The semiconductor industry has hit a major headwind in the last several months as a global shortage of microchips has backed many of the industry’s leading manufacturers into a corner. As these companies struggle to keep up with demand there has been one that has found the current market environment suitable for an IPO.
In this article, I will analyze GlobalFoundries (GFS) to find out if its shares deserve a place in your portfolio.
GFS is a provider of semiconductor manufacturing services and one of the world’s leading semiconductor foundries, delivering feature-rich process technology solutions for manufacturing chip designs used in the most critical and in-demand applications. GFS serves a range of customers, including the global leaders in Integrated Circuit (IC) design, and provides optimized solutions for the function, performance, and power requirements of critical applications. GFS’ core technology portfolio includes a range of differentiated technology platforms, including RF Silicon-on-Insulator (SOI) solutions, Fin Field-Effect Transistor (FinFET), Metal-Oxide-Semiconductor (CMOS), Fully Depleted SOI (FDXTM), Silicon Germanium (SiGe) products, and Silicon Photonics (SiPh).
Since its listing last week, GFS’ shares have performed well, gaining 25.5% and outperforming most of its peers.
Chart from Stock News
GFS’ global footprint, secured supply chains, and rapid semiconductor capacity expansion are positive stock catalysts
GFS is operating in a tough environment that is likely to continue to grow at a rapid pace in the foreseeable future as the world’s need for better semiconductor technology is never ending. Meanwhile, the golden age of semiconductors is well underway as the world embraces new technologies including the internet of things, 5G, cloud computing, artificial intelligence, and vehicle electrification.
While GFS is trailing Taiwan Semiconductor on leading-edge microchips, GFS serves the market for less advanced chips, which are critical for an increasing number of industries. Nevertheless, the chip market is very concentrated and it is estimated that approximately 77% of semiconductors revenue in 2020 was from chips manufactured in Taiwan or China. This geographical concentration is an opportunity for GFS, which can leverage its global manufacturing footprint and secured supply chains to deliver its critical semiconductors to its customers.
To take advantage of this, GFS is racing to add capacity and is expected to use the proceeds of the IPO, representing $2.6b, to help fund future investment in manufacturing capacity. While this may take a few years before completion, GFS has a significant number of…
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