Ford Explores Buying Chips Directly from GlobalFoundries to Offset Shortage

(Bloomberg) -- Ford Motor Co., responding to a global semiconductor shortage that’s crimped profits and production, will explore buying chips directly from GlobalFoundries Inc.

The automaker said Thursday it’s forming a “strategic collaboration” with GlobalFoundries, which went public in a $2.6 billion listing last month and recently moved its headquarters from California to Malta, New York, where it’s expanding a foundry to add capacity.

“If everything progresses as we hope, Ford and GlobalFoundries will team up to grow the supply for Ford’s current vehicle lineup, and also do R&D work together,” Chuck Gray, vice president of embedded software and controls for the Dearborn, Michigan-based automaker, said in an interview. “It’s an important step in our plans to vertically integrate key technologies.”

The chip shortage has dented profits at carmakers including Ford, and cost the global auto industry $210 billion in lost production, according to the consulting firm Alix Partners. The crisis has also forced auto executives to rethink their supply-chain strategies and consider doing chip design in-house as computing and software become central to modern vehicles.

Ford Chief Executive Officer Jim Farley has called the chip shortage “the biggest supply shock” he’s ever seen, and said the company would get more deeply involved in semiconductor production, dealing directly with chipmakers, rather than relying on so-called Tier One suppliers to act as middlemen.

Ford already uses chips from GlobalFoundries, but the crisis forced the two companies to speak directly and forge a closer relationship, said Mike Hogan, head of automotive at the chipmaker.

The agreement marks one of the first direct tie-ups between a major automaker and a chip producer to result from the semiconductor shortfall.

Shares of GlobalFoundries pared an early gain of as much as 7.5% to trade up 5.8% to $66.34 as of 9:39 a.m. in New York. Ford rose 1% to $20.06.

The two companies announced the nonbinding collaboration the same week that governors from nine states, led by Michigan Democrat Gretchen Whitmer, sent a letter to top congressional leaders urging them to advance legislation that would provide $52 billion in aid to semiconductor producers and ease a shortage for manufacturers.

GlobalFoundries, which hosted Ford executives at its plant in New York this summer, would be a potential beneficiary of such legislation. The company, which has plants in Europe, Asia, and the U.S., was created through the purchase of the manufacturing operations of Advanced Micro Devices Inc. in 2009 and later combined with Singapore’s Chartered Semiconductor.

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