The GlobalFoundries IPO March Continues

The GF Technology Summit was last week. It was virtual again this year but with a different format. It was a mix of live and recorded events which did include some cringe worthy moments but all-in-all it was well worth my time.

One of the biggest changes you will notice is the messaging. GF is no longer down in the technology trenches talking to chip designers. Instead GF is talking directly to systems companies about solutions and more importantly highlighting the pure-play foundry value proposition to Wall Street. And given the current semiconductor climate, Wall Street is listening.

The big questions is: Will GF go IPO or be acquired next year? Those two are not mutually exclusive but, in my opinion, they should be acquired. Rather than pouring billions of dollars into an ecosystem and spending years upon years earning customer trust, Intel could hyperscale their foundry efforts in buying GF. And of course, Samsung could make a big defensive move and acquire GF to expand their foundry offerings and customer base. Either way it needs to happen. A pure-play foundry must continue the march down the process node roadmap otherwise it will fade into the technology sunset.

I enjoyed watching GF CEO Tom Caulfield. I do know Tom and hold him in the highest regards. He is a very engaging speaker and a true semiconductor professional. I credit Tom with the great GF pivot of 2018 and I think the GF exit (IPO or acquisition) will be one for the history books, absolutely.

You can see Tom on CNN here:

https://www.cnn.com/videos/business/2021/07/21/globalfoundries-ceo-chip-shortage-semiconductors.cnnbusiness

COVID really has been a blessing and a curse to the semiconductor industry. The world now knows the importance of semiconductors and electronics to modern life. We read about it everyday now. Unfortunately, the disruption to the supply chain is causing a bit of a panic. This of course is not just a semiconductor problem, supply chains across many industries are being disrupted.

I had predicted that the semiconductor supply chain issues would ease this year but clearly that will not be the case. COVID cases are again spiking around the world and may continue for months to come.

Parts of the semiconductor supply chain are doing well. TSMC for example. Taiwan has contained the COVID problem and TSMC continues to grow double digits. And given the hefty CAPEX of TSMC, Samsung, Intel and GF for 2021 and beyond I seriously doubt there will be a wafer shortage anytime soon.

The foundry business model is fairly simple. When a chip design is started a customer commits to a foundry and downloads a PDK (process design kit). A multi year wafer agreement follows and for big customers like Apple, AMD, Nvidia, and QCOM these are sizable agreements. A foundry then builds capacity to satisfy the wafer agreements and all is well assuming the foundry can yield the process in a timely manner. Remember, it takes less time to build a fab than it does to design a CPU, GPU, or SoC so do the math here.

Semiconductor shortages will come when a foundry customer requires more wafers than expected which is what happened with COVID. In fact, some companies paused wafer orders at the beginning of COVID (Automotive) and now are experiencing shortages of their own design.

According to Malcolm Penn of Future Horizons, and he would know, there have been 14 semiconductor shortage (black swan) events in the last 50 years. The one I remember best is the Dot Com boom and bust of 2000. COVID of course is the blackest of swan events (my opinion). Either way, what does not kill us makes us stronger, absolutely.

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