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The Dawn of GLOBALFOUNDRIES

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Subject: General Tech
Manufacturer: General
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Asset Lite Strikes!

A few weeks back Ryan was invited by GLOBALFOUNDRIES to tour their Luther Forest site in New York for their upcoming Fab 2 production facility.  Of course, the place is still a forest and no work has been done so far, but GLOBALFOUNDRIES wanted to introduce themselves to the public and go about setting themselves apart from AMD as an independent company.

GLOBALFOUNDRIES came about as part of the “Asset Lite” program from AMD to reduce overall operating costs.  By spinning off the fabrication facilities into its own company, AMD was able to keep access to the Fabs for their processor products, but also allows the spin-off to pursue other companies to manufacture ASICs with, so the costs for developing these new, cutting edge processes can be spread about instead of relying on AMD and its partners to develop the technology.

With the spiraling costs of advanced process technologies, many companies are choosing to forgo their individual manufacturing operations in favor of using 3rd party foundries.  With so many big names going fab-lite, GLOBALFOUNDRIES sees a tremendous opportunity to fulfill the wafer needs of these companies.

GLOBALFOUNDRIES is still a subsidiary of AMD, but it is primarily owned by ATIC (though AMD still has majority voting control).  ATIC stands for Advanced Technology Investment Company, and is based in Abu Dhabi, which is located in the United Arab Emirates.

The ATIC Connection

The price of creating a foundry is absolutely astronomical.  A new, cutting edge Fab is in the $4 Billion US range, and that kind of money is not readily available to startups.  GLOBALFOUNDRIES of course have inherited the AMD Fabs in Dresden, Germany, which gives them a step up from being a brand new company looking to invest billions in creating these factories.

The split from AMD would probably not have been possible without the financial help of ATIC.  The funding provided by ATIC will help Global Foundries to survive the transition from being the manufacturing arm of AMD to being a fully independent foundry servicing multiple partners in the industry.

The ATIC investment is a very long term one, and the amount of capital that they are willing to invest is in the billions.  If GLOBALFOUNDRIES lives up to expectations, then there is no reason why it cannot be a profitable business.  But why is ATIC interested in GLOBALFOUNDRIES in the first place?  The answer to that lies in the UAE.

The costs of not only building a Fab, but also researching the advanced processes to be run in it, is very prohibitive for a start up.  With the funding from ATIC, GF can successfully transition from being the manufacturing arm of AMD to being a full fledged global foundry.

On a recent podcast I mentioned that GLOBALFOUNDRIES was not in fear of its life at this time because it is almost literally sitting on a lake of oil.  No, there is no oil under Dresden or Luther Forrest, but ATIC itself is wholly owned by the government of Abu Dhabi.  The UAE has become a very wealthy nation because of its oil reserves, and it certainly has one of the highest standards of living in the modern world.  Some of the largest construction projects in the world are being done in the UAE, and all of this is funded by oil.  Unfortunately for the UAE, their oil reserves are only expected to last throughout the next decade.  So what to do when the oil dries up?  The UAE certainly has a plan.

The UAE has one of the fastest growing economies in the world, and the reason for that is not wholly dependent on oil.  Dubai, part of the UAE as well, is now becoming the defacto center for unregulated banking, an industry that was previously centered in Switzerland.  In the past 30 years though, banking in Switzerland has become more strict and regulated, opening up the potential for an aggressive nation to adopt international unregulated banking.  This is one of the pillars that Dubai hopes to erect to allow its citizens to continue to enjoy the lifestyle that wealth from oil has brought this small country.

Abu Dhabi appears to be investing in the tech industry, and looks to become the Silicon Valley of the Middle East.  By investing in GLOBALFOUNDRIES, the eventual hope is to get GF to build manufacturing facilities in Abu Dhabi.  While that may or may not be possible (Fabs require a LOT of water, and that is still something that is not exactly flowing in abundance in the UAE), at the very least ATIC is a part owner of Global Foundries and will recover its investment (and hopefully more) in the years that follow once GF has garnered more customers other than AMD.

The goal of ATIC is to bring industry to Abu Dhabi, and allow it to survive (and thrive) once money from oil becomes scarce.

GLOBALFOUNDRIES

The formation of GLOBALFOUNDRIES was one of need.  AMD needed to focus on creating products, without the ups and downs of having to own its own Fabs.  While controlling an estimated 20% of the market, AMD has been bleeding money since the introduction of Intel’s Core 2 series of parts.  The Athlon and first generation Phenom processors have not fared well against the Core 2 Duo and Core 2 Quad parts from Intel, and this resulted in lower ASPs (Average Selling Price) for CPUs from AMD to bring the price/performance ratio back into a favorable range for AMD.  During the original Athlon 64 days, AMD was selling every chip coming off the line from Dresden.  During the Athlon X2 and Phenom times Dresden was not kept at full capacity, which costs money.  Even in down times, engineers still need to be paid, and work has to be done on R&D to keep up with Intel in the processor/process race.

AMD was either unwilling or unable (due to cross license agreements) to bring in other partners to manufacture their parts in the Dresden and upcoming Luther Forest Fabs, thereby keeping the Fabs utilized and sharing development costs.  So in one fell swoop AMD spun off its manufacturing into Global Foundries.  AMD, the technology company, can now focus on designing chips without the capital expenditures of owning their own Fabs.

GLOBALFOUNDRIES has three primary strengths in which they feel will allow them to compete with other foundry companies, and potentially outstrip them in terms of process efficiency and performance.  The first is the actual process technology that GF possess (and is working on), the second is their APM program for improving quality and yields, as well as time to market, and the third is their leading edge facilities in Dresden and the upcoming Luther Forest Fab.

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