It has been reported that Taiwan's UMC and the U.S.'s GlobalFoundries, the 4th and 5th largest companies in the global foundry (semiconductor contract manufacturing) market, are pursuing a merger. As China's SMIC and Huahong Semiconductor rapidly increase their market shares in the legacy semiconductor market, it is interpreted that they are seeking a way out through the merger.
According to the Nihon Keizai Shimbun and Bloomberg on the 1st, GlobalFoundries is considering a merger involving the acquisition of UMC. The headquarters will be based in the U.S., while the production facilities will be established across Asia and Europe. According to the market research firm TrendForce, GlobalFoundries had a 4.6% (5th) market share in the global foundry market in the last quarter of last year, while UMC had 4.7% (4th).
Chris Caso, an analyst at Wolf Research, noted that "through the merger, GlobalFoundries can strengthen its business competitiveness, and UMC will be able to diversify its production facilities outside of the conflict-affected areas of China and Taiwan," adding that "it can prevent the market encroachment of Chinese corporations in the legacy process area and improve its position in the market."
The consideration of a merger between GlobalFoundries and UMC is viewed as a measure to respond to the rapidly growing Chinese legacy semiconductor sector. China's SMIC, the 3rd largest foundry company, is currently advancing mass production at cutting-edge processes at the level of 7 NANO (nanometers, 1 billionth of a meter). However, the market share difference with Samsung Electronics' foundry division, which is currently mass-producing at 3 NANO, is only 3 percentage points.
Amid the growth of Chinese corporations, the market shares of GlobalFoundries and UMC are shrinking. Up until 2023, GlobalFoundries and UMC had been competing for the 3rd place in the foundry market, but they have ceded their position to SMIC since the first quarter of last year. In addition, Huahong Semiconductor, the 2nd largest foundry in China, is also increasing its market share based on a strong domestic market.
Kang Seong-cheol, a research fellow at the Korea Semiconductor Display Technology Association, stated that "In terms of legacy process technology, SMIC and Huahong Semiconductor are no longer at a disadvantage compared to global corporations," and added, "As the demand concentrates in the Chinese domestic market, they are quickly increasing their market share, leading to the perception that it is difficult for GlobalFoundries and UMC to compete with them individually."
However, there are analyses suggesting that GlobalFoundries' financial capacity could be a stumbling block. GlobalFoundries' market capitalization is approximately $20 billion (about 29 trillion won), while UMC's is about $17 billion (around 25 trillion won). It is analyzed that GlobalFoundries lacks the financial capacity to acquire UMC and will have to pursue large-scale borrowing. A semiconductor industry official noted that "when simply comparing the size of the corporations, it seems somewhat difficult for GlobalFoundries to acquire UMC," and added, "If the merger materializes, they may struggle with solutions to address financial needs."
Opinions are also emerging that the Chinese regulatory authorities and the Taiwanese government will not easily approve the merger of the two corporations. Bloomberg reported that "such types of transactions will require approval from the Chinese regulatory authorities, which will be a significant obstacle," and added, "the Taiwanese government will also likely not approve transactions that give GlobalFoundries influence over UMC's operations."