Analysts Have Mixed Opinions over Acquisition of Chartered by ATIC

Analysts: AMD and Globalfoundries May Benefit from Chartered Deal, Or May Not

by Anton Shilov
09/08/2009 | 11:51 PM

Industry analysts believe that acquisition of Chartered Semiconductor Manufacturing by Advanced Technology Investment Company and merging it with Globalfoundries, a joint venture between ATIC and Advanced Micro Devices, will allow Globalfoundries to gain new customers and revenue streams. This may provide additional profit to AMD, some believe. However, Globalfoundries is still much smaller than TSMC, which is a threat.


“We view the (Chartered) transaction as a strategic positive for Globalfoundries, which will acquire customer relationships and manufacturing capabilities in both 8” and 12” fabrication. The ATIC/Chartered Semiconductor transaction is a net positive for AMD as it could likely help moderate loss levels at AMD consolidated, as Global Foundries broadens its customer base over time,” said analyst Tim Like for Barclays Capital, reports Reuters news-agency.

“In order to be competitive, a foundry needs to be able to offer a broad variety of processes, interfaces and libraries. This is something that has not been available at Globalfoundries, given its background as a purely high-end processor manufacturing entity,” said industry consultant Harald Eggers, a former manager at Infineon, reports EETimes web-site.

However, everything may not be that positive. Globalfoundries has two customers: AMD and STMicroelectronics and is losing money. Even though Chartered has many more clients, it has been losing money for the past years. As a result, ATIC and AMD are likely to continue losing money on manufacturing operations. Moreover, in terms of market share, Globalfoundries will still be well behind market leader Taiwan Semiconductor Manufacturing Company.

“I think it is risky. Chartered is just kind of a little militia fighting against a full-fledged army,” said Wedbush Morgan Securities' analyst Patrick Wang.

Some analysts even claim that even with Chartered onboard, Globalfoundries will have hard times competing with United Microelectronics Corp.

“TSMC leadership in the foundry business appears unassailable, with our checks indicating its process development efforts are a year or more ahead of the competition and support is coming from the strongest of potential partners including Intel, Qualcomm, NetLogic, and Nvidia. Beyond TSMC, most companies we follow consistently name UMC as a key strategic second source," said JMP Securities analyst Alex Gauna.

Moreover, some the former manager at Infineon even has doubts that the integration of Chartered into Globalfoundries will go smoothly.

“There are cultural and mental differences and other unknown factors. I don't know if the integration of the two will run smoothly, but this will be an essential factor. It boils down to the question if there will be emotional winners and losers in the process,” said Mr. Eggers.