Japan to invest up to $21 billion in two US chip factories to be run by GlobalFoundries
Summary
Japan will invest up to $21 billion in two chip factories in New York state that will be jointly owned by the U.S. government and Japanese interests and operated by GlobalFoundries. The investment is part of Japan’s $550 billion U.S. investment commitment linked to lower tariffs on Japanese imports. The U.S. will take stakes in the factories and GlobalFoundries, while Renesas Electronics and Apple are expected to be initial customers.
Key Facts
- GlobalFoundries shares rose nearly 5 percent in premarket trading and had gained more than 33 percent this year as of the previous close.
- Japan will provide all investment capital, while free cash flows will initially be split evenly between the U.S. and Japan before a specified allocation is reached, after which 90 percent will go to the U.S.
- The U.S. government will acquire a 4 percent stake in GlobalFoundries, raising its total ownership of the company to about 7 percent.
- GlobalFoundries will earn fees from constructing and operating the factories and licensing chip-manufacturing technology, and CEO Tim Breen said the company will manage customer relationships.
- Some Japanese investment is expected to flow to equipment suppliers including Tokyo Electron, as GlobalFoundries seeks participation from the Japanese semiconductor ecosystem.
Semiconductor chips are seen on a printed circuit board in this illustration photo taken Feb. 17, 2023. Reuters-Yonhap
Japan will invest up to $21 billion in two chip factories in New York state that will be jointly owned by the U.S. government and Japanese interests and operated by GlobalFoundries, the company said on Wednesday.
Shares of the Malta, New York-based company rose nearly 5 percent in premarket trading. As of last close, the stock had gained more than 33 percent so far this year.
The move is part of a deal for Japan to invest $550 billion in the U.S. struck by U.S. President Donald Trump's administration last year in return for the U.S. lowering tariffs on Japanese cars and other imports from at least 25 percent to 15 percent.
The U.S. will take a stake in the new chip factories, but Japan will provide all of the investment capital, GlobalFoundries said.
The company, which is majority-owned by Abu Dhabi's sovereign wealth fund Mubadala Investment Co, will earn fees from building and operating the factories, as well as licensing chip manufacturing technology to them.
In a separate agreement, the U.S. government will take a 4 percent stake in GlobalFoundries, bringing its total ownership of the chipmaker to about 7 percent, GlobalFoundries CEO Tim Breen told Reuters.
Breen said GlobalFoundries would manage customer relationships, and initial customers for the New York factories include Japan's Renesas Electronics and iPhone maker Apple.
"We definitely would like to give priority to U.S. and Japanese customers," he said. "Ultimately, I expect other companies that aren't U.S. and Japanese will also be part of the demand, but we'll obviously go through a process after announcement to finalize the exact who gets what over what timeframe."
Japan has so far announced two batches of projects worth over $100 billion combined under the investment scheme.
Under the arrangement with the U.S., Trump selects projects to be funded by Japan. Available free cash flows from investments will be split evenly between the two countries until a specific allocation is reached, after which 90 percent will go to the U.S.
GlobalFoundries' Breen said that at least some of the capital investment by Japan will flow back to chip-manufacturing toolmakers such as Tokyo Electron and other Japanese firms that along with U.S. rivals dominate the supply chain.
"Obviously, we have a strong interest in the Japanese equipment suppliers to be part of it," Breen said. "We will be very open-minded, but we'll definitely engage very much with the Japanese ecosystem because they have great technologies."
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