GM signs deal with GlobalFoundries to secure US-made chips By Reuters

By Jane Lanhee Lee, Joseph White, and Stephen Nellis

OAKLAND, Calif./DETROIT (Reuters) – General Motors Co and chipmaker GlobalFoundries Inc announced on Thursday a long-term deal for the automaker to source US-made processors if manufactured during the pandemic.

GlobalFoundries said the agreement of at least three years was the first of its kind and establishes exclusive capacity for GM’s major chip suppliers at its upstate New York manufacturing facility.

The announcement comes two days after President Joe Biden in his State of the Union address hailed passage of the $52 billion Science and Chips Act that aims to bring chip manufacturing back to the US. United States and points to a new approach by automakers to secure semiconductors.

It also highlights a new way for chipmakers to finance expansion in the US, using a mix of financing from customers who want dedicated capacity for semiconductors and financing from the federal government.

GlobalFoundries Chief Executive Tom Caulfield told Reuters he believes supporting American manufacturing makes the company competitive when seeking some of that funding.

“This is the automaker going directly to the manufacturing foundry, reserving the capacity for their needs, making the appropriate co-investments with that foundry so that the best economics occur,” Caulfield said.

Caulfield said GM’s capacity would be installed in an existing factory in upstate New York, but declined to give details about how much of the factory’s output would go to the automaker.

GM told Reuters it is working to optimize the number of unique types of chips in its cars. But it is securing the ability for its suppliers to make the chips because the total number of chips is expected to increase.

“We see our semiconductor requirements more than doubling in the coming years as vehicles become technology platforms,” ​​Doug Parks, GM’s head of global product development, said in a statement.

‘HAND TO HAND COMBAT’

GM rival Ford Motor (NYSE:) Co said last week that its inability to acquire chips and other supply chain problems contributed to a $2 billion shortfall in fourth-quarter profit compared with company forecasts.

Ford’s chief financial officer, John Lawler, who is also acting head of the automaker’s supply chain operations, told analysts that securing an adequate supply of chips “remains a melee.”

Ford is taking “corrective actions,” Lawler said. “We have better broker projects and cash purchases. And we’re working very closely with our supply chain all the way down to Tier 2 chip suppliers.”

In late 2021, during the height of the chip shortage, GlobalFoundries and Ford announced a non-binding agreement that could see an increase in Ford’s production capacity.

Few details of Ford’s fix were provided at the time, and few have been published since.

Caulfield said GlobalFoundries is talking to almost every major automaker in the world and that GM’s deal doesn’t mean there won’t be additional deals with other automakers.

By the end of 2023, nearly 18 million vehicles will have been taken off production plans since the chip shortage began, according to Auto Forecast Solutions.

The shortage of automotive chips has dramatically changed the way automakers deal with their chip suppliers, with whom they rarely had direct contact before.

Several auto companies have now created teams and divisions to better secure chip supply and think about the design of digital car platforms in the future.

Chipmakers told Reuters last year it was time for the auto industry to shoulder some of the burden of investing in the multibillion-dollar facilities needed to produce chips.