Japan to invest up to $21 billion in two US chip factories to be run by GlobalFoundries

NEW YORK, Oct 14 : Japan will invest up to $21 billion in two chip factories in New York state that will be jointly owned by the US government and Japanese interests and operated by GlobalFoundries, the company said on Wednesday.

Shares of the Malta, New York-based company rose nearly 5 per cent in premarket trading. As of last close, the stock had gained more than 33 per cent so far this year.

The move is part of a deal for Japan to invest $550 billion in the US struck by President Donald Trump's administration last year in return for the US lowering tariffs on Japanese cars and other imports from at least 25 per cent to 15 per cent.

The US will take a stake in the new chip factories, but Japan will provide all of the investment capital, GlobalFoundries said.

CNA Games Guess Word Crack the word, one row at a time Buzzword Create words using the given letters Mini Sudoku Tiny puzzle, mighty brain teaser Mini Crossword Small grid, big challenge Word Search Spot as many words as you can Show More Show Less The company, which is majority-owned by Abu Dhabi's sovereign wealth fund Mubadala Investment Co, will earn fees from building and operating the factories, as well as licensing chip manufacturing technology to them. In a separate agreement, the US government will take a 4 per cent stake in GlobalFoundries, bringing its total ownership of the chipmaker to about 7 per cent, GlobalFoundries CEO Tim Breen told Reuters. Breen said GlobalFoundries would manage customer relationships, and initial customers for the New York factories include Japan's Renesas Electronics and iPhone maker Apple. "We definitely would like to give priority to US and Japanese customers," he said. "Ultimately, I expect other companies that aren't US and Japanese will also be part of the demand, but we'll obviously go through a process after announcement to finalize the exact who gets what over what timeframe." Japan has so far announced two batches of projects worth over $100 billion combined under the investment scheme. Under the arrangement with ​the US, Trump selects projects to be funded by Japan. Available free cash flows from investments will ​be split evenly between the two countries until a specific allocation ‌is ⁠reached, after which 90 per cent will go to the US. GlobalFoundries' Breen said that at least some of the capital investment by Japan will flow back to chip-manufacturing toolmakers such as Tokyo Electron and other Japanese firms that along with US rivals dominate the supply chain. "Obviously, we have a strong interest in the Japanese equipment suppliers to be part of it," Breen said. "We will be very open-minded, but we'll definitely engage very much with the Japanese ecosystem because they have great technologies."

The company, which is majority-owned by Abu Dhabi's sovereign wealth fund Mubadala Investment Co, will earn fees from building and operating the factories, as well as licensing chip manufacturing technology to them.

In a separate agreement, the US government will take a 4 per cent stake in GlobalFoundries, bringing its total ownership of the chipmaker to about 7 per cent, GlobalFoundries CEO Tim Breen told Reuters.

Breen said GlobalFoundries would manage customer relationships, and initial customers for the New York factories include Japan's Renesas Electronics and iPhone maker Apple.

"We definitely would like to give priority to US and Japanese customers," he said. "Ultimately, I expect other companies that aren't US and Japanese will also be part of the demand, but we'll obviously go through a process after announcement to finalize the exact who gets what over what timeframe."

Japan has so far announced two batches of projects worth over $100 billion combined under the investment scheme.

Under the arrangement with ​the US, Trump selects projects to be funded by Japan. Available free cash flows from investments will ​be split evenly between the two countries until a specific allocation ‌is ⁠reached, after which 90 per cent will go to the US.

GlobalFoundries' Breen said that at least some of the capital investment by Japan will flow back to chip-manufacturing toolmakers such as Tokyo Electron and other Japanese firms that along with US rivals dominate the supply chain.

"Obviously, we have a strong interest in the Japanese equipment suppliers to be part of it," Breen said. "We will be very open-minded, but we'll definitely engage very much with the Japanese ecosystem because they have great technologies."

Our chief editor shares analysis and picks of the week's biggest news every Saturday.

Get our pick of top stories and thought-provoking articles in your inbox

Stay updated with notifications for breaking news and our best stories

Join our channel for the top reads for the day on your preferred chat app