General Motors, GlobalFoundries strike semiconductor deal

The global chip shortage will continue and consumers will have to pay for it, said an analyst from International Data Corporation.

Sasirin Pamai | stocks | beautiful pictures

common engine signed a long-term contract with global foundry to establish an exclusive production capacity of US-made semiconductor chips, the companies announced Thursday.

The deal they call an industry first comes as automakers continue to battle supply chain issues, including year-long global semiconductor chip shortage has occasionally shut down factories during Covid pandemic.

According to the companies, the chipmaker will establish dedicated manufacturing capacity exclusively for the Detroit automaker’s key auto suppliers at its semiconductor facility in upstate New York.

“The supply agreement with GlobalFoundries will help establish a strong, flexible supply of critical technology in the United States, helping GM to meet its needs,” said Doug Parks, GM executive vice president of global product development. this need, while delivering new technology and features to our customers.” , purchasing and supply chain, said in a statement.

The deal is a win for the Biden administration, which has pushed companies to re-establish US semiconductor manufacturing, including the already enacted CHIPS Act. signed into law in August.

Parks said GM expects its semiconductor use to more than double in the “next few years” as it increases technological capabilities in its vehicles, particularly All-electric cars and trucks requires more chips than traditional media.

The companies declined to disclose details such as costs and the amount of additional capacity. They hope the deal will enable chip production in greater quantities as well as deliver “better quality and predictability, maximizing the creation of high-value content for end customers,” according to the company. Press Release.

According to GlobalFoundries CEO Thomas Caulfield, exclusive chip production for GM would be an expansion of the New York-based company’s operations.

According to Caulfield, this agreement could serve as a framework for other GlobalFoundries agreements. It offers the best economics for both companies and a roadmap for the materials needed in the future to make chips.

“This is the first deal, not the last. It’s a solution to a problem,” he told CNBC. “We believe it’s also a framework for others to take advantage of.”

Caulfield said GM-exclusive production is expected to take two to three years to actually develop.

Automakers did not previously work directly with chip suppliers. Instead, allow their larger auto suppliers to handle such negotiations. However, the semiconductor chip shortage has caused companies like GM to reach deeper into their supply chain in an effort to better secure parts for their vehicles.

Semiconductor chips are critically important components of new vehicles for areas like infotainment systems and more basic components like power steering and brakes. Depending on the vehicle and its options, experts say a vehicle can have hundreds of semiconductors. Higher-priced cars with advanced safety and infotainment systems have more than a basic model, including different chips.

The origin of the chip shortage dates back to early 2020 when Covid forced car assembly plants to close continuously. As facilities close, wafer and chip suppliers have shifted parts to other sectors such as consumer electronics, which are not expected to be affected by stay-at-home orders.

Correction: The origin of the chip shortage dates back to early 2020. An earlier version miscalculated the timing.


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