What GlobalFoundries, UMC Potential Merger Means for the Future of US Chipmaker Industry

In what could prove a seismic shift for the global semiconductor sector, US-based contract chipmaker GlobalFoundries and Taiwan's United Microelectronics Corporation (UMC) are reportedly exploring a potential merger. The bold move comes amid intensifying geopolitical tensions and a strategic push by the US to reduce its reliance on Asian chip production. If successful, the deal could create a powerful transcontinental player and significantly reshape the future of chip manufacturing.

Access to More Mature Chips

As first reported by Nikkei Asia, a merger between GlobalFoundries and UMC would result in a larger entity with operational roots across the US, Asia, and Europe. The goal, according to both firms, is to establish a combined company with the economic scale to secure America's access to mature chips—especially critical as tensions between China and Taiwan continue to escalate and China pushes for greater self-sufficiency in chip production.

The merger could also lay the groundwork for expanded research and development within the US and potentially position the new entity to challenge Taiwan Semiconductor Manufacturing Company (TSMC)—the global leader in both mature and advanced chip segments.

What Government Support Can Be Expected?

Before merger discussions surfaced, both the Biden and Trump administrations had made repeated efforts to court Taiwanese chipmakers to expand operations within the US. This included ongoing proposals to UMC to construct or acquire facilities on American soil. However, the Taiwanese firm has consistently declined, citing the high operational costs of manufacturing in the US.

Industry insiders have pointed out that a merger of this scale would likely face regulatory hurdles from both Taiwan and China. Precedents exist: in 2023, China blocked Intel's acquisition of Tower Semiconductor, highlighting the political sensitivities surrounding foundry expansion, particularly when it comes to the production of chips for external clients.

Losses and Gains

Financial performance in 2024 offers a glimpse into the contrasting positions of both firms. GlobalFoundries reported a net loss of £208.13 million ($262 million) on revenues totalling £5.15 billion ($6.75 billion). The downturn stemmed largely from a £713.49 million ($935 million) impairment charge tied to equipment upgrades at its Fab 8 facility in Malta, New York. Yet, the company still delivered over £760 million ($1 billion) in non-IFRS adjusted free cash flow—showing resilience despite macroeconomic pressures.

In contrast, UMC saw robust growth in 2024, with third-quarter revenues rising 6.5% sequentially to £1.40 billion (NT$60.5 billion) and a gross margin of 33.8%. The surge was attributed to a 7.8% uptick in wafer shipments, particularly in the 22/28nm speciality chip segment, which represented over half (53.1%) of the company's sales.

America's Semiconductor Standing

The US semiconductor industry continues its upward trajectory, driven by booming demand in artificial intelligence (AI) and data centres. In 2024, chip sales soared to £478.73 billion ($627 billion), exceeding earlier forecasts. According to a recent Deloitte report, sales in 2025 are projected to hit £532.18 billion ($697 billion), setting a new record for the sector.

Despite earlier criticisms, including branding Biden's CHIPS Act as a 'horrible waste of government money', the current Trump administration has taken a proactive stance. It launched the US Investment Accelerator office to manage the implementation of the CHIPS and Science Act. This initiative aims to fast-track private investment in domestic chip manufacturing by reducing regulatory red tape and improving inter-agency coordination.

Still, concerns remain. Industry leaders warn that such sweeping policy changes could lead to increased costs and potential disruption for US tech companies heavily reliant on overseas production.

What's Next?

If approved, the merger between GlobalFoundries and UMC could act as a catalyst for reshoring chip production and reinvigorating America's manufacturing sector. At the same time, consolidation at this scale could reverberate globally—impacting supply chains, pricing structures, and competitive dynamics.

Whether the deal will ultimately clear regulatory obstacles and win government backing remains to be seen. But one thing is clear: in a world increasingly defined by chips and circuits, who makes them—and where—has never been more politically and economically significant.