a lot of risks we would have to consider and a lot of implications of an acquisition of that nature.”