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GlobalFoundries Plans $4.4 Billion Spending as Chip Demand Rises

GlobalFoundries Inc., the contract chip manufacturer whose clients include Advanced Micro Devices Inc. and Qualcomm Inc., plans to spend $4.4 billion this year to expand production as demand for smartphones and tablets climbs.

“We continue to expand in all three of our manufacturing locations -- Germany, Singapore and the U.S.,” Kevin Kimball, a spokesman at the Silicon Valley-based chipmaker, said by e-mail on April 15. The spending compares with $3.8 billion last year and will be met by internally generated cash and funding from Abu Dhabi-based parent, Mubadala Development Co., he said.

Sales of semiconductor wafers at GlobalFoundries helped Mubadala, the state-owned company with investments in General Electric Co. and Carlyle Group, to return to profit last year. Microsoft Corp. will use a processor of AMD, one of GlobalFoundries’ biggest clients according to a Bloomberg supply-chain analysis, in its next Xbox game console, people with knowledge of the matter said last week.

GlobalFoundries is one of the few chip manufacturers able to spend billions of dollars to build factories that can churn out the processors and communications chips needed to run the newest handsets, Chief Executive Officer Ajit Manocha said in October. The company was formed in 2009 when an investment arm of the Abu Dhabi government bought AMD’s manufacturing units and merged them with Singapore’s Chartered Semiconductor Ltd.

Revenue Boost

“GlobalFoundries is expected to be the largest revenue contributor to Mubadala in coming years,” Amol Shitole, a credit analyst with SJS Markets Ltd. in Bangalore, India, said in an e-mail on April 15. Capacity expansion in wafer manufacturing business and a strong customer base are “likely to result in higher revenues from this segment,” he said.

Semiconductors contributed 47 percent to Mubadala’s revenue in 2012 compared with 42 percent a year earlier, according to the company’s financial statement. Sales of semiconductor wafers, used in the fabrication of integrated circuits and other microdevices, rose 26 percent to $4 billion.

GlobalFoundries competes with Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. in the market for contract manufacturing. They allow companies such as Qualcomm to farm out their chip production, helping customers focus on design and marketing.

Intel Corp., the world’s largest semiconductor maker, on April 16 said strong demand for server chips helps make up for a slump in the personal-computer market. While a consumer shift to smartphones and tablets from personal computers contributed to Intel’s third straight decline in quarterly revenue, its server-chip sales have benefited from the increased Internet traffic these mobile devices bring.

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