GlobalFoundries: Clients Are Migrating to Sub-10nm Faster Than Expected
by Anton Shilov on February 14, 2024 6:30 PM EST- Posted in
- Semiconductors
- GlobalFoundries
- FinFET
- 12nm
- 12LP
When GlobalFoundries abandoned development of its 7 nm-class process technology in 2018 and refocused on specialty process technologies, it ceased pathfinding, research, and development of all technologies related to bleeding-edge sub-10nm nodes. At the time, this was the correct (and arguably only) move for the company, which was bleeding money and trailing behind both TSMC and Samsung in the bleeding-edge node race. But in the competitive fab market, that trade-off for reduced investment was going to eventually have consequences further down the road, and it looks like those consequences are finally starting to impact the company. In a recent earnings call, GlobalFoundries disclosed that some of the company's clients are leaving for other foundries, as they adopt sub-10nm technologies faster than GlobalFoundries expected.
"Our communications infrastructure and data center segment continued to show weakness through 2023, partly due to the prolonged channel digestion of wireless and wired infrastructure inventory levels across our customers, as well as the accelerated node migration of data center, and digital-centric customers to single-digit nanometers," said Tom Caulfield, chief executive of GlobalFoundries, at the company's earnings call with financial analysts and investors (via SeekingAlpha).
There are four key reasons why companies migrate to 'single-digit nanometers' (e.g., 5 nm, 7 nm): they want to get higher performance, they want to get lower power, they want to reduce their costs by reducing die size, and most often, they want a combination of all three factors. There could be other reasons too, such as support for lower voltages or necessity to reduce form-factor. For now, the best node that GlobalFoundries has to offer is its 12LP+ fabrication process which is substantially better than its 12LP and 14LPP process technologies and should be comparable to 10nm-class nodes of other foundries.
Meanwhile, based on characteristics of 12LP+ demonstrated by GlobalFoundries, it cannot really compete against 7nm-class process technologies in terms of transistor density, performance, and power. Assuming that TSMC or Samsung Foundry offer competitive prices for their 7 nm-class nodes, at least some of 12LP+ customers are probably inclined to use 7 nm fabrication technologies instead, which is what GlobalFoundries confirms.
"We are actively [watching] these industry trends and executing opportunities to remake some of our excess capacity to serve this demand in more durable and growing segments such as automotive, and smart mobile devices," Caulfield said.
Back in 2022, communication infrastructure and datacenter revenue accounted for 18% of the company's earnings, but in 2023, that share dropped to 12%. Shares of PC and smart mobile devices declined from 4% and 46% in 2022 to 3% and 41%, respectively. Meanwhile the share of automotive-related revenue increased from 5% in 2022 to 14% in 2023, which is a reason for optimism as GlobalFoundries expects automotive growth to offset declines of other applications that transit from 12LP+ to newer nodes.
"[Automotive] products span the breadth of our portfolio from 12 LP+, our FinFET platform, all the way through our expanded voltage handling capabilities at a 130 nm and a 180 nm technologies," said Caulfield. "Through these offerings, we believe that GF will play a key role in the long-term transition of the automotive industry, and our customer partnerships are central to that.
GlobalFoundries revenue topped $7.392 billion for the whole year 2023, down from $8.108 billion in 2022 due to inventory adjustments by some customers and migration of others to different foundries and nodes. Meanwhile, the company remained profitable and earned $1.018 billion, down from $1.446 billion a year before.
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Soulkeeper - Wednesday, February 14, 2024 - link
I guess "good enough" wasn't a good motto afterall. ReplyKangal - Friday, February 16, 2024 - link
It's funny because it's true.Most people from the sidelines could see this being inevitable. I thought their best move could've been to act early, and sell their entire business between Saudi's and Russia. The latter has a big market to supply necessary silicon to, and the former has the capital and interest to hedge their oil wealth into. With new Russian Engineers adding to the company, Saudi money to fund Research, I actually figured they could've somewhat caught up to Intel or Samsung.
As it is, their fate is almost sealed. SMIC will miraculously produce chips that are identical to TSMC in the near future. And they will flood the industry with good alternative at a much cheaper price. Samsung will survive the flood with their own technology and connections. Intel will be an in-house thing. And TSMC will continue to get more profitable. But it is GloFo that will be facing the bankruptcy sooner than latter. Even if the authorities allowed them to get acquired by China's State, it's not like they need them or have a particular use for them, so even the Chinese don't want them now. Not for a fair price anyway.
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Tams80 - Saturday, February 17, 2024 - link
Or they could just continue specialising as they have done.There are other chip makers who already do well enough doing so.
And if anything, being not based in an authoritarian state will allow them access to mkre contacts from democracies. Reply
Santoval - Thursday, February 22, 2024 - link
"SMIC will miraculously produce chips that are identical to TSMC in the near future."Only if the Chinese -not necessarily SMIC- developed tech that could compete with ASML's cutting edge EUV scanners. And that is easier said than done.. Even if they cracked everything else (power source, masks, pellicles, EUV source etc) I doubt they could master the optics of Zeiss. They are truly one of a kind.
To print tighter and tighter nodes with DUV scanners they'd need to go beyond quad patterning to 5-, 6- or even 8-patterning. That is not practical or possible. Reply
yannigr2 - Thursday, February 15, 2024 - link
They will lose even more customers in the future. Let's not forget that China is building a small army of factories for mature manufacturing nodes, meaning many GF customers who don't need something better than 10nm could probably leave GF and go to a cheaper Chinese factory for their chips. ReplyDuncan Macdonald - Thursday, February 15, 2024 - link
To reach 7nm would have cost GF far more money than it could afford. Given the small size of GF vs TSMC the investment would have been unlikely to ever be profitable. GF had no rational choice but to abandon sub 10nm. In the long term GF may well fail - however if it had tried to keep up with sub 10nm then it would have failed much sooner.Sub 10nm manufacturing is only for the big firms - with a single sub 10nm FAB costing well over $10billion a firm with profits of under $2billion/year can not afford one. Reply
sutamatamasu - Thursday, February 15, 2024 - link
6nm is newer "12nm" for now, GF should searching new investors if want to survive. ReplyET - Thursday, February 15, 2024 - link
I looked up what GF is doing, and it seems that it does at least improves its processes (announcing 22FDX+ and 9SW RFSOI last year) and offers new abilities (lower power, smaller features, larger temperature range, ...). So it's not resting on its laurels. Still, some of the market is moving elsewhere, and it will be interesting to see how GF tries to handle this. Replyflgt - Friday, February 16, 2024 - link
$1B profit on $7B revenue, not bad. They know their place in the market, and it can work for them. They can pick up depreciated assets from other fabs and move forward. With lower capital and R&D expenses they should be able to keep costs low and attract customers. It was a reasonable strategy to not go head-to-head with TSMC and IFS. Their biggest problem might be China attacking the low end of the market. Replydo_not_arrest - Wednesday, March 6, 2024 - link
The Chinese (SMIC + others?) are not going to release their technology for foundry customers anytime in the near future. To do that would give western clients access to sensitive documents and technology information that is needed to do design work. That would quickly reveal that the Chinese are in violation of many patents and that they are stealing IP from other foundries.What China will do, and that they are doing, is steal enough technology from the rest of the world to get cutting edge nodes working, start manufacturing their own chips with their own designs, and stop being customers of western companies. In automotive this is BYD, and pretty soon all the electronics in BYD cars will be manuf. in China as well. Then they will take their stolen IP and try to sell it to us in the west by undercutting prices. Reply