General Motors Co. and GlobalFoundries are forming a long-term agreement to give GM a dedicated supply of a critical part on semiconductors, the companies announced Thursday.
Through what's called a "first-of-its-kind agreement," GF will manufacture wafers and direct them to GM's semiconductor suppliers for the automaker's vehicles. Production of the wafers will take place at GF's semiconductor facility in upstate New York. Timing on when GF will produce GM's supply for chips was not released. GM and GF also did not disclose financial terms of the agreement.
Since late 2020, automakers have battled a shortage of semiconductors or microchips used throughout a vehicle from the heated seats to infotainment systems. The agreement should help eliminate some of the bottlenecks that led to costly canceled production time. Lack of chips led to weekly production interruptions for automakers throughout 2021 and some downtime in 2022. With the electric vehicle transition and push for more self-driving vehicle technology, automakers will need even more semiconductors.
"We see our semiconductor requirements more than doubling over the next several years as vehicles become technology platforms," said Doug Parks, GM executive vice president of global product development, purchasing and supply chain, in a statement. "The supply agreement with GlobalFoundries will help establish a strong, resilient supply of critical technology in the U.S. that will help GM meet this demand, while delivering new technology and features to our customers."
GM in 2021 said it would work to reduce the number of unique chips needed to power tech-heavy vehicles. This strategy will allow chips to be made in higher volumes and "offer better quality and predictability, maximizing high value content creation for the end customer," GM said.
GF, a global semiconductor manufacturer, is forming these long-term agreements with new and existing customers and growing global capacity to meet increased customer demand.
"At GF we are committed to working with our customers in new and innovative ways to best address the challenges of today's global supply chains," GF CEO Thomas Caulfield said in a statement. "GF will expand its production capabilities exclusively for GM's supply chain, enabling us to strengthen our partnership with the automotive industry and New York State, while further accelerating automotive innovation with U.S.-based manufacturing for a more resilient supply chain."
GM and GF note in a press release that "supportive policies like the bipartisan CHIPS and Science Act are encouraging the onshoring of semiconductor production and reestablishing the U.S. as a global leader of this critical technology."
President Joe Biden signed the $280 billion bipartisan bill last summer to encourage onshoring of semiconductors after the shortage from overseas supply cost automakers billions.
