In recent years, much attention has been on whether Intel can close the gap in cutting-edge chip technologies and become a true rival to TSMC. Samsung on the other hand already competes, the company is also facing mounting challenges, however. But a new challenger may be emerging for the Taiwanese king of silicon lithography: according to reports, GlobalFoundries and UMC may be exploring a merger to create a stronger competitor.
These rumors surfaced via Nikkei Asia, which claims that the deal would not be an acquisition of one company by the other but a merger. And it appears this isn’t mere speculation from one party – Nikkei reports that both companies are actively evaluating the pros and cons of the proposed union. While it might seem like an April Fool’s prank given the date the report arrived at (March 31) or one of the many unsubstantiated rumors that often come up, the details suggest this is a genuine negotiation.
Nikkei states it has obtained a document analyzing the plan, likely prepared for internal use by one of the involved parties (most likely GlobalFoundries). This plan, reportedly codenamed “Project Ultron,” aims to create a foundry that could command up to 28% of the global chip manufacturing market.
UMC has officially denied that any talks are taking place. However, such denials are common in the early stages of negotiations, especially when parties are cautious about creating false expectations should the deal fall through.
Both Samsung and Intel are expectedly keen to position themselves as larger rivals to TSMC, but their strategies hinge on the most advanced semiconductor processes. That’s not the case with GlobalFoundries and UMC – these companies specialize in so-called “mature” nodes such as 28nm, 20nm, and 12nm, which are used in more affordable products or applications that don’t benefit from the most advanced nodes (e.g., analog and RF circuits).
Even if the merger goes through, this core business model likely won’t change (though GlobalFoundries could in theory try to revive its earlier ambitions for a 7nm EUV process). “Ultron” would still focus on older, cost-efficient manufacturing processes. Interestingly, UMC is currently co-developing such a process with Intel. A merger with GlobalFoundries could throw a wrench into that collaboration.
UMC is a Taiwan-based company with a history in foundry business that is comparable in length to TSMC’s. In 2021, it was the third-largest foundry in the world behind TSMC and Samsung. GlobalFoundries, which originated from AMD’s manufacturing spin-off and has head quarters in the U.S. (though it’s owned by Abu Dhabi’s Mubadala fund), was the fourth-largest. At the time, UMC and GlobalFoundries held 7.9% and 6.9% of the market, respectively, compared to Samsung’s 8.7% and TSMC’s dominant 59.5%. Last year, both UMC and GlobalFoundries retained around 6% market share, but they’re being closely trailed by China’s SMIC at 5%.
China factor could complicate things
Later this month, GlobalFoundries will welcome a new CEO, Tim Breen (appointed in February), and this merger could represent a strategic move under his leadership. The market for mature and budget-friendly chip technologies is increasingly dominated by aggressive Chinese competitors, putting pressure on both GlobalFoundries and UMC. A merger could be a defensive measure to reinforce their market position..
However, even if both companies agree to merge, the plan could be derailed by antitrust regulators. While it might clear review in the U.S. and Taiwan, China poses a significant risk. The Chinese government has recently used merger approvals (or the lack thereof) as leverage in its trade disputes with the U.S., blocking deals like NXP–Qualcomm and Intel–Tower Semiconductor. Moreover, Beijing likely prefers to give its own domestic players a competitive edge over GlobalFoundries and UMC to strengthening these foreign companies. This political element could be the single biggest obstacle to “Project Ultron.”
SMIC watching from the sidelines…
There is also a potential dark horse in the race to compete with TSMC: China’s SMIC. Once a minor player, trailing behind UMC and GlobalFoundries, SMIC enjoys robust state backing. That support is part of China’s broader push for self-reliance in the semiconductor sector and its ambition to challenge Western, Korean, and Taiwanese dominance.
SMIC has been growing rapidly, buoyed by increased demand in China due to both government preference and U.S. sanctions on foreign tech. Even before that, it was the only company aside from TSMC, Samsung, and Intel that still pursued cutting-edge processes – albeit with substantial delay after the leaders. UMC and later GlobalFoundries, on the other hand, abandoned such ambitions. Now, that persistence might be paying off: SMIC could be poised to leapfrog its older competitors, which will likely remain focused on legacy and analog chip manufacturing.
Sources: Nikkei Asia, Tom’s Hardware
English translation and edit by Jozef Dudáš
⠀
