x Abu Dhabi, UAEThursday 27 July 2017

Singapore approves Abu Dhabi chip deal

Completed purchase puts government-owned ATIC second in the world by revenue in its field.

Big fish: Chartered makes customised chips for Microsoft, Broadcom and Qualcomm.
Big fish: Chartered makes customised chips for Microsoft, Broadcom and Qualcomm.

The Singaporean high court has given final approval for Chartered Semiconductor Manufacturing to be purchased by Advanced Technology Investment Company (ATIC), an investment firm fully owned by the Abu Dhabi Government. ATIC paid S$5.6 billion (Dh14.65bn) for Chartered, which manufactures customised chips for Microsoft, Broadcom and Qualcomm. The acquisition includes US$2.2bn (Dh8.07bn) in debt and convertible bonds, while S$2.5bn will go towards Chartered's common shareholders. "The acquisition process is now completed," said Jim Norling, the chairman of Chartered Semiconductor.

ATIC will combine the manufacturing divisions of Chartered within its Globalfoundries business, a joint venture with the US microchip maker Advanced Micro Devices (AMD). ATIC controls a majority stake in the joint venture. Globalfoundries is now the second-largest customised chip maker in the world with revenues so far this year of $1.83bn. Due to terms of the acquisition, Chartered is to be de-listed from the NASDAQ exchange on December 28 and the Singapore Exchange one day later.

Analysts have said it is likely that Globalfoundries will create pricing pressure for its Taiwanese rivals, United Microelectronics Corporation (UMC) and Taiwan Semiconductor Manufacturing Company (TSMC) for market share in the customised chip making industry over the next year. "Combining Globalfoundries with Chartered makes the company a more formidable threat today based on increased customer exposures from Chartered, technology road maps, access to capital and existing capacity," Steven Pelayo, a technology analyst for HSBC, said in a recent research report.

The owner of Chartered Semiconductor will be ATIC International Investment Company, a wholly owned subsidiary of ATIC, according to regulatory documents. Globalfoundries now controls chip making facilities in Singapore and Germany and broke ground for a plant in New York this year. "With the approval process behind us, we will now focus our attention on combining two great companies, Chartered and Globalfoundries," said Ibrahim Ajami, the chief executive of ATIC.

"Customers have told us they are excited about the combination of technology, talent and capacity this new entity will bring to the marketplace. We share their enthusiasm." Due to lower customer spending on computer products, this past year will go on record as one of the worst for the semiconductor industry since the dot-com bubble burst in 2001, recent estimates by the technology consultancy Gartner indicate. The semiconductor industry will post a revenue decline for just the sixth time in the past 25 years, with worldwide revenue totalling $226bn this year, an 11.4 per cent decline from last year.

"With the market emerging from recession, semiconductor vendors need to track the end users' spending patterns through 2010 in order to detect any disruptions in demand or additional demands that outstrip capacity," said Stephan Ohr, the semiconductor research director at Gartner. Globalfoundries is now part of a handful of chip makers developing 28-nanometre semiconductors, a next-generation design that improves computer performance by 40 per cent and reduces power consumption by 20 per cent in a chip that is half the size of current models. In theory, the smaller the chip, the less its battery consumption, making tomorrow's electronic gadgets work far longer on battery power than today's offerings.

With the acquisition now complete, Globalfoundries controls 11.3 per cent of the market compared with UMC's 14.1 per cent, said the computer manufacturing consultancy iSuppli. TSMC commands the lion's share of the market with 49 per cent. Mubadala Development, the strategic investment arm of the Abu Dhabi Government, is the largest shareholder in AMD with a stake of almost 20 per cent. AMD is the ninth-largest semiconductor manufacturer in the world by revenue, according to Gartner, rising two spots from last year.