The chip manufacturing industry is shifting westward. Not too far, you understand -- today's hegemony in the Far East is starting to share the cake with an upstart in the Middle East.
Since Abu Dhabi investment agency ATIC bought a majority position of the semiconductor foundry operations of Advanced Micro Devices
A sudden $10 billion boost of Globalfoundries' factory capacity is very significant. Chartered brought about $20 billion of plants, property, and equipment to the table (after depreciation), and AMD's equipment was worth much less. With this infusion, Globalfoundries becomes a serious rival to industry leader Taiwan Semiconductor Manufacturing
This is good news on many levels:
- More competition fosters innovation and customer-friendly pricing policies. Fabless chip designers like Broadcom
(Nasdaq: BRCM)and NVIDIA (Nasdaq: NVDA)would love to have a matched pair of competing foundries fighting over their business.
- The next time a global recession turns into refreshed demand for chips, the foundries will be able to support higher order volumes instead of becoming a bottleneck for the upturn.
- And of course, $10 billion of new construction means lots of equipment sales to fill the factories. Shareholders of MEMC Electronic Materials
(NYSE: WFR), Nanometrics (Nasdaq: NANO), and KLA-Tencor (Nasdaq: KLAC), among other testing and fabrication equipment makers, will absolutely love it.
Will Globalfoundries win this race, or simply push Taiwan Semi to try harder? Either way, I think we're looking at a new era of globalized chip manufacturing, after decades of exclusively Asian-centric operations. Share your thoughts on how this trend will change your portfolio using the comments below.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. NVIDIA is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.