How a Global Foundry Is Losing Money in a Chip Boom - Bloomberg

How a Global Foundry Is Losing Money in a Chip Boom - Bloomberg

The current state of the global semiconductor market has been alternatively labeled by auto makers, politicians and executives as a shortage, a crisis, and even a squeeze. For the companies at the center of it all, the only word to describe what we’re seeing is a chip boom. It’s inexplicable, then, that any company which ought to be bathing in profits could still be losing money.

Enter GlobalFoundries Inc. The New York-based company is the world’s third-largest contract chipmaker and has just filed for a Nasdaq listing. With shares of leader Taiwan Semiconductor Manufacturing Co. up more than double since the darkest days of the Covid-19 pandemic, and nearest rival United Microelectronics Corp. rising almost five fold, investors ought to be clamoring over GlobalFoundries’ $1 billion offering.

Like its rivals, GlobalFoundries manufactures chips based on the designs of clients, most of which don’t have their own factories. Rather than land the most-advanced orders for components like smartphone processors and graphics chips, the company in 2018 reoriented its strategy toward chasing down older product types — which it euphemistically calls “feature rich” — that include parts that convert sound and images to digital signals.

Supplying older semiconductor products doesn’t attract the high prices commanded by TSMC, but they are much cheaper and easier to make. With modern cars lacking much-needed sensors, and even Apple Inc. noting the impact on iPad and iPhone sales, this ought to be a golden era for GlobalFoundries.