Why Did GlobalFoundries Stop All Its 7 nm Development?

GlobalFoundries, a leading semiconductor foundry, announced in late 2018 its decision to discontinue all 7 nm process technology development. This strategic shift was driven by a combination of high development costs, evolving market demands, competitive pressures, and a focus on strengthening strategic partnerships.

High Development Costs

The development of advanced nodes like 7 nm requires substantial investment in research and development (RD) as well as manufacturing infrastructure. GlobalFoundries recognized that continuing down this path would not be financially viable. The costs associated with each new node increase significantly, with each subsequent node costing around 50-70% more than the previous one.

Market Demand

The company’s market analysis revealed a growing preference for specialized chips over the most advanced nodes. This trend was particularly pronounced in sectors such as the automotive and IoT industries, where the demand for the latest cutting-edge technologies was not as pronounced. Recognizing this shift, GlobalFoundries decided to pivot towards more mature technologies that better align with its customer’s needs and resources.

Competitive Landscape

GlobalFoundries faced intense competition from giants like TSMC and Samsung, both of which were heavily invested in leading-edge technologies. To differentiate themselves in the market, the company needed to focus on areas where they had a competitive edge, such as more mature nodes that cater to specific customer demands.

Strategic Partnerships

GlobalFoundries has been working on strengthening partnerships with companies that require specific technologies rather than competing head-to-head with advanced node manufacturers. This shift in focus allowed the company to offer specialized solutions that traditional advanced node players could not provide.

The Future Strategy

As a result of these strategic decisions, GlobalFoundries shifted its focus to 12 nm and larger nodes. These nodes promise greater returns and better alignment with the needs of the market. The company is now concentrating on developing these nodes, which are more suited to the specialized chip demands of its customers.

Lack of Knowledge and Financial Constraints

Developing at 7 nm without prior expertise in 10 nm and 14 nm is nearly impossible. Even with data from other companies, the knowledge and experience required for such a transition are considerable. From a financial perspective, the costs of a new fab, estimated at $10 billion or more, make the investment in 7 nm technology financially risky for GlobalFoundries.

The decision to shift focus away from 7 nm technology was a tough one for the company, but it provides a clearer path forward. The future strategy involves leveraging existing strengths in more mature nodes, improving cost-effectiveness, and potentially forming strategic alliances with companies that require specific technological solutions.

Going forward, GlobalFoundries will need to invest further in its infrastructure and find ways to compete effectively in the lower density node market. They may need to collaborate with foundries like TSMC, which focus on higher density nodes, to ensure a cost-effective and profitable business model at 10 nm and above. This approach will be essential for GlobalFoundries to prevent themselves from being consistently outpaced by competitors like TSMC.