What would you call a company that specializes in mixed-signal chips produced in back-edge manufacturing processes? Those familiar with the industry may say that this is a semi-representative company. By that same definition, we should probably think of GlobalFoundries as just another analog chip company.
An old friend pointed this out and we think it’s worth exploring because it helps us not only understand GlobalFoundries’ prospects, but also how we think about industry definitions.
At first glance, this equivalence is meaningless. GlobalFoundries is a foundry, manufacturing chips for third parties. Analog companies like Texas Instruments design and sometimes even manufacture their own chips.
Guest author Jonathan Goldberg He is the founder of D2D Advisory, a cross-functional advisory firm. Jonathan develops growth strategies and alliances for companies in the mobile, networking, gaming and software industries.
The entire world has spent the past three years learning the difference between fabless and plumbing companies. when we show up on the podcast, this is usually the first point we make. But dig a little deeper and the similarities start to emerge.
Both companies make similar chips, or at least chips that end up in similar end markets—industrial infrastructure, automotive, wireless, etc., and all of those chips perform well in later edge processes. GlobalFoundries came out of Moore’s Law treadmill at 16 nanometers, and most Texas Instruments chips use older processes. This is the analog domain and analog signals don’t scale the way digital processors do, so mature processes work fine most of the time.
People will argue that GlobalFoundries has no chip designers, which is a great unstaffed capability at all. That’s right, except that fabless analog companies tend to work closely with their own rapid manufacturing operations. There’s a lot more scope back and forth, so while GF doesn’t really talk to end customers, they end up doing a lot of the design work.
So the two companies are not identical, but they are somewhat similar. They make similar products for similar end markets and sit in similar premises in semi-finished operations. Going forward, it probably makes sense to think of GlobalFoundries as a representative company. For GF, that likely means its future depends on convincing some of the smaller analog companies to outsource their production to GF and forego capacity expansion.
In theory, GlobalFoundries could start working directly with end customers. We know they signed a deal with Ford during a capacity crunch, but from what we can tell it’s not exactly a logical endeavor with clear strategic end goals. But it is not impossible for them to walk this path.
Maybe we’ll see more blurs like this. Once upon a time, all semis were doing their own manufacturing. And while there are still many reasons why foundries should be built state of the art ($20 billion per plant), the economic case for dividing the two needs to be rethought for others.
The recent lack of capacity has awakened many people to this reality. With Moore’s Law no longer fully operational, many companies will begin to think of building manufacturing as a core competency again. The pendulum will never swing all the way and lose fabless form, nor will the pendulum stay still.