Advanced Computing in the Age of AI | Thursday, September 23, 2021

GlobalFoundries Attempting to Derail Acquisition by Intel Through an IPO of Its Own: Report 

In July, reports that Intel is pursuing a $30 billion acquisition of chip fab operation GlobalFoundries threw the chip market into a tizzy, with Intel declining to comment and industry analysts offering a wide range of comments about the possibilities of such a deal.

Things have been relatively quiet since that original July 15 report by The Wall Street Journal, but a new Aug. 18 (Wednesday) story by Reuters just tossed some more gasoline onto the rumor frenzy with a report stating that GlobalFoundries is pursuing an IPO in the United States through a confidential filing meant to keep the action out of the limelight.

The proposed IPO could value the chipmaker at about $25 billion, according to Reuters, based on interviews with people who are familiar with the matter.

“The move is the clearest sign yet that GlobalFoundries … is not eager to accept a potential tie-up with Intel Corp.,” the story continued. “GlobalFoundries is working with Morgan Stanley, Bank of America Corp., JPMorgan Chase & Co., Citigroup, Inc. and Credit Suisse Group AG on the IPO preparations,” according to Reuters’ sources.

The IPO filing by GlobalFoundries is expected to be revealed in October, the Reuters story continues, and will go public by the end of 2021 or by early 2022, “depending on how quickly its application is processed by the U.S. Securities and Exchange Commission (SEC), the sources said.”

No formal offer has yet been made by Intel for GlobalFoundries, and it may not even happen due to market conditions and timing issues, the report continued.

But GlobalFoundries may not be waiting around to see if a move comes from Intel, the report states.

“GlobalFoundries is concerned that such a combination would upset some of its key customers that compete with Intel, such as Advanced Micro Devices Inc.,” according to Reuters’s sources. “It could also face intense antitrust scrutiny from U.S. President Joe Biden's administration, which has become more hostile to transformative mergers, the sources added.”

Growing its foundry business and chipmaking capacity are both high on Intel’s public agenda as the company unveiled recent moves to re-establish its leadership position in semiconductors as part of Gelsinger’s ambitious IDM 2.0 (Integrated Device Manufacturing) strategy to reinvigorate its operations.

The company has been looking at ways of building more chips for other companies as well as its own Intel chips as demand for chips continues soars around the globe. Chip shortages due to disruptions and cutbacks caused by the COVID-19 pandemic continue to rile whole industries, from computers to cars and trucks, consumer goods and more, with expectations that the supply problems could continue through 2023.

It has been an interesting year so far for chipmaker Intel.

Pat Gelsinger, Intel CEO

In February, Intel alum Pat Gelsinger, who worked for the company for 30 years before leaving for leadership positions at EMC and then at VMware, rejoined Intel, this time as CEO after he had reportedly been overlooked for the post his first time around.

In March, just a month after Gelsinger rejoined Intel, the company announced ambitious plans to spend $20 billion to build two new fabs to dramatically increase its computer chip production capabilities.

Intel’s interest in boosting its chip production is so central to its plans that another report in July said the company could spend an additional $20 billion to also build two chip fabs in Europe if it can get government subsidies. The July 14 story by Data Centre Dynamics said the company is eyeing countries including Germany, the Netherlands, France and Belgium, with the possibility of spending some $100 billion on chip plants in Europe over the next several decades.

GlobalFoundries, meanwhile, has not stayed pat in 2021. In July,  just days after The Wall Street Journal report that Intel is seeking to buy GlobalFoundries, the company announced that it is planning to spend $1 billion to add needed chip manufacturing capacity as soon as possible at its fab plant in Malta, N.Y., while also unveiling its intentions to add an all-new fab plant that will double its overall chip production. The moves are meant to help resolve ongoing U.S. semiconductor supply chain shortages.

The coming investments are part of the company's broader global expansion plans that include the recently announced new fab in Singapore and $1 billion planned investment to expand in Germany, which are being done to meet the growing demand from customers worldwide, the statement added.

GlobalFoundries employs more than 15,000 people worldwide, including 7,000 people across the U.S., and nearly 3,000 at its headquarters in Malta, New York. The company has invested more than $15 billion in its Fab 8 facility over the last decade to support innovation and increase manufacturing capacity.

GlobalFoundries’ CEO Caulfield strongly denied the rumors of an acquisition by Intel during an interview about the fab news on July 19 with CNBC business reporter, Jon Fortt.

“There’s nothing to that story,” Caulfield told Fortt in the interview.

Fortt also asked Caulfield about whether he has concerns about building more chip fab plants due to previous industry boom and bust patterns over the years.

“The reason why I have confidence that we're not going to have this burst of capacity and create some of the old cyclicality of the industry – it's very simple,” said Caulfield. “This industry has to double in the next few years.”

In April, GlobalFoundries also announced that it is moving its corporate headquarters to Malta, where it has its most advanced semiconductor manufacturing facilities.

Owned by Mubadala Investment Co., which is an investment arm of the Abu Dhabi government, GlobalFoundries is based in the U.S. and was created in 2008 when it was spun off by Intel rival AMD.

Gelsinger succeeded Bob Swan at Intel when he returned in February, tasked with the job of reinvigorating the monolithic company and breathing new energy and life into its organization, products and leadership. Gelsinger’s hiring came after activist hedge fund Third Point had urged Intel’s board to explore “strategic alternatives” after manufacturing setbacks plagued the company and resulted in a two-to-three year lag in process leadership.

In June, four months after taking over the reins of Intel, Gelsinger announced a string of executive leadership changes as he continues to shake things up inside a company that leads its marketplace but could use a boost in energy.

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