GlobalFoundries: Made-In-USA Is Profitable And CHIPS Act Is A Positive

Jan. 18, 2023 9:36 AM ETGLOBALFOUNDRIES Inc. (GFS)BAND, INTC, MU, QCOM, TSM2 Comments
Chetan Woodun profile picture
Chetan Woodun
5.9K Followers

Summary

  • Analysts at Goldman do not seem to share the enthusiasm of the U.S. Department of Commerce concerning the CHIPS Act.
  • This thesis shows that the CHIPS Act will indeed be helpful to reduce dependence on Asia, but, if done in a targeted fashion, as exemplified by GlobalFoundries.
  • The U.S. foundry play is also on a profitability uptrend, which is likely to be sustained.
  • It can also rely on LTAs for long-term growth drivers as it faces some demand softness in the first half of this year.
  • Also, with its differentiated product offerings, it is also important to think differently when valuing the company.

Flag of USA on a processor, CPU Central processing Unit or GPU microchip on a motherboard. Congress passes the CHIPS Act of 2022 to strengthen domestic semiconductor manufacturing, research and design.

William_Potter/iStock via Getty Images

According to Goldman Sachs (GS) research entitled "The CHIPS Act Won't Reduce Reliance on Asia for Semiconductors", it is 44% more expensive to build and run a fab in America than in Taiwan, implying that profitability would

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Data by YCharts

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GlobalFoundries Product Differentiation and Industry Verticals (gf.com)

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Comparison with peers (seekingalpha.com)

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Income Statement (seekingalpha.com)

This article was written by

Chetan Woodun profile picture
5.9K Followers
My aim is to provide differentiated insights, whether it is for investing, trading, or informational reasons. For this purpose, I am not a classical equity researcher or fund manager, but, I come from the IT world as the founder of Keylogin Information and Technologies Co. Ltd. Thus, my research is often backed by analytics and I make frequent use of charts to support my position.I also invest, and thus, in this tumultuous market, I often look for strategies to preserve capital. As per my career history below, I have wide experience, initially as an implementer in virtualization and cloud, and I was subsequently a team leader and project lead, mostly working in telcos.I have also been a mediocre entrepreneur in real estate, and a farmer, and like to dedicate at least 5 hours per week to working on a non-profit basis. For this purpose, I regularly contribute peer reviews and opinions for enterprise tech and help needy families by providing sponsored work.As for Research, I started with Tech stocks before going Multi-Tech with Fintechs, Biotechs, and Cryptotechs.I have been investing for the last 25 years, initially in mutual funds where the "learned economists" would always advise you to "think long term". Got a lot of experience in the 2008/2009 downturn when I lost a lot. Since then I do my own research and have fallen in love with Seeking Alpha because of the unique perspectives it provides to someone investing hard-earned money as well as access to some of the best financial advisors.We live only once but can have many "investment lives" especially when investing in individual stocks.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

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