GlobalFoundries, controlled by Abu Dhabi, files for IPO due to chip shortage


GlobalFoundries, the world’s third-largest semiconductor foundry, is heading towards an IPO in the United States, as the Abu-Dhabi-owned company steps up investments in its US manufacturing sites.

In his prospectus Filed with the SEC on Monday, GlobalFoundries said Mubadala, a UAE state investment fund, will list its shares on Nasdaq and “will continue to have substantial control after this offer.” Mubadala currently owns 100% of the company.

GlobalFoundries is third in the semiconductor manufacturing market, behind Taiwan Semiconductor Manufacturing (TSMC) and Samsung. The company has three factories in the United States – two in New York State and one in Burlington, Vermont – as well as a factory in Germany and another in Singapore. One of the New York sites, located at East Fishkill, was purchased by ON Semiconductor in 2019 and will transfer books from GlobalFoundries next year.

In April, GlobalFoundries moved its headquarters in Santa Clara, California, Malta, New York, which houses its most advanced facilities. New York-born CEO Tom Caulfield told CNBC this month the company plans to invest $ 1.4 billion in chip factories in 2021 and will likely double its investment next year. .

Formed in 2008, when a division of Mubadala purchased AMD’s manufacturing operations in Dresden, Germany, GlobalFoundries counts chipmakers Qualcomm, Broadcom, Samsung and AMD among its largest customers. As a group, its top 10 customers represent nearly three quarters of turnover.

GlobalFoundries manufactures chips designed by its customers for use in contactless payments, battery power management touchscreen drivers and many other purposes. Intel in March announced plans to compete in the market and become a foundry for other companies, planning to invest $ 20 billion in US factories.

With the start of the Covid-19 pandemic last year, the demand for electronic devices like laptops, monitors and game consoles has increased, leading to a supply shortage and highlighting the need for more capacity. . Meanwhile, consumers are flocking to electric vehicles, further stressing the supply chain.

“Although the supply-demand imbalance is expected to improve in the medium term, the semiconductor industry will need a significant increase in investment to meet demand, with total industry turnover expected to double. over the next eight to ten years, ”GlobalFoundries said. said in his prospectus.

GlobalFoundries’ revenue fell 17% last year to $ 4.85 billion, but the company highlighted two main reasons for the drop. GlobalFoundries divested a business that brought in $ 391 million in 2019, and more broadly, the business has changed contract terms with most of its clients, changing how and when it recognizes revenue.

In the first half of 2021, revenue increased 13% from the previous year to just over $ 3 billion.

Foundry operations are inherently low-margin businesses, with high costs associated with labor, plant operations, and the purchase of equipment and raw materials. For the first half of this year, GlobalFoundries recorded a gross margin, or the remaining revenue after taking into account cost of goods sold, of nearly 11%, a reversal from a negative margin a year earlier. . His net loss for the six-month period narrowed to $ 301 million from $ 534 million.

Although GlobalFoundries is headquartered in the United States, it is considered a “foreign issuer” because it was incorporated in the Cayman Islands by Mubadala. This means the company is exempt from certain Nasdaq rules that apply to U.S. corporations, such as having most of its board seats occupied by independent directors and seeking shareholder approval for certain stock compensation agreements.

GlobalFoundries did not say how much money it plans to raise or how much Mubadala will control after the offer. Regardless of the level of ownership, investors will have to bear the risk of buying into a company controlled by Abu Dhabi.

“Mubadala will continue to have substantial control following this offering, which could limit your ability to influence the outcome of key transactions, including a change of control, and otherwise affect the prevailing market price of our common shares,” said stated GlobalFoundries in Risk Factors. of the prospectus.

LOOK: GlobalFoundries Plans to Increase Production to Address Chip Shortage

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