Apple exploring U.S.-based chipmaking deal with Globalfoundries

“Apple is exploring a possible deal with chipmaker Globalfoundries to produce future chips, according to a report,” Brooke Crothers reports for CNET. “A semiconductor industry source told CNET that Apple and Milpitas, Calif.-based Globalfoundries are ‘kicking the tires.’ But ‘by no means’ is any firm deal imminent at this point, the source added.”

“The original speculation about the deal appeared at chip site SemiAccurate on Friday. The report said Apple has ‘bought into’ a fab at Globalfoundries — a fab is a chip plant, in semiconductor industry parlance,” Crothers reports. “If Apple owned capacity at a fab, it would give the company the kind of control over both design and chip manufacturing that Intel has, the report said.”

“Currently, Apple processors such as the A6 are made by Samsung at a facility in Austin, Texas, as well as other locations. But Apple doesn’t “own” manufacturing capacity per se,” Crothers reports. “If the Globalfoundries deal reached fruition, it could be a backup plan of sorts, the source said… Globalfoundries has a relatively new fab in upstate New York that has “a lot of idle capacity and a lot of new [production] tools,” said the source. It’s capable of making ARM chips (the same chip design Apple uses) based on 32 and 28 nanometer manufacturing process technology. And it’s developing more advanced 20 and 14 nanometer process technologies, the source added. Linley Gwennap, principal analyst of The Linley Group, doesn’t see Apple owning capacity, however. ‘I don’t see why Apple would buy a fab, but they might front some money to Globalfoundries to guarantee access,’ he told CNET.”

Read more in the full article here.

28 Comments

  1. ‘I don’t see why Apple would buy a fab, but they might front some money to Globalfoundries to guarantee access.’

    Really? Curious that he doesn’t explain any further than that. Samdung manufacturing chips for Apple is a weakness that Apple could do away with by manufacturing their own.

    1. Apple doesn’t own manufacturing capacity for the same reason many companies lease cars. Once you own something you’re hostage to its requirements and its limitations. If Apple wants to increase capacity today, they don’t have to build and staff another factory, they just let a contract to another qualified assembly contractor. That contractor has the responsibility to hire workers, keep the air conditioner working and deal with a whole host of other issues that Apple keeps off their plate by contracting out the work. It lets Apple focus on design and product support.

      There is no company in America that can churn out Apples annual production volume of complex devices. And Apple can’t risk running parallel production lines in the US, because one of two things could happen. One, the US made products could be better than the offshore made products, reducing the desirability of the offshore products. The other is the US-built items could be worse than the offshore products. That would be very bad indeed.

      What I worry about is the vast middle of America. The people too capable to be doing maintenance and warehouse work but not smart or educated enough to work for an Apple. What do they do for a job? And if they aren’t able to work to their full potential and contribute their economic value to the GDP, what happens to the national economy, which is dependent on well paid workers spending their income?

      1. Great commentary.

        There also remains the eternal cost problem. Obviously, the USA is economically suffering because of (among other reasons) the need to lower manufacturing costs and therefore wages/benefits. Costs pressures aren’t going away.

        Meanwhile, however, feeding money to nasty old enemies China in response to cost pressures is a BAD thing. And no folks. I never have held any faith in the capitalism-ization of China. What a load of BS. Look what happened instead. 😛

        1. “Obviously, the USA is economically suffering because of (among other reasons) the need to lower manufacturing costs and therefore wages/benefits.”

          I agree with your conclusion that cost pressures on manufacturing are only getting worse, however energy costs and corporate taxes are primary cost pressure on manufacturing in the US not wages. (hell even, Canada has half the US business tax rate (and they actually offer free healthcare, whereas obamacare is just going to increase the load on employers)

          1. I can’t validate your point about energy costs. But I know that SOME (not all) of the corporate tax rates are idiotic. The US federal government got a great big black eye when the tax rate for bringing foreign corporate profits back into the USA were publicized to the world at Apple’s recent visit to the Senator Carl Levin witch hunt. –Prohibit bringing foreign profits into the USA with an outrageous tax rate? Oblivious DUH Factor. 😛

      2. It’s called owning the means of production. If you just contract out and rely on other peoples talents/innovations, you are just another product as other competitors will copy you in short order able to use the same suppliers. Or the suppliers themselves (Samdung) will copy you. We all know how effective intellectual property and patents are. The only way to secure your innovations is to produce them yourself.

        1. Just a thought here. With things like Fab plants, unless your going to use 100% capacity, contracting out is usually better.

          You can use a number of tools to make sure that your product is safe and secure and you get first build. Apple spends BILLIONS each year (not buying but) purchasing advance ownership of parts to be built. If Apple wants them, Apple gets first production at an agreed upon price but they can also not order the entire amount of parts and get their money back. Its win-win cause the fab house has the money on tap and no 30-60-90 day wait for payment.

      3. Good points, but there is a middle ground. Apple can reduced is risks by owning fab capacity to produce a portion of its annual needs. This provides a stable floor and reduces reliance on third parties, which provides Apple with a much stronger negotiating position for new contracts. In addition, Apple can roll technology into its owned fabs in a controlled manner, building new capacity before retiring older 28nm capacity. Apple could also use its fab for prototype chip production to explore new capabilities without having to release this information to potential competitors, such as Samsung. I would not trust an NDA with Samsung any further than I could throw the company. And even non-competitors could leak information to Samsung, Google/Motorola, or Microsoft

        1. I see you point, but getting into the fabrication end of the business brings a lot of issues with it. Retirement plans for all those workers, health benefit packages. Are they going to have similar benefits to the employees in Cupertino? How will Apple go about denying them the right to unionize without coming off as assholes? Where will the plants be located? There’s not exactly an “electronics assembly valley” in America right now. Those facilities require manufacturing engineers, lab technicians, process control specialists. Where do they come from? Some plants require lots of power.

          As long as there are multiple qualified assembly contractors, Apple doesn’t have to worry about any of these factors. It’s like renting a car. If the car stops working, you just rent another one.

    1. It feels good to say this but building and running a fab and keeping it up to date is reay hard and expensive. Also, there are a lot of patents protecting specific technologies. On the plus side it could work because of Apple’s volume. Even at 450mm Apple would process vast numbers of wafers. I’m sure they have looked at this and other options.

      1. When you’re operating at the scale Apple does, everything becomes hard & expensive but that’s why tens of millions of consumers buy Apple products – because Apple produces world-class products by solving the expensive & hard problems.

        That’s what separates the best from the also-rans.

      1. You are right of course. Apple couldn’t build anything that others have built nor hire people to run it. They could not license the technology that others have or is available for license to its competitors. Apple is doomed or something.

  2. I have to hand it to Apple. Their response to the Chinese harassment, hassles, crime and leaks has been slow. But it IS happening. It would be great if Apple manufacturing could move home again.

    BUT, Apple still has an outrageously TechTard, disrespectful, self-destructive Wall Street / Corporate Oligarchy run government with which to contend.

    My country’s government requires a MASSIVE enema. And neither of our two brain-dead political parties have a clue or an interest. F*ck them both. They BOTH require flushing and good riddance. 😛

      1. While off topic and dreaming, why not go for broke? Don’t flush the two political parties. The sewer system would back up big time. Nobody wants that. Instead, look to the past, combined with new technologies, to inject action into political leadership.

        I recently had dinner with a writer of alternative U.S. histories. He had some ideas.

        That perfectly preserved woolly mammoth recently discovered in Siberia—there’s already serious talk of cloning the animal, of raising herds in Montana or Saskatchewan. (I can already visualise the “Mammoth Burger” signs popping up at truck stops.)

        What about cloning Grover Cleveland? He could run for U.S. President and win, muscle congressional lollygaggers to repeal the Federal Reserve Act and steamroll Wall Street. (The 22nd amendment should not technically apply to a clone.) His VP Theodore Roosevelt could reconstitute the Rough Riders and liberate Cuba, triggering an economic boom in fine cigars and vintage cars. With the gold standard restored, the BEP could issue new banknotes and replace Cleveland’s face on the thousand-dollar bill with Ronald Reagan’s.

        The burgundy was not very good that evening 😉

        1. HaHaHaHa! I think you’re going to enjoy the story series I’m writing. I like your imagination.

          The USA has all the guts it needs to clean out the cancerous infestations. I attempt to help out locally and write about it globally. But at an optimistic guess I’d say it’s going to take a generational shift to recognize the problems as a cultural whole, trash both current parties and start up at least two new parties that actually represent We The People. I enjoy encouraging that next generation.

          In business, I tell people that cyclic recessions can be a good thing because it’s like breathing. Recessions breathe out the bad air, helping to clean out the dead wood in organizations. We are limpingly recovering from a huge worldwide economic depression that started in 2007 with the fraudulent loan scandal spearheaded by Goldman Sachs. It makes great sense for this to be the time of breathing OUT the twisted clowns of our Corporate Oligarchy as well as ALL their political puppets. – It could happen! 😀

        2. @hannahjs
          enjoying your reverie? sadly, the life span of a daydream is momentary. we both know the true, and only, solution is to eliminate the mob – and i don’t mean the sopranos.

  3. China still needs handling with kid gloves. Apple’s growth is all going to come from china in the next five years so they can’t piss them off too much. The more production goes to the US the more push back you’ll see from China markets. Government has a hand in everything including China Mobile. Definitely a balancing act.

  4. The only way to stop wall street from screwing you is to be vertically integrated. WS hates aplle and are probably the folks goiading samdung to try and screw apple.

    Delta (the airlines) is an example. They bought a refinery. They need to go one further. They need to buy a producer of oil. Maybe make a deal with some folks in north Dakota. Oil to supply the refinery in exchange for shares. That will really screw-up the shysters of WS.

    Apple should do the same. Solar panels, if they truly last 25 years, is a good start (if not buy a gas producer), be self sufficient energy wise. Having their own fabs, is great too. They should probably buy into sandisk, but in a different partnership model. They get a percentage of the production.

    Anything to prevent WS from playing games.

    1. It’s a great idea in concept but where does it stop? Do they buy their own farms and make their own tractors? Do they form their own construction company and build their own buildings?

      Your point has Merritt, but finding the line is all about balance. Civilization is an ecosystem all of its own that is constantly evolving new organisms like Apple and dinosaurs like Microsoft. They have to adapt to the ever changing environment carefully or perish.

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