According to a filing with the U.S. Securities and Exchange Commission, Chipmaker GlobalFoundries is marketing 33 million shares while Abu Dhabi’s Mubadala Investment Co., its major shareholder, plans to sell 22 million shares.
Mubadala currently owns 100% of the company and “continue to have substantial control after this offering.”
GlobalFoundries plans to list on the Nasdaq under the symbol GFS. It plans to raise as much as $2.6 billion in a U.S. initial public offering. At the top of that range,it would have a market value of $25 billionbased on the outstanding shares listed in its filing.
The offering is being led by Morgan Stanley, Bank of America, JPMorgan Chase, Citigroup and Credit Suisse.
Business Overview
$GlobalFoundries(GFS.US)$is one of the world’s leading semiconductor foundries. The company was created by purchasing the manufacturing operations of Advanced Micro Devices Inc. in 2009 and later combining it with Singapore’s Chartered Semiconductor.
According to Gartner,in 2020, the company was the third largest foundry in the world based on external sales.
GlobalFoundries previously gave up on the kind of leading-edge production that would match the capabilities of Taiwan Semiconductor or Samsung.Instead,it's serving the market for less advanced chips, which are increasingly critical to carmakers and other industries.
GlobalFoundries has over50ecosystem partners spanning IP, electronic design automation, outsourced assembly and test and design services. Building on an existing library of more than4,000IP titles, it currently has more than950IP titles in active development across26process nodes and34IP partners.
The company has built deep strategic partnerships witha broad base of more than 200 customers as of December 31, 2020, many of whom are the global leaders in their field.
In the first six months of 2021, the top ten customers, based on wafer shipment volume, included Qualcomm, MediaTek, NXP Semiconductors, Qorvo, Cirrus Logic, Advanced Micro Devices (“AMD”), Skyworks Solutions, Murata Manufacturing, Samsung Electronics and Broadcom.
The company attracted a large share of single-sourced products and long-term supply agreements. As of the date of the company's prospectus,the aggregate lifetime revenue commitment reflected by these agreements amounted to more than $19.5 billion.
A key measure of GlobalFoundries's position as a strategic partner to the customers is the mix of wafer shipment volume attributable to single-sourced business (Single-sourced products are defined as those that can only be manufactured with GlobalFoundries's technology and cannot be manufactured elsewhere without significant customer redesigns).It represented approximately61% of wafer shipment volume in 2020, up from 47% in 2018.
Financial Performance
Revenue at GlobalFoundries dropped last year by 17% to $4.85 billion. GlobalFoundries said the reason is that it divested a business that brought in $391 million in 2019, and more broadly the company shifted contractual terms with most of its customers, changing how and when it recognizes revenue.
In the first half of 2021, revenue climbed by 13% from a year earlier to just over $3 billion.
Click to view the prospectus

$GlobalFoundries(GFS.US)$ definitely good value buy, it spin off from $Advanced Micro Devices(AMD.US)$

$GlobalFoundries(GFS.US)$ Historically, the semiconductor industry has been plagued by cyclicality but as the industry has become more concentrated, the cyclicality has become moderate, with $Taiwan Semiconductor(TSM.US)$ being the biggest winners of this period of concentration. The reason we have a chip shortage is because the technical challenges and costs of creating advanced chips are so large that there are effectively barriers to entry that prevent the emergence of a serious rival to the top chipmakers. A concentrated industry means that businesses can defy asset growth effects and expand production without harming future returns.
The smoothing out of the industry's cyclicality is also a function of the demand for chips. Chips are everywhere. The shift to cloud, the emergence of the Internet of Things (IoT), the rise of 5G, the increasing importance of artificial intelligence (AI) and next-generation auto chips are, to quote the company's F-1 registration form, "driving a new golden age of semiconductors". This market will be worth $1 trillion by the end of the decade, double its present valuation.
GlobalFoundries believes that as of 2020, it has an estimated serviceable addressable market (SAM) of around $54 billion, based on data from Gartner.
Semiconductors have often suffered from the ill effects of the asset growth effect. The asset growth effect is an observable phenomenon in which low asset-growth stocks outperform high asset-growth stocks. In other words, as investment increases, future returns decline. This is because industries in which businesses are expanding are doing so because the returns are attractive. That attracts other businesses and eventually, supply is in excess of demand, and prices collapse until supply and demand are in equilibrium. With concentration and rising demand, cyclicality is much more moderated and the landscape supports high valuations.

$GlobalFoundries(GFS.US)$GlobalFoundries faces many of the same challenges that a market entrant would face. $Taiwan Semiconductor(TSM.US)$has a massive lead on the rest of the competition. A customer who wants the best chips in the world pretty much has to buy from TSMC. Samsung has remained competitive, but it has faced challenges with its 10 nanometer (nm) and 8nm chips, which led to many of its customers ditching it for TSMC. TSMC is not a monopoly, but any discussion of the chip industry and winners and losers has to factor in the bare fact that TSMC is the best and largest chipmaker in the world. China has tried to throw money at the problem with the $SMIC(00981.HK)$, but sanctions and technical challenges mean that even with money, SMIC struggles.
The biggest threat to TSMC is not another chipmaker, but the possibility of a Chinese invasion of Taiwan and a nationalization of the company and redirection of its supply to mainland China.
If we factor in that many of the chips Samsung makes are for its own devices, GlobalFoundries is the world's second largest chipmaker in the world. Like TSMC, Samsung also uses the 7nm process. GlobalFoundries is still stuck in the 14nm era and struggled with a shift to 10nm. The company has said that it will jump straight from 14nm to 7nm. Meanwhile, TSMC is shifting to 5nm.
$Intel(INTC.US)$and GlobalFoundries are highly reliant on potential federal government aid to help them get past TSMC. There is no scope for startups. On their own, these two US chipmakers are too far behind TSMC to be a credible threat. That means they will struggle to steal market share, unless non-product issues such as Sino-American competition and concerns over a potential Chinese invasion scare away customers. TSMC has been intelligent in this regard and is investing $12 billion in its Arizona 5nm plant.

$GlobalFoundries(GFS.US)$The inevitable conclusion that any insightful reader will have made by this point is that GlobalFoundries must struggle for profitability. This is reflected in its results.
In 2020, the company earned revenues of $4.85 billion, down from $5.81 billion in 2019, making a loss of $1.35 billion, against a loss of $1.37 billion in 2019. Revenue in 2018 was $6.2 billion, with a loss of $2.77 billion.
The company is unprofitable, although, amidst the global chip shortage, its losses have narrowed. In the first half of the year, it earned revenues of $3.04 billion and a loss of $301.2 million compared to revenue of $2.7 billion and a loss of $533.6 million for the same period last year.
Declining growth, as we can see, predates the pandemic and hints at the technical challenges that the company like many of $Taiwan Semiconductor(TSM.US)$competitors face: TSMC has the best product-market fit in the industry by far. Until it can meet that challenge, GlobalFoundries is unlikely to grow or turn a profit.

$GlobalFoundries(GFS.US)$ It'd take them a long time to get a new line with smaller node running. They'd have to get in line for UV machines from ASML, then dust off and master the new tech they dropped, AND get customers, and have a good road map with guaranteed investments... If they move that way, it will be a long slow grind.