Globalfoundries Plans Big Investment in New York State Chip Plant

Chip manufacturer Globalfoundries Inc. said it is planning a multibillion-dollar investment in an upstate New York factory, part of a novel strategy for introducing new production technology.

The company, which is owned by investors affiliated with the government of Abu Dhabi, didn't provide specific dollar figures for the plans. Dan Hutcheson, an analyst at VLSI Research, estimates that Globalfoundries would need to spend $4 billion to $5 billion on new equipment to accomplish its goals.

Globalfoundries, which last year purchased the chip operations from International Business Machines Corp., makes chips to order for other companies. It competes in what the industry calls the foundry business with larger rivals such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. Another contender is Intel Corp., which now offers foundry services in addition to manufacturing chips it designs.

Chip manufacturers have long competed by cramming more transistors and other components on squares of silicon, which yields more computing capability and data storage capacity at a lower cost. The pace of introducing finer production processes every two years or so—dubbed Moore's Law after Intel's co-founder—has been running into technical delays and economic challenges that have reduced the payoff from miniaturization.

Sanjay Jha, the former Motorola Inc. chief executive who took the CEO post at Globalfoundries in January 2014, said it would break from standard industry practice by skipping a generation of production technology. The company in 2018 plans to begin making chips with circuit dimensions rated at 7 nanometers, or billionths of a meter, compared with 14 nanometers for its most advanced chips today.

TSMC, Intel and Samsung all plan to move from roughly the same dimensions to 10 nanometers before introducing production processes that can create 7 nanometer circuitry. Mr. Jha argued that the technical benefits of the intermediary step weren't great enough to justify its cost.

The planned 7-nanometer technology, by contrast, will bring a 30% boost in performance and a 60% reduction in power consumption, he said.

Semiconductor companies learn about new production techniques and materials with each generation of manufacturing technology, which is one key reason they don't typically skip steps.

Roger Kay, an analyst at Endpoint Technologies Associates, called Globalfoundries' strategy bold. "It's a bit risky to make that big of a jump," he said.

Globalfoundries is planning other unusual moves, aided by an influx of IBM engineers. Besides the production process to be introduced in Malta, N.Y., the company is advancing an entirely different production process at its factories in Dresden, Germany. Mr. Jha said that process—known as fully depleted silicon-on-insulator, or FD-SOI—is better suited for devices where cost and low power consumption are higher priorities that performance.

"One technology doesn't fit all," Mr. Jha said at a gathering of reporters Wednesday in Santa Clara, Calif.

In another novel step, the company plans to offer future FD-SOI chips with the ability to store data using a new technology called magnetoresistive random-access memory. Globalfoundries will introduce circuitry developed by Everspin Technologies Inc., a Chandler, Ariz., company that has been working on alternatives to existing memory chips.

Write to Don Clark at [e-mail]

(END) Dow Jones Newswires

September 15, 2016 18:15 ET (22:15 GMT)

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