After suffering huge losses and falling into trouble, GlobalFoundries sells its factory again

It is no longer news that GF is selling factories. Since January this year, GF has sold factories three times. It was originally thought that GF would stop and take a break, but unexpectedly, GF gave up another factory. Today, GF announced that it would sell its photomask business to Toppan Photomasks, a subsidiary of Japan's Toppan Company. The specific price was not disclosed. This is the second time that GF has sold related businesses after selling many wafer factories in recent years. This part of the business is actually the legacy of IBM's Dresden wafer factory in Germany acquired by GF. Toppan is also an important partner in their photomask business and one of the photomask suppliers for 12/14nm process.
 

In 2009, AMD spun off its semiconductor manufacturing business and found ATIC, an investment fund of a Middle Eastern oil tycoon, to establish GlobalFoundries. GlobalFoundries later acquired IBM's semiconductor business and became the world's second largest wafer foundry. However, the good times did not last long. With the abandonment of 7nm, GlobalFoundries' decline was particularly smooth.

According to the latest data from market research firm TrendForce, TSMC's market share in the second quarter of 2019 was 49.2%, followed by Samsung (18.0%), GlobalFoundries (8.7%), UMC (7.5%), and SMIC (5.1%). GlobalFoundries, which originally ranked second, has been more than doubled by Samsung in market share, and with Samsung's recent success in winning large orders from Nvidia and IBM, the gap between GlobalFoundries and Samsung will become increasingly larger. Samsung will be able to achieve its goal of occupying 25% of the chip foundry market as early as the year after next. GlobalFoundries has been falling behind, and SMIC, which relies on the Chinese mainland market, has already started trial production of the 14nm FinFET process, which is threatening GlobalFoundries' position. Under pressure from both sides, GlobalFoundries' future is difficult to be optimistic.

In January this year, GlobalFoundries announced that it would sell its Fab3E 200mm wafer fab in Singapore to World Advanced Semiconductor for US$236 million (approximately RMB 1.59 billion). World Advanced Semiconductor is a
subsidiary of TSMC Group and specializes in 200mm wafer fab business.

Through this transaction, World Advanced will take over all equipment, resources, customers, and employees of the Fab3E factory, while GlobalFoundries will simultaneously launch its MEMS business, freeing up its hands to upgrade other factories and process technologies.

In April, GlobalFoundries announced that it had reached a final agreement with ON Semiconductor to sell GlobalFoundries' 12-inch wafer fab Fab10 in East Fishkill, New York, to ON Semiconductor for $430 million. Of the $430 million sale amount, $100 million will be paid immediately, and the remaining $330 million will be paid before the end of 2022, when ON Semiconductor will gain full control of the plant and complete the transfer of all relevant employees.

 
After selling the New York factory to ON Semiconductor, GF stated that it would not sell any more wafer fabs and would focus on the company's revenue growth. However, less than a month later, GlobalFoundries announced a new transaction - selling its ASIC business Avera Semiconductor to Marvell, which will pay GlobalFoundries $650 million in cash in the next 15 months, and an additional $90 million after meeting certain conditions, totaling $740 million, and the transaction is expected to be completed in fiscal year 2020. These contracts include the transfer of Avera's revenue base, winning strategic designs for infrastructure OEMs, and a long-term wafer supply agreement between GlobalFoundries and Marvell.

 
GlobalFoundries’ dilemma
is that the investment required for the 7nm process is too large. The EVU lithography machine for producing 7nm is mainly produced by ASML, and the price of one machine is US$180 million. GlobalFoundries’ annual revenue is only US$5.5 billion, so funding has become an important factor restricting GlobalFoundries’ development. On the other hand, the technical difficulty is too high. Currently, only TSMC and Samsung can successfully produce 7nm. Even a strong company like Intel is stuck in the quagmire of the 10nm process. The order concentration of wafer foundry is high, and there are only a handful of major customers. Customers who use the 7nm process in the market, such as Apple, Qualcomm, Huawei, and NVidia, have already given 7nm orders to TSMC, which can mass produce. Even if GlobalFoundries completes the research and development and mass production of the 7nm process, it is still unknown whether it can escape from TSMC and Samsung. Therefore, it is too risky for GlobalFoundries to rashly invest in 7nm.

For GlobalFoundries, it has now entered a vicious cycle of selling factories at a loss. GlobalFoundries has been losing money for the past 10 years, increasing from $145 million in 2016 to $209 million in 2017, and its foundry business has continued to borrow money for investment. GlobalFoundries' advanced processes can no longer advance, and the existing processes are threatened by latecomers. SMIC, which relies on the Chinese mainland market, has already risked trial production of 14nm FinFET process. The rise of SMIC seriously threatens GlobalFoundries' position, so GlobalFoundries' orders will continue to decrease, and it can only sell factories, falling into a vicious cycle.

 
The landlord has no surplus food.
As chip manufacturing processes continue to advance, investment is becoming more and more like a "bottomless pit", and GlobalFoundries' losses are also like a bottomless pit. According to Mubadala's financial report, between 2011 and 2017, the total revenue of the wafer manufacturing business was approximately US$32.1 billion, but the loss was US$7.4 billion. Among them, losses of more than US$1 billion were recorded in 2014, 2015, and 2017. In 2015, Mubadala's capital expenditure on GlobalFoundries reached nearly US$3 billion, but then began to decline sharply. In the first half of 2018, Mubadala invested US$550 million in GlobalFoundries, and most of the capital expenditure was transferred to the oil industry. Faced with the increasing losses, it is easy to understand that the Middle Eastern financiers withdrew their capital. After all, the landlord has no surplus food. However, for GlobalFoundries, whether to sell the factory or continue to sell the factory is a problem.