2 min

Intel is very interested in chip manufacturer GlobalFoundries. This is what the Wall Street Journal reports. Intel considers an acquisition so that it can increase its production of processors.

According to sources of the business newspaper, an acquisition of GlobalFoundries would cost Intel approximately 25 billion euros (30 billion dollars). This would make the acquisition the largest Intel has ever done. GlobalFoundries is planning to go public, but this would not stand in the way of a takeover. On the other hand, a takeover would save all the trouble of an IPO.

Manufacturer for other chip designers

With GlobalFoundries, Intel would gain a large manufacturer of processors. Once divested by AMD, GlobalFoundries manufactures processors for third party chip designers but does not design them itself. Most major chip designers, such as AMD, Nvidia, Qualcomm, and Huawei, outsource production to specialists like GlobalFoundries, rather than investing in their own factories. The largest manufacturer of chipsets for other parties in the world is TSMC. GlobalFoundries also has a large production capacity with several factories in the United States.

Tip: EU should pay Intel 8 billion euros for two chip factories

Fits within Intel’s strategy

For Intel, the acquisition of GlobalFoundries could work out well. The acquisition fits into the strategy that CEO Pat Gelsinger foresees for the chip manufacturer. He wants to make Intel the main supplier for processors by also manufacturing chips for third parties. Intel can only execute this strategy if the chip manufacturer can increase its production capacity by creating or building more production facilities. The factories of GlobalFoundries can do just that.

Intel is already investing more than 17 billion euros (20 billion dollars) in new production facilities in the US and possibly another 17 billion euro’s in the European chip market. Intel is also to become much more of a producer for other chip designers and thus compete more effectively with TSMC. These investments are for new factories that have to build and new production lines need to be installed. It could take a while before they are operational. If Intel would acquire Globalfoundries, it has factories that are already running.

It is not known when the acquisition will be announced or even completed. In any case, the negotiation process will probably take some time. GlobalFoundries is a major manufacturer of AMD’s processors, and that could likely cause some problems if it comes to a takeover.

Tip: TSMC puts 2.4 billion euros into capacity expansions