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Reimagining the Automotive Semiconductor Supply Chain with GlobalFoundries

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MarketInsite Nasdaq Blog

The demand for semiconductor chips has exploded in recent years. Between 2001 and 2022, unit sales of semiconductors increased by 290%, resulting in annual sales reaching $573.5 billion in 2022. Chips have become mission-critical to the functionality, safety, transformation and success of many industries, including the automotive industry. According to Grand View Research, the global automotive semiconductor market is expected to grow at a compound annual growth rate (CAGR) of 8.1% from 2023 to 2030. Tracking the rise of semiconductor demand, GlobalFoundries (Nasdaq: GFS), a leader is feature-rich semiconductor manufacturing, developed a direct-to-source model that paves the way for future automotive innovation by providing a reliable chip supply chain.

GlobalFoundries listed on the Nasdaq Stock Exchange in October 2021 raising nearly $2.6 billion, making it the largest semiconductor IPO in history. The company has a highly diverse geographic footprint, with manufacturing sites across the globe including the U.S., Germany and Singapore. In December 2022, GlobalFoundries was added to the Nasdaq-100 Index, which is comprised of the 100 largest non-financial companies listed on the Nasdaq. 

The Rise of Semiconductors

Semiconductor chips have become part of consumers’ daily lives, powering everything from smartphones to household appliances to cars. Chips control the heating and cooling systems in air conditioners, fridges and microwaves; they affect all the safety features of a car, including airbags and breaking systems, as well as the car’s direction, location and speed; they even affect the display, battery use, reception and cameras in our phones. 

Over half of semiconductor demand is generated by U.S.-headquartered companies, but only 12% of chips are manufactured in the U.S. This overwhelming demand made chip supplies overly reliant on a global supply chain, a reliance that was challenged during the Covid-19 pandemic. 

During the pandemic, the automotive industry was plagued by supply chain issues and a chip shortage, as semiconductor suppliers sent their products to other sectors like tech or consumer goods. The disruption caused production slowdowns across the automotive industry and highlighted the need for greater supply chain resiliency. 

GFS_Automotive Innovation

Creating a Resilient Supply Chain

GlobalFoundries identified the supply chain disruption as an opportunity for innovation and developed its direct-to-source model, alleviating supply chain pressures and providing automakers with more direct access to semiconductors specifically made for their products. 

Traditionally, the automotive chip supply chain relies on subsystem makers to produce electronic control units (ECUs), which are then used for various electronic functions in a car.  Semiconductor manufacturers would produce general purpose chips to be used in the automotive ECUs. 

But creating general purpose chips led to two stark drawbacks. Automakers had no control over where these chips were produced, leaving the supply chain open to production slowdowns like the pandemic. Meanwhile, on the manufacturing side, semiconductor makers had limited visibility into where the chips produced were going. Chips could be used for anything from a smartphone, a car, or a vacuum. 

GlobalFoundries’s direct-to-source model connects foundries directly with original equipment manufacturers (OEMs), like General Motors (GM).

GFS_SupplyChain

Under this new model, GlobalFoundries directly partners with OEMs to produce semiconductors tailored to the equipment’s specific purpose. In addition, OEMs can dictate where these vital chips are produced. 

As Kamal Khouri, Vice President & General Manager for Automotive at GlobalFoundries describes it, “We bridge the supply chain relationship…We discuss the needs for that auto OEM and ensure we can provide the technologies they care about, in the locations they care about, and that the economics are transparent to them.”  

Kamal Khouri_Headshot

A Leader in Semiconductor Manufacturing

The relationship between foundry and OEM highlights an underlying change occurring in the automotive industry. Cars have evolved from a tool that simply takes us from Point A to Point B. Now, consumers expect a personalized experience when they get into the driver’s seat—favorite radio stations are preprogrammed, seats adjust automatically. All these features are integrated so seamlessly that many consumers no longer think of these electronic functions as a luxury but as a standard experience. 

By providing a secure and reliable supply of chips for car OEMs, GlobalFoundries enables companies to create products needed today and accelerates the innovation of more sustainable, safer and increasingly useful products for the future. The technology advancements made by GlobalFoundries increase safety, enhances user experience and advances sustainability through vehicle electrification.

As Khouri describes it, “The automotive industry is going through a monumental change. It's a change in the way we interact with the vehicle. It’s a change in what our users experience and what they expect a vehicle can provide to us.”

In February 2023, GlobalFoundries and General Motors announced their first strategic, long-term partnership that established a dedicated automotive chip manufacturing process exclusively for GM’s chip supply. “GM recognized that semiconductors are critical to their future success. They also had a desire to manufacture these critical semiconductors in the United States,” said Khouri. 

Khouri is already looking ahead for GlobalFoundries, “We want to be an integral part of the auto industry. We want to be the automotive foundry of choice. When automakers think about semiconductors, we want them to think about GlobalFoundries.”

To learn more about how GlobalFoundries is Reimagining Tomorrow for the semiconductor industry, the company is hosting its annual GF Technology Summit on August 29 and 30, 2023. 

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