Globalfoundries expands chip factories as worldwide demand recovers

Globalfoundries, a major contract chip manufacturer, said today it is increasing its chip factory capacity in Germany and New York as worldwide customer demand recovers. The new expansions could mean hundreds of millions, if not billions, of dollars more spending, depending on the scale of the investments.

The spending is a reflection of confidence in the overall tech economy, since chips are used in everything electronic and are a bellwether for technology spending. The chip industry is expected to grow 30.6 percent in 2010 to $300.3 billion, up from $229.9 billion in 2009, thanks to a robust recovery, according to market researcher iSuppli.

Globalfoundries, which spun out from Advanced Micro Devices in 2009 with funding from the government of Abu Dhabi, makes chips for AMD as well as other chip design companies. It is creating a series of new projects for its 300-millimeter chip factories to “support expected increases in both near-term and long-term customer demand.” Overall, Globalfoundries — which combined operations with Chartered Semiconductor in January — had $2.75 billion in annual revenue in 2009.

The new investment includes the construction of an additional factory at its Fab 1 site in Dresden, Germany, to add equipment that can make 45-nanometer, 40-nanometer and 28-nanometer chips and increase overall output to 80,000 wafers per month. (A wafer is a basic unit that is processed in a chip factory; once it is finished, it is sliced into individual chips). Fab 1 is already the largest chip factory in Europe, and its new expansion means its manufacturing site will cover eight soccer fields. Output is expected to be ready in 2011, and work is starting immediately. The expansion is still contingent on approval of subsidies from the German government.

Globalfoundries is also expanding the factory under construction at its Fab 8 site in New York to increase capacity for 28-nanometer, 22-nanometer, and 20-nanometer chips and bring overall site output to 60,000 wafers per month. The investments will create hundreds of new jobs in both locations.

Meanwhile, the Advanced Technology Investment Company, which is controlled by Abu Dhabi and is the entity that owns the stake in Globalfoundries, plans to create an advanced technology cluster in Abu Dhabi. The site is next to the Abu Dhabi International Airport and is expected to house advanced technology companies.

“For ATIC, [Globalfoundries] represented the first step in Abu Dhabi’s vision to become a leader in the semiconductor industry,” said Ibrahim Ajami, chief executive of ATIC. “Today we announce the next phase as we take our first steps in establishing a world-class advanced technology cluster over the coming years.”

Globalfoundries’ biggest rival is Taiwan Semiconductor Manufacturing Co., which has more than $10 billion in annual revenue.