GM–GlobalFoundries Partnership Seen as Setting Trend
A partnership between General Motors (GM) and GlobalFoundries is likely to set a trend as automakers face semiconductor shortages for years to come, analysts and chip suppliers told EE Times.
GM and GlobalFoundries last month made a “first of a kind” pact under which the New York–based chipmaker will manufacture for GM’s key chip suppliers. The partnership comes as shortages of car chips continue to constrain automobile production even as electrified and autonomous vehicles are expected to double vehicle chip content during this decade.
The GM–GlobalFoundries deal helps to tighten up a complicated supply chain that includes carmakers, integrated device manufacturers, subsystem manufacturers, distributors and chip suppliers. The complexity of the supply chain has contributed to the chip shortages.
“The fact that now we have a direct relationship between these two ends of the supply chain is extremely important,” Kamal Khouri, VP of the automotive business at GlobalFoundries, told EE Times. “It solidifies our commitment to automotive.”
The partnership reduces risks for GM and GlobalFoundries with a multi-year agreement that provides predictability in terms of how many cars GM will produce per year and the number of wafers GlobalFoundries will supply.
“It’s very predictable and it’s measurable,” Khouri said. “We can sit down and plan it together with [GM]. That gives us a lot of stability in our forecasts and our revenue.”
Khouri and Ondrej Burkacky, the global co-lead of the semiconductors practice at management consultancy McKinsey, said the shortage will continue for about two years.
Automakers around the world, including Toyota and Ford, still bear the impact.
In February, Ford said it lost about $2 billion in profit during its most recent financial quarter, mainly because of the chip crunch.
“We are having concerns here and there that the shortage is going to persist perhaps two more years,” Burkacky told EE Times. “Before, there was a limited interest among automotive OEMs to secure the supply of semiconductors. They always thought they were available. You could rely on an ASP decline year over year. That was an easy one. I think now not many people would call it an easy one.”
More automobile OEMs like GM will form direct partnerships with suppliers like GlobalFoundries, Burkacky predicted, noting a survey McKinsey conducted with automotive and engine executives.
“The common view is that we will see much more of this not only for silicon carbide, where it’s more obvious in a way, but also in certain strategic areas,” he said.
Khouri said that the main shortages he’s recently heard about are microcontrollers and power-management ICs.
Automakers depend on chip facilities that produce mature technologies ranging from 180-nm MCUs to variants of 90-nm and 55-nm chips. The chips are made on legacy 200-mm wafers in fabs that are difficult to upgrade. Often, the production tools for 200-mm wafers are simply not available.
“Some people do actually refurbish 300-mm tools to run 200 mm,” Burkacky said. “It’s a bit wild, but people do it.”
At most mature fabs, the same machines and equipment have been in operation for longer than 20 years, which leads to a greater risk of frequent failures and production losses, McKinsey said in a recent report. In one case, a tool-level analysis revealed that a fab’s wafer output was 43% below its true capacity.
Operators of the old fabs have tended to prioritize cost reduction over increasing efficiency. With the urgent need for automotive chips, it’s time for a more proactive, systematic approach that focuses on maximizing capacity rather than controlling short-term expenditures, according to the McKinsey report.
It’s difficult for the operator of a mature fab to open a new facility, Khouri said. “You’re used to running a legacy technology, and it’s on depreciated assets, and now you have to buy new assets and a new building. All of a sudden, the price of that particular technology has doubled or tripled because you’re running it on brand new assets, and you have to recover your investment.”
As vehicles become increasingly sophisticated, electrified and autonomous, their semiconductor content will increase to even higher levels. That could intensify the current shortage of automotive chips, resulting in further production slowdowns at OEMs, the McKinsey report warned.
The subsidies from governments aimed at reviving regional chip production might also worsen the shortage of automobile chips in the future, according to Burkacky.
“If a lot of the subsidies are going into leading-edge technology, and it’s ignoring the mature feature nodes that are needed for automotive and industrial, we run into a problem,” he said.
Open to partnerships
GlobalFoundries is open to more partnerships like the one with GM, Khouri said. “We call this a ‘first of a kind’ and definitely not last of a kind. There is not an exclusive relationship to have this type of business model with an OEM, and it is not limited to the automotive space either.”
GlobalFoundries has made a “tremendous” effort to serve automotive over the last two years, Khouri said. “That was my job day in and day out—making sure that I’m solving the chip shortages for my end customers.”
In 2019, the company’s automotive revenue was a little shy of $100 million, while in 2023, that number will soar to about $1 billion, Khouri said.
“That is directly correlated to the capacity that we’ve been able to put in for automotive,” he added. “GlobalFoundries is an $8 billion company, and automotive revenue is just shy of $1 billion. That gives you a rough estimate of where we are.”
Not all of GM’s chips will be made at GlobalFoundries, according to Khouri.
“We don’t have certain capabilities. We don’t do sub-12-nm technology. I can’t comment on GM’s other semiconductor solutions in their cars, but I assume they have some advanced nodes being used for certain functions.”
Other chipmakers like Texas Instruments are ramping up production to meet demand in automotive and industrial applications. TI is building a new 300-mm chip plant in Lehi, Utah, expanding an existing facility in the same location.
Construction of the new fab is expected to begin in the second half of this year, with production as early as 2026.
The TI fab will run 300-mm wafers for analog and embedded processing products, starting in the 65- and 45-nm nodes.
“Our toolsets and talent there have the ability to manufacture smaller geometries,” Brian Dunlap, VP of TI’s 300-mm fab operations, told EE Times. “We really feel like that’s going to support our customers’ needs for decades to come.”
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