Chip giant Intel's $30 billion play for GlobalFoundries, potentially its largest-ever deal, shows the tectonic plates of the global semiconductor industry are shifting.
The talks are at an early stage, but the push towards becoming a chip manufacturer for third-party customers was foreshadowed by new CEO Pat Gelsinger earlier this year, the Wall Street Journal reports.
It's a major shift for Intel, which has traditionally made semiconductors only for its own use.
It is also yet another marker in the realignment of the semiconductor sector under the twin impacts of COVID-19 and US-China hi-tech rivalry, with chip shortages across the world economy and disruption of legacy supply chains.
As a result the chip manufacturing sector, also known as the foundry or fab business, is booming.
The world's biggest manufacturer, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), reported record quarterly revenue of $13.3 billion, up 28%, on Thursday. It's predicting around 23% growth in the third quarter.
On an earnings call this week executives said they expected the shortage of auto chips to gradually ease this quarter, but tightness in global production capacity would probably continue into next year, Reuters reported.
TSMC has said it will invest $100 billion in new facilities over the coming three years.
However, with rising military tensions across the Taiwan Strait, it is under pressure from Washington to diversify production away from Taiwan, where its advanced manufacturing sites are located, and mainland China.
It has begun work on a $12 billion fab in Arizona, due to start production in 2024, and has confirmed it is considering the construction of a smaller "specialty fab" in Japan.
It is also expanding capacity at its existing Nanjing plant for lower-end production.
Intel's acquisition target GlobalFoundries was spun out of Intel rival AMD in 2008. Although US-based, it is owned by Abu Dhabi sovereign wealth fund Mubadala Investment Co.
It is also expanding to take advantage of soaring demand, with work about to begin on a new $4 billion fab in Singapore.
The company had a 5% share of the global foundry market in Q1, according to research firm TrendForce.
Huawei, which has been denied access to TSMC's world-leading capabilities by US sanctions, is moving into the manufacturing sector, plans to build a $279 million wafer fab in Wuhan.
— Robert Clark, contributing editor, special to Light Reading