MALTA, N.Y. - GlobalFoundries (NASDAQ: NASDAQ:GFS), a leading semiconductor manufacturer, announced it has been granted up to $1.5 billion in funding through the CHIPS and Science Act by the U.S. Department of Commerce. This financial support is earmarked for the expansion of its New York facilities and the modernization of its Vermont plant. In addition to the federal funding, New York State has committed an additional $550 million to the initiative.
The investment aims to bolster U.S. chip manufacturing capabilities, a move underscored by the bipartisan CHIPS and Science Act. Dr. Thomas Caulfield, CEO of GlobalFoundries, emphasized the importance of secure and reliable chip supply for critical industries such as automotive, smart devices, and defense, stating that the funding will help meet the demand for American-made semiconductors.
GlobalFoundries plans to utilize the awarded funds for three major projects. Firstly, the expansion of its Malta, New York facility will incorporate technologies from its Singapore and Germany sites to support the U.S. automotive industry. Secondly, the Vermont fab will undergo upgrades to increase its production capacity, particularly for next-generation gallium nitride semiconductors. Lastly, a new state-of-the-art fab is slated for construction in Malta, New York, to cater to a variety of markets, including automotive and AI.
These projects represent more than a $13 billion investment over the next decade at the two U.S. sites, with the aim of tripling the Malta campus's capacity. The expansion is expected to create approximately 1,000 direct manufacturing jobs and over 9,000 construction jobs.
GlobalFoundries also plans to continue investing in workforce development in New York and Vermont, fostering a pipeline of semiconductor talent through education and training programs.
The company's commitment to sustainability will be reflected in the design and construction of its expanded facilities.
This news is based on a press release statement from GlobalFoundries.
In other recent news, semiconductor manufacturer GlobalFoundries Inc. reported mixed third quarter results for fiscal year 2024, registering a 7% increase in revenue from the previous quarter to $1.739 billion, but a 6% decline year-over-year. The non-IFRS gross margin stood at 24.7%, and diluted earnings per share were reported at $0.41, both exceeding the company's guidance. Despite the year-over-year decline, GlobalFoundries anticipates growth in the fourth quarter and aims for significant growth in free cash flow for the full year.
In other developments, GlobalFoundries is nearing the finalization of its award from the Chips and Science Act, with the U.S. Commerce Department informing Congress that the company, along with two other semiconductor manufacturers, are close to receiving their final awards. This follows a preliminary agreement in February to allocate $1.5 billion to GlobalFoundries for the construction of a new semiconductor production facility in Malta, New York, and to expand existing operations in Malta and Burlington (NYSE:BURL), Vermont.
UBS recently initiated coverage of GlobalFoundries with a Neutral rating, citing concerns about potential oversupply in the markets for mature node technologies and projecting this trend to continue through 2026. The firm also anticipates that GlobalFoundries will exhibit lower growth and gross margins compared to other companies in the sector, contributing to projections for the company's financial results in 2025 and 2026 that are below the broader market consensus. Despite these concerns, UBS acknowledges the company's strong positioning and diverse technology offerings.
InvestingPro Insights
GlobalFoundries' recent $1.5 billion funding grant through the CHIPS and Science Act aligns with several key insights from InvestingPro. As a prominent player in the Semiconductors & Semiconductor Equipment industry, the company is well-positioned to leverage this significant investment for growth and innovation.
According to InvestingPro data, GlobalFoundries currently has a market capitalization of $23.42 billion, reflecting its substantial presence in the semiconductor market. The company's price-to-book ratio of 2.03 suggests that investors are willing to pay a premium for its assets, which could be further enhanced by the planned expansions and upgrades.
An InvestingPro Tip indicates that 14 analysts have revised their earnings upwards for the upcoming period, potentially factoring in the positive impact of this government funding and expansion plans. This optimism is balanced by another InvestingPro Tip noting that analysts anticipate a sales decline in the current year, which the new investments may help to mitigate in the longer term.
The company's financial health appears stable, with InvestingPro data showing that liquid assets exceed short-term obligations, and the company operates with a moderate level of debt. This financial stability could provide a solid foundation for the ambitious $13 billion investment plan over the next decade.
It's worth noting that InvestingPro offers 5 additional tips for GlobalFoundries, providing investors with a more comprehensive analysis of the company's prospects. These insights can be particularly valuable in assessing the potential impact of the CHIPS Act funding on GlobalFoundries' future performance.
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