To guarantee supply of chips, GM signs deal with GlobalFoundries

DETROIT, Michigan: Two days after President Joe Biden praised, during the State of the Union speech, the passing of the $52 billion Chips and Science Act that aims to return chip manufacturing to the US, General Motors and chipmaker GlobalFoundries announced the signing of a three-year agreement for the manufacturing of US-made computer chips.

The deal will enable GM to avoid the chip shortages that kept millions of cars from being manufactured during the COVID-19 pandemic.

The agreement is the first of its kind and establishes a dedicated capacity exclusively for GlobalFoundries at their upstate New York fabrication facility, company officials said.

The act also offers a new method for chip manufacturers to finance their US expansion, through a combination of funding from both interested customers and the federal government.

In an interview with Reuters, GlobalFoundries Chief Executive Tom Caulfield said supporting US manufacturing makes the company competitive when seeking funding.

"This is the automaker going right to the manufacturing foundry, reserving the capacity for their needs, making the appropriate co-investments with that foundry so that the best economics take place," he said.

In a statement to Reuters, GM said it is working to streamline the types of chips used in its cars, and it is also securing capacity for its suppliers, because the demand for chips is expected to rise.

Last week, GM rival Ford said that its inability to acquire chips and other supply chain issues contributed to a $2 billion shortfall in its fourth-quarter profit, compared with its forecasts.

Chip manufacturers also told Reuters that the auto industry must contribute to the investment in the multibillion-dollar facilities needed for producing chips.