US chip giant GlobalFoundries confirms it has ceased operations at its only Chinese facility, with industry experts saying the poorly-planned project was doomed to fail. Closure deals blow to China’s plans to move up semiconductor value chain, amid increasingly hostile tech rivalry with the United States. Beijing boasted that the final total investment in the GlobalFoundries plant could be US$10 billion. The plant was intended to produce 300mm wafers, a key material in making chips, but production never started at the 65,000 square metre facility, which was completed mid-2018

US chip giant GlobalFoundries has halted operations at a joint venture factory in China, the company has confirmed, dealing a potential blow to China’s bid to own a bigger slice of the global semiconductor market.

The closure of the firm’s only China facility comes just three years after it announced plans to make chips in the mainland, and comes amid an escalating tech war with the United States.

The winding down, however, has little to do with the fierce superpower rivalry. It comes after two years of speculation as to what was actually happening at the US$100 million facility, which was hailed as “a miracle” by local media when announced to fanfare in 2017, but which never got off the ground.

Nonetheless, the symbolism is rich.

China is struggling in its efforts to boost its domestic chip research and production in a bid to counter US efforts to block it from American technology.

Last week, the US Department of Commerce upped the ante by banning the sale of Huawei-designed chips produced outside America if they are made using the US software and technology, adding further pressure to the Chinese telecom giant’s global supply chain.

The GlobalFoundries factory, in a hi-tech park in city of Chengdu, was one of China’s major foreign-invested semiconductor projects, for which the local government rolled out the red carpet three years ago.

At the time, Chengdu boasted that the final total investment in the plant could be US$10 billion. The plant was intended to produce 300 mm wafers, a key material in making chips, but production never started at the 65,000 square metre facility, which was completed mid-2018.

A spokesperson for California-based GlobalFoundries confirmed that the Chengdu plant had stopped operations and that it had offered staff an “employee optimisation plan”, a commonly-used euphemism for lay-offs.

“The plan is being carried out on the basis of open and transparent communications with the employees and they have been offered various options to choose from based on their personal situations,” a company statement read.

A 2018 annual report from the joint venture, in which GlobalFoundries had a stake of 51 per cent with the rest controlled by an investment vehicle of the Chengdu government, showed that the plant had 320 employees.

A company notice sent to employees dated May 14 and seen by the Post said that after mid-June, the company would only pay 70 per cent of Chengdu’s minimum monthly wage, about 1,246 yuan (US$175.38), while negotiating severance packages with staff.


For some industry analysts who have followed the Chengdu project from its inception, its demise has less to do with the more to do with poor planning.

There was little detailed research and planning before the project was launched. As far as the Chengdu government is concerned, it lacks a sufficient understanding of GlobalFoundries.

“There was little detailed research and planning before the project was launched. As far as the Chengdu government is concerned, it lacks a sufficient understanding of GlobalFoundries, its decision-making mechanism and economic strengths, and it did not get strong support from the central government,” said Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICwise.

The idea of establishing a joint venture was first pitched to, a neighbouring city of Chengdu, in 2016. Chongqing signed a memorandum of understanding with GlobalFoundries to set up a plant to manufacture 300mm silicon wafers – components for making integrated circuits – using technology from GlobalFoundries’ Singapore factory.

After the deal to open a Chongqing plant fell through for unclear reasons, Chengdu moved in to cut a deal with GlobalFoundries in late-2016. A 2017 blueprint stated that 3,500 employees could be working at the site, according to Wallace Pai, then GlobalFoundries’ general manager for China.

But production never started. Initially the project was supposed to have two phases: using mainstream technologies to manufacture 300mm wafers from 2018, then transferring to more advanced technologies in late-2019.

However, in October 2018, the two partners decided to “bypass” the phase one manufacturing stage, partly because of China’s increasing demand for more advanced products and GlobalFoundries’ own financial stress. The project has since stalled.

Comparing official announcements from the Chengdu government and GlobalFroundries back in 2017, Gu from ICwise said the two had different focuses, which might explain the plant’s derailment. The government clearly wanted to bring in mainstream, lower-risk technologies to boost the city’s brand, while the company aimed for Chinese capital and government support to invest in more advanced technology, Gu said.

The joint venture will continue after the factory’s demise, with GlobalFoundries still expecting to expand sales in the Chinese market, the company said in its statement. It now has five factories, three in the US and one each in Singapore and Germany.

When The Post contacted the office of the joint venture partner within the Chengdu government, the person answering the phone said they did not know anything about the closure nor future plans, before hanging up without giving their name.

“Our focus in China is on developing and growing our partner ecosystem including creating local technology infrastructure and bringing more intellectual property vendors and electronic design automation partners to better serve the local market,” the company said.

According to the China Semiconductor Industry Association, China’s integrated circuits sales rose 15.8 per cent in 2019 from a year earlier to 756.2 billion yuan (US$106.44 billion), while sales in the global semiconductor market dropped by 12 per cent to US$412 billion.

Last week, Dutch company ASML Holding, a key supplier of chip-making equipment, planned to expand its customer service base in Wuxi, in Jiangsu province, according to a local government report. ASML said the move was to meet increasing demand in the Chinese market.

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