Globalfoundries hopes to gain on chip outsourcing

The microchip foundry plans on business picking up as the industry restructures.

Globalfoundries, the customised microchip foundry owned by the Abu Dhabi Government, is hoping to pick up more business next year as the US$300 billion (Dh1.1 trillion) worldwide industry tries to cut costs by outsourcing chip making.

Advanced Technology Investment Corporation (ATIC), owned by the Abu Dhabi Government, has a 73 per cent stake in Globalfoundries and plans to build a US$6 billion (Dh22.03bn) microchip making plant in the emirate by 2015.

The technology research company Gartner expects global semiconductor revenue to grow 32 per cent to $300.3bn this year but anticipates a slowdown in the rate of growth next year.

Gartner also estimates the global contract microchip market's growth will slow to 9.4 per cent next year from 40 per cent this year.

But despite the projected slowdown, Doug Grose, the chief executive of Globalfoundries, expects the company to add customers in the next year to help it outperform the wider industry and become the second-largest foundry in the world.

Globalfoundries is the third-largest microchip foundry in the world by revenue, behind Taiwan Semiconductor Manufacturing Corporation (TSMC) and United Microelectronics, with projected revenues of $3.5bn this year.

Globalfoundries was created in 2008 after ATIC bought a majority stake from the US chip maker Advanced Micro Devices for $2.1bn.

"The foundry element of the overall semiconductor industry is actually growing faster than the actual semiconductor industry," said Mr Grose inside the Yas Hotel ahead of semiconductor summit hosted by ATIC.

He said Globalfoundries's growth would continue over the next year despite the slowdown in the wider industry, which analysts attribute to a lack of spending on electronic goods.

Globalfoundries is looking to land several new customers in the wireless market over the next year to take advantage of the growing trend of technology companies outsourcing their chip production to facilities such as Globalfoundries and TSMC, Mr Grose said.

"[Companies] can't afford the huge investments, whether its infrastructure or the people to do the process work. So more and more people are going to come this way," he said.

Ibrahim Ajami, the chief executive of ATIC, said Globalfoundries's revenues had this year grown by about 40 per cent from last year and he expected continued "double-digit" growth over the next few years.

"Our goal in 2011 is to continue to grow by double-digits and grow faster than any other foundry in the industry," Mr Ajami said.

"Because we're investing so much and building so much, we need to keep the momentum on our side to grow. The industry is projected to grow between 5 and 10 per cent next year.

"We need to beat that industry growth because if we are growing at the same rate as the industry, we're not doing anything special."

ATIC has pledged about $10bn in investment to Globalfoundries, with $3.6bn set aside to expand the current facilities and the rest towards building Abu Dhabi's foundry.

Mr Ajami said ATIC did not at present plan to increase its investment in Globalfoundries but that could change, depending on competition.

"We are increasing in a very competitive world and the plans could change, the industry could change, [market] cycles could change," he said. "We need to prepare to continue to the commitment we have about how serious we are about this industry."