GlobalFoundries: European Chip Subsidies May Damage Ability to Compete

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GlobalFoundries, the semiconductor manufacturing specialist spun out of AMD's now-defunct chip manufacturing unit, has voiced worries regarding the German government's distribution of a $22 billion ($20 billion) subsidy that's part of the (now approved) $47.4 billion European Chips Act. According to available information, Intel is the number one recipient of the grant by a large margin, guzzling around 50% of the contended $20 million to be allocated to Intel's new Magdeburg Mega Fab complex. Intel, by the way, already tried to expand its slice of the subsidy pie, but was denied.

GlobalFoundries' argument is that the subsidy amount is big enough that it can distort other companies' ability to compete. It's relatively easy to see the argument: Intel's Fiscal Year 2022 revenue stood at $63.1 billion; GlobalFoundries' stood at just $8 billion. And with another $6 billion of the subsidy's $20 billion tranche being reserved for Taiwan's TSMC and Germany's own Infineon, that means all other semiconductor players will have to share a $4 billion budget.

As GlobalFoundries CEO Tom Caulfield told the Financial Times, "there is a real risk of dependence on a single supplier, market foreclosure and less resilient supply chains as a consequence."

Policy decisions such as these are always hard to execute correctly; there's no arguing against GlobalFoundries' assessment that subsidies of this magnitude can distort competition. But then again, there are reasons for a company such as Intel to receive a bigger slice of the subsidy pie: Intel's more cutting-edge tech naturally has higher R&D  and installation costs, and its facilities operate at a scale that's different from what GlobalFoundries could possibly achieve with its current financial results and product portfolio (despite the fact that the company has a relevant and unique European positioning in fields such as optical and RF technologies). That said, it's important to get these injections right.

It is, however, also of note that GlobalFoundries hasn't been completely shunned by these semiconductor subsidies; the company (alongside European company STMicroelectronics) recently stood at the receiving end of an $8.2 billion injection courtesy of the French government. That's almost half of the company's yearly revenue being delivered to open hands. This funding was also approved under the umbrella of the European Chips Act. 

According to the Financial Times, Saxony's Economy minister, Martin Durlig, waved GlobalFoundries' criticism with a simple "there will be enough room for all providers to thrive." Hopefully, $47.4 billion will be enough.

Francisco Pires
Freelance News Writer

Francisco Pires is a freelance news writer for Tom's Hardware with a soft side for quantum computing.