Wall Street Journal: Intel acquires GlobalFoundries, betting big on long-term prosperity of chip manufacturing

On Thursday, local time in the United States, the Wall Street Journal broke the news that Intel was in acquisition talks with chip manufacturer GlobalFoundries, and the transaction amount could reach a staggering $30 billion. On July 18, the media continued to analyze the matter.

The article points out that six months after taking office, Intel CEO Pat Gelsinger's route to revitalize the chip manufacturing division is becoming increasingly clear: act quickly and "wave the checkbook."

Gelsinger took over as CEO in February from Bob Swan after years of criticism over Intel's "toothpaste-squeezing" strategy. The biggest question for analysts and investors was whether the company would abandon chip production and focus on design. After all, Nvidia and AMD have both chosen to outsource chips, gradually eating into Intel's market share.

Gelsinger gave a negative answer. If Intel's acquisition of GlobalFoundries can achieve phased results, then his promise that Intel will expand its chip foundry business will gradually be implemented. This is a big plan worth $50 billion.

It would be Intel's largest acquisition ever and nearly twice as big as its largest deal to date, when Intel paid about $16.7 billion for microprocessor maker Altera Corp. in 2015.

More than a month after Gel Singer took office, he promised that Intel would invest $20 billion to build a new plant in Arizona. Less than two months later, he announced a $3.5 billion capacity expansion plan in New Mexico. He admitted that Intel had actively tried to enter the foundry field before, but with little success, and it can be said that it was almost a failure. He said: "Our previous efforts have yielded very little return."

Matt Bryson, an analyst at Wedbush Securities, said that the acquisition of GlobalFoundries could be a shortcut for Intel to overtake others. He said: "One of the concerns about Intel is that they don't really know how to run a foundry business. GlobalFoundries will provide them with a series of mature foundry mass production plans."

Intel shares closed down 1.51% on Friday.

The global chip shortage has put the semiconductor manufacturing sector in the global spotlight as never before, with demand for laptops rising sharply and new ways of working increasing demand for cloud computing services and the data centers that run on them. Chip companies say a surge in demand for chips for new 5G phones is exacerbating capacity shortages. Automakers have been forced to idle factories due to a lack of chips, and prices for some electronics have risen as a result.

Politicians around the world have included chip manufacturing in the list of important issues that their governments need to discuss, and US President Biden has pledged to spend about $50 billion to promote domestic chip manufacturing.

The Wall Street Journal believes that Intel is betting that the prosperity of the chip industry is sustainable. Gelsinger believes that the chip foundry market should reach $100 billion by 2025. He is ready to win over big customers such as Qualcomm and Amazon.

TSMC said in April that it will invest $100 billion over the next three years to increase production capacity as the global chip market continues to expand. Samsung plans to invest a total of about $116 billion by 2030 to diversify its products and increase its semiconductor output.

According to Counterpoint Research, TSMC's share of the global chip foundry market last year was about 59%, while Samsung's was 14%.