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Globalfoundries's facility in Germany. Jeff Topping / The National
Globalfoundries's facility in Germany. Jeff Topping / The National

Chip maker delays plan for factory in capital

Globalfoundries postpones its plan to start work on the Gulf's first microprocessor-fabrication plant in Abu Dhabi.

Globalfoundries, the chip manufacturer, has postponed its plan to start building the Gulf's first microprocessor-fabrication plant in Abu Dhabi next year.

The company, which is 91 per cent owned by Abu Dhabi's Advanced Technology Investment Company (Atic), will not start construction of the facility next year because of the uncertain global economic outlook.

"We will not be engaging in any ground breaking in Abu Dhabi in 2012," said Ibrahim Ajami, the chief executive of Atic.

"Against the backdrop of a global economy still very volatile, we took a decision from a board level that we should not have another facility right now, but we should assess what happens before the end of 2012 on our growth strategy."

Atic, which is a wholly owned subsidiary of Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, helped to set up Globalfoundries with the US-based semiconductor company Advanced Micro Devices (AMD) in 2009.

Since then, Atic has steadily increased its investment in Globalfoundries with the two companies having announced in June last year that they had selected a site for a fabrication factory near Abu Dhabi International Airport. The factory was planned to be operational by 2015.

The plant would join other Globalfoundries facilities in Germany and Singapore to build chip components for clients such as AMD, Broadcom and Qualcomm.

Globalfoundries and Atic have put the project on hold for now as they shift their focus next year to their plant under construction in Saratoga county, New York state.

"We have a state-of-the-art facility in New York state that has cost Atic over US$4 billion[Dh14.6bn]," said Mr Ajami.

He said Globalfoundries and Atic were still committed to Abu Dhabi, and the companies would decide towards the end of next year when they would restart plans to construct a plant in the capital.

Currently, the foundries market has enough capacity as companies such as Samsung enter the industry.

Also, the decline in demand for laptop and desktop computers means the world has enough microprocessor makers, analysts say.

The research company Gartner has cut its forecast for growth in the global PC industry to 3.8 per cent from 9.3 per cent, citing slower growth in Europe and the US.

"There's plenty of capacity coming online, plus in the same time, you have a deterioration of the end-demand. So the equation is not good," said Jerome Ramel, a semiconductor analyst at Exane BNP Paribas, based in London.

But Mr Ramel said more competitors still needed to enter the industry and build more plants as the foundries market was dominated by Taiwan Semiconductor Manufacturing Company, which had a 50 per cent share of the market.

Also, these foundries across the globe need to increase their capacity to handle future growth, he said.

"In this industry when you have a new partner for a foundry, you want to make sure that your partner is really there for the next four to five years. You want to see the technology roadmap, you want to see the capacity," said Mr Ramel.

"Globalfoundries has to show something to their clients, to show a roadmap for the next five years, they have to show milestones they have achieved."


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