GlobalFoundries Secures $1.5B in Direct Funding Amidst CHIPS Act Support

GlobalFoundries (NASDAQ: GFS), a prominent semiconductor manufacturer, has recently garnered $1.5 billion in potential direct funding from the United States Department of Commerce as part of the CHIPS Act. Additionally, New York announced $600 million in separate funding for GFS. These funding programs aim to bolster the company’s investments in Malta and New York and triple its production capacity over the next decade through the expansion of an existing facility and the construction of a new fabrication plant (fab) on the same campus.

Key Highlights

• Funding Announcement: GlobalFoundries receives $1.5 billion in direct funding from the US Department of Commerce and an additional $600 million from New York State.
• Expansion Goals: The funding will be utilized to construct a new gallium nitride (GaN) foundry for power chips at its Burlington fab and expand its existing 300mm fab in Malta, NY, to produce automotive chips.
• Capacity Increase: The new 300mm fab capacity and the expansion are anticipated to triple the existing capacity of the Malta campus over the next decade.

“GlobalFoundries Secures $1.5B Direct Funding from US DOC and NY State for Semiconductor Capacity Expansion under CHIPS Act”

GlobalFoundries, headquartered in Santa Clara, California, operates as one of the world’s largest semiconductor manufacturers. The company specializes in designing and building integrated circuits (ICs) for various industries, including automotive, consumer electronics, communications equipment, and industrial applications. In response to the ongoing global semiconductor shortage crisis, the Biden Administration introduced the CHIPS Act, allocating $52 billion to incentivize the expansion of semiconductor manufacturing facilities in the United States.Under the terms of the funding agreement, GlobalFoundries will utilize the $1.5 billion to construct a new GaN foundry for power chips at its Burlington fab in Vermont. GaN technology enables higher efficiency and faster switching speeds compared to traditional silicon-based components, making it ideal for power conversion applications in electric vehicles, renewable energy sources, and telecommunications networks. The company will also leverage the funding to expand its existing 300mm fab in Malta, NY, to manufacture automotive ICs.The $600 million in separate funding from New York State will contribute to the overall expansion goals outlined above. The new 300mm fab capacity and the expansion are projected to triple the existing capacity of the Malta campus over the next decade, enabling GlobalFoundries to produce upwards of 1 million wafers annually upon completion of all phases.Deutsche Bank, which maintains a Buy rating and $62 price target on the stock, commented that the CHIPS Act/NY funding would help GlobalFoundries more profitably capitalize on both geopolitical trends towards localized, reliable capacity and semi-sector-wide trends requiring more legacy edge capacity for markets such as Automotive, IoT, Defense, etc. Analysts have long expected GlobalFoundries to be a primary beneficiary of the CHIPS Act alongside Intel and Texas Instruments, and view the recent announcement favorably for the company and its share price.

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GlobalFoundries’ receipt of $1.5 billion in direct funding from the US Department of Commerce and an additional $600 million from New York State represents a significant milestone in the company’s history. The funding will facilitate the construction of a new GaN foundry for power chips at its Burlington fab and expand its existing 300mm fab in Malta, NY, to produce automotive ICs. The new 300mm fab capacity and the expansion are anticipated to triple the existing capacity of the Malta campus over the next decade, enabling GlobalFoundries to produce upwards of 1 million wafers annually upon completion of all phases. The funding will also help GlobalFoundries more profitably capitalize on both geopolitical trends towards localized, reliable capacity and semi-sector-wide trends requiring more legacy edge capacity for markets such as Automotive, IoT, Defense, etc., ultimately contributing to the company’s future growth and success.