Report: GlobalFoundries and UMC Considering Merger
According to Nikkei Asia, U.S.-based semiconductor foundry GlobalFoundries and Taiwan's second-largest chip manufacturer, United Microelectronics Corporation (UMC), are reportedly exploring a potential merger. Sources reveal that Tim Breen, appointed as GlobalFoundries' new CEO in February and set to assume the role in April, is open to considering various strategic options, including collaboration with UMC.
The report highlights that it remains uncertain whether the merger will materialize, and acquiring UMC could present significant challenges for GlobalFoundries. While GlobalFoundries has a market value of approximately $20 billion, UMC's market value is estimated at around $17 billion. Both companies operate in capital-intensive, cyclical industries, and GlobalFoundries lacks the necessary cash reserves to fund a direct acquisition, likely requiring substantial borrowing or stock dilution to proceed.
Beyond the complexity of merging operations and determining control over the business, geopolitical factors are expected to complicate the potential deal. Analysts Charles Shum and Steven Tseng noted in a report that regulatory approval from Chinese authorities could pose a “significant hurdle,” emphasizing that Taiwan's government may also be reluctant to approve a transaction that places both companies under GlobalFoundries' control—considered the most likely structural approach.
An evaluation plan reviewed by Nikkei Asia suggests that a merger between GlobalFoundries and UMC would establish a larger U.S.-based entity with a production network spanning Asia, the United States, and Europe. The proposed merger aims to create a company capable of achieving economic scale, ensuring a stable supply of mature process chips even as U.S.-Taiwan relations face strain and China's domestic chip production continues to expand.
Wolfe Research analyst Chris Caso stated in a report that a merger would allow GlobalFoundries to “achieve greater scale, while UMC could diversify its manufacturing capabilities beyond Taiwan and mainland China.” Caso added that consolidation in the mature-node manufacturing sector would strengthen companies' ability to withstand mounting competition from Chinese manufacturers and enhance their standing with clients.
