The Zhitong Finance App learned that GFS.US (GFS.US) plans to build two new chip factories in New York State, and the Japanese government will provide financial support of up to 21 billion US dollars. As part of the agreement, the US government will also acquire approximately 4% of GF's shares. As of press time, GF was up 4.4% in the premarket.
Under an agreement announced Wednesday, GF will operate a plant jointly owned by the US and Japan at its existing plant in upstate New York. The construction capital for these plants will come from Japan's plan to invest 550 billion US dollars in the US.
These plants will produce so-called “basic chips,” or critical but relatively less advanced semiconductors for automobiles, industrial equipment, and communication devices. As electronic products penetrate into various products, demand for such chips is strong, and chip manufacturers are always competing to meet market demand.
The AI boom has also exacerbated supply constraints as industry resources focus on more advanced chips, such as Nvidia's AI accelerators. GF's agreement aims to boost US basic chip production and reduce dependence on East Asian suppliers to address US national security concerns.
The US Department of Commerce holds 4% of the shares, and GF can reallocate funds for the Chip Act
Under a broader arrangement with GF, the US Department of Commerce will acquire about 4% of the company's shares, “further allowing the American public to share GF's growth.” GF will be able to reallocate funds from previous US “Chips and Science Act” grants to invest in improving manufacturing capacity, including advancing work in fields such as silicon photonics, chip packaging, and silicon-germanium.
GF will operate these new plants in the same way as existing plants. Its current factory service customers include companies such as Apple and Japan's Renesas Electronics.
Profits will be distributed between owners and GF in accordance with the method set out in last year's US-Japan trade agreement. The agreement sets a 15% tariff cap on Japanese goods exported to the US in exchange for Japan's commitment to invest in US projects before the end of Trump's presidency.
GF CEO: There is a shortage of supply in the entire industry, and it is necessary to respond to customer needs
GF CEO Tim Breen said in an interview that this arrangement will help the company meet the surge in demand for its products.
“We need to respond to customer needs,” he said. “Currently, the entire industry is in short supply.”
GF has begun construction of its first plant, located near Malta, New York, where its headquarters are located. The company expects the plant to be put into operation in 2029. The second plant will move forward as soon as the first one is completed, but this depends in part on future demand, Breen said.
“Of course it depends on the market,” he said. “We wouldn't do that if there was no demand in the market, but all the indicators I saw today indicate that the market is in high demand.”
US-Japan Framework: Japan invests in US semiconductor manufacturing for the first time
Under the US-Japan framework, the Trump administration selected projects based on the recommendations of the Investment Commission headed by Secretary of Commerce Howard Lutnick. If the project lacks commercial viability or is too risky, Japan can reject it. The terms of the agreement stipulate that after Japan recovers the principal amount and accrued interest, profits will be distributed to the US at a ratio of 90-10.
Earlier this year, Japan invested $36 billion in US oil, gas, and critical mineral projects, and $73 billion in nuclear power projects and natural gas power plants. The GF deal will be Japan's first foray into US semiconductor manufacturing. Japan's Trade Minister Akazawa Ryomasa said in September that discussions on artificial intelligence and chip investment will have “very significant weight” in the implementation of the trade agreement.
GF's positioning: not chasing the most advanced manufacturing process, prudent capital expenditure
GF is one of the few companies in the US that still makes chips locally. Another such company, Intel, is also supported by the US government. Under an unconventional agreement brokered by the White House last year, the US federal government is now one of Intel's biggest investors.
Although GF is headquartered in Malta, nearly three-quarters of its shares are held by UAE sovereign wealth fund Mubadala Investments.
As a chip foundry, GF undertakes chip manufacturing business outsourced by customers. Although it has left the market for the most advanced and expensive chip production — such as the chips needed for Nvidia's AI processors — it is still a major supplier of less complex but equally important electronic components.
Everything from household appliances to aerospace hardware is becoming increasingly digitized, and so is the demand for chips. High-end semiconductors such as AI accelerators also require supporting components to adjust the power supply and convert various signals into data.
However, GF's production technology is relatively backward, which means it is unable to produce processors or memory chips that have surged in demand over the past year.
GF was created through the spin-off of AMD's factories and the acquisition of other facilities around the world, and has taken a more conservative approach to factory network spending. This made it profitable, but often led to weak revenue growth. Last year, its annual budget for new plants and equipment was less than $1 billion. Meanwhile, TSMC, the world's largest chip foundry, spent more than 40 billion US dollars.
Breen said the US-Japan agreement gave GF an opportunity to expand in a smart way. “From an economic perspective, this is actually a pretty exciting win-win situation,” he said.