Chartered merger set to boost Globalfoundries

The proposed merger with Chartered Semiconductor Manufacturing will help propel Globalfoundries forward in its bid to become a foundry leader, according to analysts
Written by Vivian Yeo, Contributor

The proposed merger with Chartered Semiconductor Manufacturing and will help propel AMD manufacturing spinoff Globalfoundries forward in its bid to become a foundry leader, according to analysts.

Last week, Advanced Technology Investment Company (ATIC) and Chartered Semiconductor Manufacturing announced that they entered into a definitive agreement, in which ATIC would acquire Chartered for S$2.5bn (£1bn). ATIC owns about two-thirds of Globalfoundries, the joint venture the investment firm created with AMD.

The deal is subject to Singapore's High Court and Chartered's shareholders, but according to market analyst iSuppli, chances are good the deal will go through.

In a statement, iSuppli said Chartered and Globalfoundries earned a combined revenue of $1.2bn for the first half of 2009, which would propel it to number-two among pure-play foundry players. TSMC was the clear leader at $3.3bn.

The deal addresses a number of "glaring weaknesses" Globalfoundries has in service and its ability to produce in bulk. In particular, with the addition of Chartered, Globalfoundries would have two operational 300mm facilities and five 200mm ones.

"This acquisition provides Globalfoundries the ability to produce both bulk and Silicon on Insulator [SOI] technology," Len Jelinek, iSuppli's director and chief analyst for semiconductor manufacturing, said in the statement.

"Prior to this, Globalfoundries could only manufacture SOI. But even of larger significance is that prior to the acquisition, the company was stuck doing things the way their largest customer — AMD — wanted. Now, they pick up the infrastructure that Chartered had in place and that's a major boon for them," Jelinek added.

Jim McGregor, chief technology strategist at In-Stat, said in a research note that the potential merger was a "huge step" for Globalfoundries.

He pointed out that the deal would deliver the third of three critical factors defined by In-Stat as vital to the foundry's long-term success.

The first two — gaining a significant customer and breaking ground on new capacity — had already been achieved. The third was to become a part of the Common Platform manufacturing alliance.

"Gaining Chartered gives the company formal entree to the Common Platform alliance, which it was already loosely linked to through its relationships with IBM," McGregor explained. "This does assume that the transaction doesn't nullify the alliance or any contractual obligations, but we do not believe that it will because it actually adds more value to the Common Platform as an alternative to TSMC, the world's foundry powerhouse."

McGregor added that the fact that Globalfoundries had accomplished all three of these tasks in less than a year — "far quicker than In-Stat had predicted" — was "impressive" and drives the company "into a critical position in the market".

Market shifts ahead
iSuppli added that the old foundry landscape was under duress, and that changes are happening fast. UMC (United Microelectronics Corporation) could regain its second spot with the expected completion of its acquisition of Hejin later in the year.

UMC did not respond to ZDNet Asia's request for comments by press time.

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