Intel to Acquire GlobalFoundries for $30B - Rumors

Mergers and Acquisitions in the Semiconductor Industry

Mergers and acquisitions within the semiconductor industry consistently involve substantial financial investments. In 2020 alone, transactions encompassing four chip companies reached a combined total of $106 billion, notably featuring Nvidia’s acquisition of ARM for $40 billion.

A surprising aspect of the previous year’s active M&A landscape was Intel’s lack of participation. However, this situation could evolve should a speculated $30 billion agreement to acquire chip manufacturer GlobalFoundries be realized.

Reported Rumors

Initial reports regarding this potential acquisition surfaced yesterday in The Wall Street Journal.

Strategic Rationale for Intel

Patrick Moorhead, founder and principal analyst at Moor Insight & Strategies, a firm closely monitoring the chip sector, posits that the acquisition of GlobalFoundries would be a strategically sound move for Intel.

Currently, Intel is implementing a new business model focused on both internal chip production and offering manufacturing services to other companies, guided by CEO Pat Gelsinger, who assumed leadership in January with the objective of revitalizing the company.

“GlobalFoundries possesses specialized technologies and processes crucial for 5G RF, IoT, and automotive applications. A combined Intel and GlobalFoundries would establish a ‘full-stack provider’ capable of delivering comprehensive solutions to clients,” Moorhead explained to TechCrunch.

“This aligns perfectly with Intel’s IDM 2.0 strategy – its chip manufacturing plan – and would accelerate its implementation by several years compared to pursuing it independently.”

Addressing Global Chip Shortages

The acquisition would also provide Intel with additional chip manufacturing capacity at a time characterized by worldwide chip shortages and heightened demand across various sectors, partly attributable to the pandemic’s disruption of global supply chains.

Intel has already announced plans to invest over $20 billion in constructing two fabrication plants (fabs) in Arizona. Integrating GlobalFoundries into these plans would significantly broaden their manufacturing capabilities in the future, though it would necessitate a further substantial investment amounting to tens of billions of dollars.

GlobalFoundries Background

GlobalFoundries is a globally operating chip manufacturing company headquartered in the United States. The company originated as a spin-off from Intel’s competitor, AMD, in 2012.

Currently, GlobalFoundries is owned by Mubadala Investment Company, the investment division of the Abu Dhabi government.

Investor Response

The market has reacted positively to the prospect of this merger, with Intel’s stock increasing by 1.59% as of this publication. It is crucial to remember that this deal remains speculative and is subject to change, as no agreements have been finalized.

Further updates will be provided as the situation develops.