GM inks agreement with GlobalFoundries to secure chips made in the U.S

GM inks agreement with GlobalFoundries to secure chips made in the U.S

By Jane Lanhee Lee and Joseph White

OAKLAND, Calif/DETROIT (Reuters) – General Motors Co and chipmaker GlobalFoundries Inc on Thursday announced a long-term deal for the automaker to secure U.S.-made processors that will enable it to avoid the factory-halting chip shortages that kept millions of cars from being manufactured during the pandemic.

GlobalFoundries said the agreement was the first of its kind and establishes a dedicated capacity exclusively for GMs key chip suppliers at their upstate New York fabrication facility.

The announcement comes two days after President Joe Biden in his State of the Union address praised the passing of the $52 billion Chips and Science Act that aims to bring back chip manufacturing to the United States. GlobalFoundries Chief Executive Tom Caulfield told Reuters he believes supporting U.S. manufacturing makes the company competitive when seeking some of that funding.

“This is the automaker going right to the manufacturing foundry, reserving the capacity for their needs. Making the appropriate co-investments with that foundry so that the best economics take place,” Caufield said.

GM said the chip supply deal was “yet another tangible proof point of how GM is separating itself from our competition.”

GM rival Ford Motor Co said last week that its inability to acquire chips and other supply chain problems contributed to a $2 billion shortfall in fourth-quarter profit compared to the companys forecasts.

Ford Chief Financial Officer John Lawler, who is also interim head of the automakers supply chain operations, told analysts that securing adequate supplies of chips “continues to be hand-to-hand combat.”

Ford is putting “corrective actions in place,” Lawler said. “We‘ve got better pipelines from brokers and spot buys. And we’re working very closely with our supply chain down to the Tier 2 chip suppliers.”

In late 2021, during the height of the chip shortage, GlobalFoundries and Ford announced a non-binding agreement that could involve increasing production capacity for Ford.

Few details of that arrangement were provided at the time and few have been released since. Caulfield said GlobalFoundries is talking to almost all the major global automakers, and that the GM agreement does not mean there wont be additional deals with other manufacturers.

By the end of 2023, almost 18 million vehicles will have been removed from production plans since the chip shortage began, according to Auto Forecast Solutions.

The auto chip shortage dramatically changed the way carmakers deal with their chip suppliers, with whom they previously rarely had direct contact.

Several auto companies have now created teams and divisions to better secure chip supply and think about the design of digital platforms for cars going forward.

Chip manufacturers told Reuters last year, it was time for the auto industry to carry some of the burden of the investment for the multibillion-dollar facilities needed for producing chips.