Gone are the days when we discussed deals of thousands of dollars. Billions are now being invested and spent in industries that are flourishing all over the world. The government of Abu Dhabi just signed a $6 Billion deal with Advanced Micro Devices, with an initial plan of investing in a new chip-manufacturing business enterprise.
This week, the government promised another $3.9 Billion to purchase Chartered Semiconductor, a Singapore based chip manufacturing company.
This huge investment in the chip industry has made all the major investors and financial advisors wonder if people at government of Abu Dhabi’s investment arm-Advanced Technology Investment Company-have a definite fiscal plan for success or did they just gambled up with this much money to lose it all in one game.
Joseph Byrne, a chip analyst working for Linley Group recently stated that it was a ‘high-stakes game of poker’ that these companies are playing. People who show up with most chips at a poker game aren’t necessarily always the ones leaving with the biggest stacks.
Although, Advanced Technology’s move has created a rather unsecure vibe in the chip industry, the deal has some candid benefits. Advanced Technology has founded Global Foundries, which will mainly be responsible for making chips for A.M.D. and others. Although it has some other small, short-term projects going on as well, such as advanced chip plants, the main issue that arises with Global Foundries is the lack of market outside its usual high-volume chip produce for A.M.D.
This is where Chartered comes in.
Chartered has been in business for quite a while now. Their main competitors in the chip manufacturing enterprise are companies like Taiwan Semiconductor Manufacturing and the United Microelectronics. Chartered has wide range of short-term and long-term customers, but it hasn’t been financially stable in terms of chip production. It has constantly been behind all the major big name competitors in owning advanced chip plants.
Advanced Technology has engineered a plan that will bring together these two-Global Foundries and Chartered- to make a perfect blend of new and old, short-term and long-term, high volume and low volume customers with new and old chip-making plants. With this plan, Advanced Technology has brought together two most valuable things for contract chip makers: capacity and scale.
The competition for Advanced Technology is still tough though. Taiwan Semiconductor Manufacturing and United Microelectronics are both giants who have reached the pinnacle of business of contract chip-making. Global Foundries will face a high level of competition while trying to earn customers who have already worked with these two companies.
Analysts suggest that Advanced Technology will have a huge favor to its name in accidental conditions, like if one of these fails a large-scale research or development and advancement project, more customers will start looking for other options. That being said, Global Foundries will of course have to make these advancements successfully to attract more customers. If this joint venture delivers next technology nodes, customer WILL turn towards them. If they can’t, they will lose heavily.