In context: The difficulties facing the semiconductor industry have go so well-known recently that mainstream news stories about scrap shortages, and the corresponding issues they're causing, have become commonplace. Along the way, a much wider audience has begun to acquire some of the idiosyncrasies and structural challenges that face the scrap business.

Chip shortages are triggering important plans within big semiconductor firms. The almost contempo instance is GlobalFoundries' declaration of greatly expanded capacity at its existing chip fabrication institute in Singapore. The company announced a $4B investment in conjunction with Singapore regime officials and committed customers to build a 250,000 square pes addition that's expected to open for production in 2023.

The investment volition enable the company to increase its overall output past 33%, growing its 300 mm wafer chapters from almost 720,000/year up to just under ane.2 million/year, in addition to the nearly 700,000 200 mm wafers they as well manufacture in that location each year. (Worthy of note, the news was relayed to me by an all-female contingency of executives from GlobalFoundries—a starting time in more than 20 years of roofing the semiconductor business concern.)

The need for additional chip production capacity has get painfully obvious during the pandemic, so it'southward clearly great to see the GlobalFoundries (GF) investment existence made. The news of this expansion is important both to the company and to the semiconductor industry overall for several different reasons.

First, it places some much deserved attention on the office of the industry that, bluntly, has been overlooked for much of the concluding few decades. For those who do sentry chip industry developments, most of the press and attention is directed towards what are referred to every bit leading process nodes. In English language, that means smaller and smaller chip sizes—for example 7nm (nanometer), 5nm, 3nm, etc. While these cutting-edge chips do ability smartphones and a lot of other sexy, important devices, they simply represent about thirty% of the bit industry'south full revenues and about x% of the units manufactured.

More chiefly, they're extremely difficult and expensive to develop. That's why, several years dorsum, GF made the—at the fourth dimension, rather controversial—decision to no longer play the nanometer game but instead focus on adding new capabilities and features to fries that were congenital at larger transistor sizes (12 nm and upwardly). Non only do these types of chips make up the bulk of both shipments and revenues for the semiconductor industry, but it turns out in that location are quite a few applications for which they are the best technology to employ. Applications like RF (radio frequency), analog power, and not-volatile retentivity, for case, which are critical for things like 5G, automotive, IoT, and many other industries, are all-time suited to the chip sizes that GlobalFoundries chose to focus on.

Unfortunately, much of the industry had bought into the notion that everything related to chips was only better if information technology was smaller. As a upshot, advisable amounts of investments in these less "sexy" types of fries were not fabricated, and that led the entire manufacture to the critical shortage phase that information technology finds itself in. The GlobalFoundries investment is clearly a footstep in the correct direction in starting to accost the issue around fewer cutting-border nodes. The fact that the company as well referred to similar types of investments it plans to make in both the US and Europe highlights the increased emphasis these types of components are receiving.

Unfortunately, the GF news as well highlights how expensive and slow changes to the chip industry are. While many major manufacturers, especially machine makers, are clamoring for as many chips as they can get every bit soon equally they can perchance get them, the sobering truth is that there is no easy respond to this problem and that it will be several years before it can be resolved.

As long-fourth dimension chip industry observers know, the semiconductor business organisation has ever been highly cyclical with many different phases of shortages and surplus because of the time it takes to fill in the gap. With some forecasts expecting semiconductor shipments and revenues to more than than double throughout this decade, this time things may exist unlike, and potential oversupply issues seem to be a long style off.

Some other cistron is that the environment around the chip industry is very different now than information technology was pre-pandemic. For one matter, the concentration of chipmaking facilities in very few regions around the world has become an enormous geopolitical effect. In fact, large governments around the world are now clamoring to put policies into place that encourage local production of chips.

Here in the United states of america, the Senate recently passed the CHIPs for America Act, which sets aside $52 billion in incentives for US-based manufacturing and R&D efforts, while the newly introduced bipartisan Facilitating American-Built Semiconductors (FABS) Act is expected to provide additional tax incentives for US chip manufacturing. Government leaders are recognizing the criticality of a geographically diverse set of semiconductor suppliers, and even chipmakers themselves are starting to make more efforts at expanding their global attain—something that GlobalFoundries has been doing for more than than 10 years.

The fact that the GF announcement was made in conjunction with the Singapore Economic Development Board is a clear manifestation of these principles, as many future chip manufacturing deals will also likely reflect these private-public partnerships. The roughly one,000 highly skilled jobs expected to be created as part of the fab expansion is yet another reason government interest is so strong. The GF deal is also interesting because of the participation past what it termed "committed customers." Conspicuously multi-billion-dollar manufacturing investments cannot be wisely made without business firm, long-term financial commitments from key customers—it's no longer a "build it and they will come" kind of environment. As a result, I expect to meet other new fab facility news, both from GlobalFoundries and other industry players, to incorporate a client element to them.

The pandemic has made clear our societal dependence on digital, bit-driven devices and services. As a event, providing the right political environment and appropriate financial incentives to ensure a steady, secure, and diverse supply of the critical chips that power them will unquestionably be a key priority for both businesses and governments for some time to come up. As a US-based company, it'southward groovy to see GlobalFoundries assist set the tone for how these types of global semiconductor issues and deals will first to get done.

Bob O'Donnell is the founder and chief analyst of TECHnalysis Inquiry, LLC a technology consulting firm that provides strategic consulting and market place research services to the technology manufacture and professional person financial community. Y'all tin follow him on Twitter @bobodtech.

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