Ford partners with GlobalFoundries to increase chip supplies

Ford Motor Co and chip manufacturer GlobalFoundries Inc on Thursday said they plan to work together to boost supplies for the automaker's vehicles and the broader U.S. auto industry but gave few details about what the deal entails.

The two companies announced a non-binding agreement that could involve increasing production capacity for Ford's current lineup and performing joint research and development on several categories of chips that are likely to be key to future cars, such as battery-management systems and self-driving systems.

Over the past year, a global chip shortage has caused Ford and other automakers to curtail vehicle production. Most companies have directed the chips they receive to their most profitable vehicles. That has led automakers to explore ways to boost access to chips.

Majority owned by Abu Dhabi's sovereign wealth fund, GlobalFoundries became publicly traded this year when it sold a stake in its business in a $26 billion initial public offering.

The company has said that some of the $2.6 billion raised in the deal will go toward building a second chip factory at a site in Malta, New York. Ford and GlobalFoundries did not disclose any terms of the deal or say whether Ford was providing funding or other commitments to reserve capacity at any of GlobalFoundries' current or future factories. The two said only that the "strategic collaboration" does not involve any cross-ownership between the companies.

"We hope Ford and GlobalFoundries will team up to grow the supply in a more formal way to support our current vehicle lineup and our future needs," Ford Vice President Chuck Gray said in an interview. The No. 2 U.S. automaker planned to get into the business of designing its own chips and having them manufactured by a partner, Gray said. Some major automakers such as Volkswagen have said they plan to design their own self-driving chips.

Ford and GlobalFoundries said the research will be targeted at developing new chips and working with chip suppliers around that. GlobalFoundries Senior Vice President Mike Hogan said the chips will be designed and developed at Ford's direction and built in the United States. Ford outlined three categories of chips that it would jointly research with GlobalFoundries: autonomous driving chips, in-car data networking chips and battery management chips. In May, Ford said it was redesigning parts to use more accessible chips and was also weighing other strategies, including signing supply deals directly with foundries that make the wafers used in semiconductors.

On Thursday, Ford Chief Executive Jim Farley said the deal with GlobalFoundries is part of Ford's plan to vertically integrate key technologies.

The market for self-driving chips is dominated by Nvidia Corp, Intel Corp and Qualcomm Inc, some of them using advanced chipmaking technology that GlobalFoundries is not currently capable of producing.

Other categories of chips, such as networking and battery-management, are dominated by existing auto suppliers NXP , Marvell Technologies Inc and Analog Devices , many of which either manufacture their own chips or work with GlobalFoundries rivals.