Semiconductor shortage: Intel to acquire GlobalFoundaries in $30 billion deal

NEW YORK: Intel Corp is in talks to buy semiconductor manufacturer GlobalFoundries Inc for about $30 billion, the Wall Street Journal reported.

A deal could help Intel ramp up production of chips at a time demand is at its peak and the company is looking to start producing chips for car makers that have struggled to keep operations running due to severe shortages.

Intel, one of the last companies in the semiconductor industry that both designs and manufactures its own chips, said earlier this year it would expand its advanced chip manufacturing capacity by spending as much as $20 billion to invest in factories in the US.

GlobalFoundries, which is owned by Abu Dhabi sovereign wealth fund Mubadala Investment Co, has a manufacturing footprint across the US Europe and Asia.

There are reports that Mubadala is looking at a potential listing of GlobalFoundries later in the year. GlobalFoundries’ customers includes Advanced Micro Devices Inc, its parent company before it was spun off more than a decade earlier, a relationship that could spark antitrust questions about an Intel deal.

Semiconductors are the foundation of the advanced technologies that we all rely on. From cell phones, laptops and washing machines to refrigerators, cars and airplanes. The global pandemic played a huge part in the current semiconductor shortages.

Restoring the supply and demand balance will take time because semiconductor manufacturing is not suited to rapid and large shifts in demand. And as the overall demand for chips increases, the manufacturers simply don’t have the capacity to meet the demand in the time required.

Making a semiconductor is one of the most complex manufacturing processes. Lead times of up to 26 weeks are the norm to produce a finished chip. And as manufacturing has consolidated to a small collection of big chip makers, predominantly in Asia, demand far exceeds the available supply.