Japan to invest up to $21 billion in two US chip factories to be run by GlobalFoundries

Japan ​will invest up to $21 billion in two chip factories ​in New York state that will be jointly ‌owned ​by the US government and Japanese interests and operated by GlobalFoundries, the company said on Wednesday.

The move is part of a deal for Japan to invest $550 billion in the ‌US struck by President Donald Trump's administration last year in return for the US lowering tariffs on Japanese cars and other imports from at least 25% to 15%. The US will take a stake in the new chip factories, but Japan will ‌provide all of the investment capital, GlobalFoundries said.

The company, which is majority-owned by Abu Dhabi's sovereign wealth fund Mubadala Investment ‌Co, will earn fees from building and operating the factories, as well as licensing chip manufacturing technology to them. In a separate agreement, the US government will take a 4% stake in GlobalFoundries, bringing its total ownership of the chipmaker to about 7%, GlobalFoundries CEO Tim Breen told Reuters.

Breen said ⁠GlobalFoundries would ​manage customer relationships, and initial customers ⁠for the New York factories include Japan's Renesas Electronics and iPhone maker Apple. "We definitely would like to give priority to US and Japanese customers," he ⁠said. "Ultimately, I expect other companies that aren't US and Japanese will also be part of the demand, but we'll obviously go through a ​process after announcement to finalize the exact who gets what over what timeframe."

Japan has so far announced two batches ⁠of projects worth over $100 billion combined under the investment scheme. Under the arrangement with the US, Trump selects projects to be funded by Japan. Available free ⁠cash ​flows from investments will be split evenly between the two countries until a specific allocation is reached, after which 90% will go to the US.

GlobalFoundries' Breen said that at least some of the capital investment by Japan will flow ⁠back to chip-manufacturing toolmakers such as Tokyo Electron and other Japanese firms that along with US rivals dominate the supply chain. "Obviously, we ⁠have a strong interest ⁠in the Japanese equipment suppliers to be part of it," Breen said. "We will be very open-minded, but we'll definitely engage very much with the Japanese ecosystem because they have great technologies."