Globalfoundries has also done what may seem illogical and said it intends to invent the fab-lite foundry. That is the implication of dividing Globalfoundries’ business between a foundry part and an ASIC development business that is free to go other foundries at 7nm and beyond. Is it the case that the company formed by AMD’s desire to exit capital intensive chip manufacturing now itself wishes to get out of capital-intensive chip manufacturing? What we do not yet know is how significant a business ASIC development will be as a proportion of the whole. It seems unusual and may receive double-takes from potential customers before its receives their business.

if we also step back and look at this radical rethink we must also question whether it the beginning of end of Globalfoundries? Or the end of the beginning for a company that could yet prosper?

Undoubtedly what we are seeing is a familiar process of re-alignment imposed on a chip manufacturing company because of the exponentially increasing cost of R&D at the leading edge – and certainly below 10nm – and the exceptional success of Taiwan Semiconductor Manufacturing Co. (Hsinchu, Taiwan) at meeting demand for miniaturization in a timely manner.

It is also ironic that an inability to keep AMD as a client at 7nm could have made Globalfoundries’ roadmap to 7nm and beyond unviable. The word in the first half of this year was that AMD would split its 7nm business between TSMC and Globalfoundries. But that talk of a split may have just been a fig leaf to spare Globalfoundries’ blushes, with the lion’s share of the orders going to TSMC. In any case it now seems that AMD will now get all its 7nm FinFET silicon made by TSMC.

The only other leading-edge FinFET manufacturers left in the game are Intel – arguably also failing to compete with TSMC – and Samsung, which is cross-subsidized by its mobile phone, television and broader engineering businesses.

Globalfoundries has said it will put its 7nm R&D on hold indefinitely and re-assign leading technologists to work on finding differentiating options at 14nm/12nm and on FDSOI. It is effectively throwing in the leading-edge towel. It can never resurrect that 7nm R&D. And on this occasion, it is not even asking if it can license a process from Samsung to stay in the game, something that it did with the 14nm FinFET process.

Next: Going different

Instead it is looking to go down the differentiated silicon route at 14nm/12nm, a place where it may even get a slight head start on Samsung and TSMC who are busy serving customers with digital chips on those nodes. However, this differentiated argument does beg the question, what is the difference between Globalfoundries’ FDSOI offering, also serving the differentiated silicon market, and its newly redirected FinFET offering. Do they overlap or dovetail together? Differentiated silicon is also a familiar mantra that was espoused by another company that chose not to pursue the leading-edge: STMicroelectronics (see ST’s Bozotti on ‘back-to-silicon’ differentiation) as well as speciality foundries such as Tower Semiconductor Ltd.

It must be said the writing has been on the wall for Globalfoundries for some time.

Because it is privately owned by Abu Dhabi’s soverign wealth fund Mubadala Investment Company it doesn’t have to publish financial accounts. But Globalfoundries has been thought to struggling against rival TSMC at the leading edge for many years.

Basically, TSMC executes so well at bringing up new processes at the leading-edge that it dominates that business with Samsung able to grab the some prestige customers on a strategic basis. Globalfoudries reportedly made a loss of $522 million in the first half of 2017 and this may have prompted Globalfoundries to push for investigations of TSMC by the authorities for alleged monopolistic behaviour. TSMC has always denied any wrong doing and the wheels of this form of justice grind exceedingly slowly with no news – good or bad for either company – on the horizon.

It would seem that Mubadala has decided that its $15 billion to $20 billion experiment to establish Globalfoundries as a leading-edge foundry is over and incoming CEO Tom Caulfield – appointed in March 2018 – has had to cut the company’s cloth according to its means.

Indeed, the lack of support may have prompted the previous Globalfoundries CEO, Sanjay Jha, to resign – rather like a professional soccer team manager who leaves because his club declines to give him the money to buy-in first-class players.

The arguments put forward by Caulfield do make sense. These are: that fewer fabless customers are moving to the leading-edge; that expensive nodes such as 14nm/12nm are expected to last longer and that differentiated silicon is better business than simply pursuing the high performance leading edge. And the last is definitely true if you struggle to win that business.

Next: Lingering concern

However, there is a lingering concern that a foundry that is on the transition from leading-edge to specialist foundry AND design service company is neither one thing nor the other. A company that is hunting around for identity and profit is not necessarily an attractive vendor. It is definitely the case that while Singapore and Dresden foundry complexes are configured to manufacture “differentiated silicon,” Globalfoundries wafer fab complex in Malta, New York, has been a very expensive exercise in pursuing leading-edge manufacturing of ICs. It has been supported by the state of New York on the basis of bringing that leading-edge manufacturing back to the United States. Globalfoundries decision to turn its back on the leading-edge, while almost inevitable, will likely not play well in the political corridors in New York and Washington and may even produce strong reactions.

However, this is a path that has been trodden before with success. There was a time when TSMC and United Microelectronics Corp. (UMC) were always mentioned together as the exemplars of foundry manufacturing. UMC was also outrun by TSMC at the leading edge but has successfully transformed itself into a second-tier foundry with differentiated offerings and operating just behind the leading edge.

Could a re-aligned, slimmed down Globalfoundries, achieve similar success? Or does it effectively become a target for acquisition allowing Abu Dhabi to find the exit it is probably now wishing for? And would such an acquisition also ultimately mean the breaking up of Globalfoundries into its constituent geographical parts in New York, Dresden and Singapore?

The words of Ahmed Yahia Al Idrissi, chairman of the board of directors of Globalfoundries, when Caulfield was appointed could now be seen in a different light. At that time, March 2018, he said: “We will continue to invest to differentiate and grow the business and further consolidate the industry through partnerships, in a way that allows us to better serve our customers,”

Does the bit about consolidating the industry mean that Globalfoundries is looking to buy – or be bought?

Related links and articles:

News articles:

GloFo rethinks its future, drops 7nm FinFET

Second tier foundries lose market share

UMC to pay big price for Fujitsu foundry

ST’s Bozotti on ‘back-to-silicon’ differentiation

Report: Globalfoundries asks China to probe TSMC

Report: GlobalFoundries accuses TSMC of unfair selling

TSMC responds to antitrust investigation reports

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