CEO of largest U.S. chip foundry explains why semiconductor shortage could last through 2022

GlobalFoundries campus in Malta, N.Y.

Mary Thompson | CNBC

GlobalFoundries, the third-largest foundry, is planning to take a position $1.4 billion in its chip factories this 12 months, and can doubtless double that funding subsequent 12 months, CEO Tom Caulfield advised CNBC in an interview.

Caufield mentioned the corporate’s manufacturing capability is totally booked and that industrywide semiconductor provide could lag behind demand till 2022 or later.

“Right now all our fabs are not only more than 100% utilized, we are adding capacity as fast as we can,” Caulfield mentioned.

A shortage of semiconductor microchips is inflicting havoc world wide, delaying car production and affecting the operations of some of the largest shopper electronics producers.

The shortage has highlighted the function of a handful of foundries, that are the factories contracted by semiconductor companies to construct chips. Many, like GlobalFoundries, are investing billions in new manufacturing strains and upgraded gear to maintain up with the surge in demand and shortfalls in provide.

GlobalFoundries is the largest U.S.-headquartered “pure” foundry, with factories within the U.S., Germany and Singapore. It manufactures semiconductors designed by corporations like AMD, Qualcomm and Broadcom. It’s at present a non-public firm owned by the federal government of Abu Dhabi. The firm is contemplating an IPO within the first half of 2022 or sooner, Caulfield mentioned.

Major investments and rising demand

GlobalFoundries remains to be a comparatively small participant, with solely a 7% share of the foundry market according to Trendforce. Other foundries are investing massive {dollars} too.

Taiwan-based TSMC, the largest firm within the house with a 54% market share, said on Thursday it plans to take a position $100 billion over the following three years to extend its capability to satisfy demand.

Intel, which designs and manufactures its chips, announced on March 23 it plans to turn into a foundry and manufacture chips for different corporations. It’s investing $20 billion U.S. chipmaking vegetation.

Caulfield mentioned he welcomes Intel’s shift and does not see the corporate as a brand new competitor. One key distinction is Intel is expert at “bleeding edge” manufacturing or making chips with the smallest and most dense transistors, that are required for highly effective CPU chips on the coronary heart of a pc or smartphone.

But Caulfield says the business shortages, particularly for the automotive world, aren’t as a result of of demand for main node chips. The shortages are for different components automobiles want, like radar chips, which do not essentially require probably the most superior manufacturing out there on the time.

“The auto industry is not having a chip shortage because it doesn’t have CPUs. No one’s saying I can’t build enough computers, it’s all the other chips,” Caulfield mentioned.

Chips which can be designed to allow particular options are what GlobalFoundries focuses on.

GlobalFoundries manufactures safe chips for contactless funds, battery energy administration and contact show drivers. These chips first have been utilized in massive portions for smartphones, however at the moment are included in a variety of merchandise from automobiles to home equipment, which has created a surge in demand.

However, most of the investments within the foundry world have been for constructing bleeding-edge, high-speed chips. That all changed last year when the pandemic hit, and gross sales of electronics together with laptops, displays, and sport consoles rose when individuals purchased gear to work or go to high school from dwelling.

Those merchandise require loads of further chips past the CPU, seeding the beginning of the chip shortage and highlighting the necessity for extra capability to construct what Caulfield calls “feature-rich” chips. Smartphones and computer systems additionally more and more want non-leading node chips to hook up with 5G networks or add further cameras.

GlobalFoundries warned it can take months earlier than it might probably enhance the quantity of chips available on the market, however that the capability enhance is sensible for long-term investments. “The minute you say, I want to make more capacity, it’s a 12-month cycle,” Caulfield mentioned.

“The semi industry going into Covid was projecting a 5% annual growth rate for five years. We’re projecting that to almost double now,” Caulfield mentioned. “It’s not a one-time thing. It’s a structural shift, that the pervasive need for semiconductors is accelerating.”

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