Globalfoundries Inc, one of the world’s largest semiconductor makers, has dropped out of the race to develop the more advanced production technology, a move that is to increase the electronic industry’s reliance on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
The California-based company — with plants in New York state; Dresden, Germany; and Singapore — said it is shifting resources to improve and extend existing techniques and giving up on developing 7-nanometer technology.
The technique is the latest way to cram as many transistors as possible onto a silicon wafer — how the industry has improved electronic components for decades.
The new strategy would require an unspecified number of job cuts.
The move further reduces the number of companies trying to build cutting-edge semiconductors and adds to concern that the industry is struggling to deliver advances that underpin all modern electronics.
Globalfoundries, owned by the government of Abu Dhabi, is the second-largest manufacturer of chips designed by other companies, a market dominated by TSMC.
The logic of the move is simple for chief executive officer Tom Caulfield: Stop pouring the majority of its research and equipment budget into work that might never pay off and instead invest in current technology that many customers will continue to use for years.
Most companies that want advanced production also want it in enormous volume, something Globalfoundries cannot handle.
That shortens the firm’s list of potential customers, Caulfield said.
“We need to be relevant to our industry,” he said. “We’ll still have heavy investment — more than a billion dollars a year — but we’re investing in areas where we can make a near-term return.”
Caulfield said Globalfoundries would concentrate on the ability to add features such as embedded memory to other chips — an important innovation for a wide range of components that do not need to be made using the latest production techniques.
Apple Inc, Qualcomm Inc and Nvidia Corp are among a host of companies that rely on others to make the chips they design.
These microprocessors are the heart of most smartphones and PCs. They have been getting faster and more efficient for decades, thanks to manufacturing partners such as TSMC and Globalfoundries that constantly improve production.
However, this process has become increasingly difficult because some dimensions of the required transistors have shrunk to almost the width of an atom.
Intel Corp used to lead the race, but it has delayed the latest round of shrinking, giving rivals such as Advanced Micro Devices Inc (AMD) and Qualcomm a chance to leapfrog Intel and grab more of the markets for PC and server chips.
Still, Intel makes its own chips, while AMD and Qualcomm rely on other companies.
AMD has been Globalfoundries’ largest customer, but it has been working with TSMC more recently.
Globalfoundries decision to give up on the latest production technology means AMD would need TSMC even more now to ensure future processors emerge on schedule.
AMD said it was aware of the change of strategy by Globalfoundries and added that the timing of new chips, to be produced by TSMC, would not be affected.
This could help TSMC continue an eight-year run of consecutive revenue increases.
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