Intel eyeing acquisition of GlobalFoundries: WSJ

Intel logo
Buying an existing chip manufacturer could give Intel a faster route to more production than building its own new plants. (Walden Kirsch/Intel Corporation)

Intel is looking to acquire New York-based GlobalFoundries from an Abu Dhabi investment fund for around $30 billion as the chip giant continues on its aim to boost its semiconductor manufacturing capabilities, according to a Wall Street Journal report.

Intel did not comment for the report, and GlobalFoundries told the WSJ only that it was not in talks with Intel, but the story noted that any deal discussions may be occurring directly with the company’s current owner, Mudabala Investment Co., which is an investment fund connected to the Abu Dhabi government with some operational presence in the U.S. 

GlobalFoundries is widely seen as a minor player in the global semiconductor manufacturing market--not in line with the likes of South Korea’s Samsung or Taiwan’s TSMC, but if the acquisition were to happen, it would be a significant move on Intel’s stated goal to boost its manufacturing capacity, said Jack Gold, principal analyst at J. Gold Associates.

“Intel, like all of the chip companies, needs to increase its fab capacity,” Gold said in an email to Fierce Electronics. “It takes years to build new manufacturing, so buying an existing fab is a much faster way to market.”

Earlier this year, Intel announced a plan to invest at least $20 billion in new chip fabs as part of a broader effort to build up its manufacturing capacity. Buying GlobalFoundries could be a more cost-efficient move in that vein, although it’s not clear that it would change anything in regard to Intel’s previously stated plans to build its own plants. “Since it costs $20B or more to build out a new modern fab, Intel buying an existing fab for $30B, even if not using all the latest technology, is a bargain,” Gold said. “And it can produce chips immediately and not take 3+ years of construction.”

Gold added that even though GlobalFoundries is regarded as a “relatively minor player,” there might be other reasons an acquisition would make sense. “First, GF has been improving its game – it used to be a laggard in the process node race but has made some strides over the past couple of years,” Gold stated. “More importantly, it has been working with IBM on some advanced processes that could prove very valuable. So if Intel buys GF, it also gets to work closely with the advanced semiconductor manufacturing capability of IBM R&D, which has been instrumental in the past in advancing chips that it has been using in its high end systems.”

Although, an interesting new development happened recently regarding the IBM-GlobalFoundries relationship: The two companies are suing one another. IBM initially filed its lawsuit last month seeking billions of dollars and alleging GlobalFoundries didn't fulfill its end of the partnership between the two companies, according to several published reports.

That lawsuit arrived as Mudabala has been reported to be pursuing an IPO for GlobalFoundries. Ultimately, selling the company might be a quicker, less laborious and less time-consuming process than an IPO for Mudabala. “I think the GF owners have grown a bit disillusioned of their purchase and would like to get a return on their investment after many years of trying to make it a major competitor in the market and not really succeeding,” Gold said.

RELATED: Intel plans two fabs in Arizona for $20B, more later