Globalfoundries is throwing in the towel. On Monday, the company said that it would cut short the development of new 7-nanometer manufacturing technology, highlighting how hard it now is to stay to stay on the leading edge of the semiconductor industry.
The change of heart highlights the mounting challenges to etching smaller and smaller transistors onto the slabs of silicon inside everything from data centers and factories to smartphones and thermostats. The announcement raises questions about whether there are still financial benefits to spending billions of dollars on the development of chips tattooed with transistors almost the width of a virus and the hundreds of millions on equipment capable of manufacturing them without the slightest defects.
For Thomas Caulfield, chief executive officer of Globalfoundries, that stopped making financial sense with 7-nanometer production. The company just does not have enough customers to make it profitable. The strategy is to invest in current technology that could remain in use for years and matters more to its customers. But the move leaves Intel, Samsung and Taiwan Semiconductor Manufacturing Corporation to fight over the most advanced technology.
“These nodes are transitioning to design platforms serving multiple waves of applications, giving each node greater longevity,” Caulfield said, adding that Globalfoundries would concentrate on the production of chips based on 14-nanometer and 12-nanometer FinFet. The company is focused on adding new components to chips, including embedded memories like magnetoresistive random-access memory (MRAM).
“The vast majority of today’s fabless customers are looking to get more value out of each technology generation to leverage the substantial investments required to design into each technology node,” Caulfield said. “This industry dynamic has resulted in fewer fabless clients designing into the outer limits of Moore’s Law. We are shifting our resources and focus by doubling down on our investments in differentiated technologies across our entire portfolio that are most relevant to our clients.”
The changes are intended to rebalance the world’s second largest contract chip manufacturer, which employs around 17,000 people worldwide and serves customers including Advanced Micro Devices, STMicroelectronics and Broadcom. The company’s spokesperson, Jason Gorss, said that it would have to cut around five percent of the workforce after employees are reassigned to new product lines inside GlobalFoundries.
“Basically it narrows the market for 7-nanometer technology down to Samsung and TSMC,” said Dan Hutcheson, chief executive of VLSI Research, in a recent interview. “ But it makes a lot of sense to bet on where you have differentiated technology. You can focus technical resources on winning there as opposed to fighting on two fronts. If you’re trying to do what other companies are doing and you don’t have a cost advantage, you’re toast.”
This is the latest recalculation for Santa Clara, California-based company as it attempts to carve out more of the $57 billion foundry business. Last year, the company said that it would shortcut around 10-nanometer technology that it claimed would have marginal performance and power benefits compared to the high manufacturing costs. Before Caulfield came aboard, Globalfoundries said that it would be in limited production of 7-nanometers before the end of this year.
“Lifting the burden of investing at the leading edge will allow Globalfoundries to make more targeted investments in technologies that really matter to the majority of chip designers,” said Samuel Wang, research vice president with Gartner, which estimates that advanced nodes under 12-nanometers will represent a fourth of the $85 billion foundry market in 2022. “Fewer customers can afford the transition to 7nm and finer geometries.”
Halting development could have repercussions for some customers, blowing wind into the sails of the company’s rivals. Mark Papermaster, AMD’s chief technology officer, recently announced that the company would shift all 7-nanometer production to TSMC, while using GlobalFoundries to manufacture its current product line. “We do not expect any changes to our product roadmaps as a result of the changes,” Papermaster said in a statement.
The Santa Clara, California-based company announced that graphics chips based on 7-nanometer technology would be available before the end of the year. AMD plans to release computer processors based on the same node next year. That could erode Intel’s manufacturing lead, which has been under threat amid persistent struggles with its 10-nanometer process. Analysts say that Intel’s technology is roughly the equivalent of TSMC’s 7-nanometer node.
The changes inside the privately-held company could boost the industry’s dependence on TSMC, which has earned $33.8 billion in revenue over the last year from around 450 customers, including Nvidia and Apple. While the company holds 55.9 percent of the contract chip manufacturing business, Globalfoundries commands 9.4 percent, United Microelectronics 8.5 percent and Samsung 7.7 percent, according to market research firm TrendForce.
The overhaul also means more investment into fully-depleted silicon-on-insulator technology—more commonly called FD-SOI—increasingly used in wireless, automotive and Internet of Things applications, including connected sensors and factory equipment. The company is now ramping up production of 22-nanometer chips based on the technology. Last month, it announced that orders for FD-SOI technology have reached $2 billion.
The company is building its latest factory in the central Chinese city of Chengdu, planning to start manufacturing in the world’s fastest growing electronics market before the end of the year. Last year, Globalfoundries announced it would convert the roughly $10 billion plant over to FD-SOI production in second half of 2019. It is also trying to perfect 12-nanometer FD-SOI technology that boosts performance with the same low power.
“FD-SOI is a differentiated process that no one else can match right now, except maybe Samsung, and they are further behind,” Hutcheson said. “GlobalFoundries needs the cutting edge of low power and that’s where FD-SOI really shines.” He added in an interview with Electronic Design: “We’ve seen a much broader shift in technology because everyone’s looking at different ways to lower costs and hit new technology targets.”
The company can take advantage of its lead in radio frequency components targeting millimeter waves used in 5G communications. These include switches and amplifiers used in the front ends of smartphones and other electronic devices and ordered by customers like Anokiwave and Skyworks Solutions. Other businesses focus on electronics used in analog and power applications, including automotive radar based on silicon germanium (SiGe).
Globalfoundries also announced it would spin out its business focused on application-specific integrated circuits—more commonly known as ASICs—which shrink die space and increase efficiency by sacrificing programmability. But the company, which was founded when AMD divested its manufacturing operations almost a decade ago, acknowledged that it would point customers that need 7-nanometer technology to other foundries.