NEW YORK, July 16 (Reuters Breakingviews) - Intel (INTC.O) may buy chip manufacturer GlobalFoundries for $30 billion, says a Wall Street Journal repor

Intel might spend $30 bln to slim down

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2021-07-16 21:00:14

NEW YORK, July 16 (Reuters Breakingviews) - Intel (INTC.O) may buy chip manufacturer GlobalFoundries for $30 billion, says a Wall Street Journal report. That seems logical in light of Intel’s production problems, and a global semiconductor shortage. But it might make most sense if any acquisition were followed by a bigger Intel divestment.

Chipmaking is expensive and difficult, so most companies either design or produce. GlobalFoundries does the latter but Intel does both, and boss Pat Gelsinger has opened up its factories to rival semiconductor designers to spread costs . GlobalFoundries would bring customers and technology – though the company, owned by Abu Dhabi sovereign fund Mubadala Investment, isn’t in talks, according to the Journal.

The risk is that GlobalFoundries customers might not like seeing Intel inside. Besides, investors like specialization. Intel is valued at 3 times trailing revenue. Specialized rivals Advanced Micro Devices (AMD.O) and Taiwan Semiconductor Manufacturing (2330.TW) are valued at 8 and 11 times.