Who Will Buy Abu Dhabi's Microchips?

Doug Grose, the chief executive of the new Abu Dhabi-owned chipmaker Globalfoundries, spoke with the Financial Times recently and gave a bit more detail on how the new venture plans on finding customers.

Globalfoundries owns the manufacturing half of AMD, and will keep busy in the early days by continuing to make chips for them. But it is pretty clear that for the venture to reach the scale needed to pay for the enormous cost of building, maintaining and upgrading microchip factories, it will need to find some new customers. And if you talk to industry watchers, the number one question mark is who those customers might be.
From the interview, it seems that the strategy will be to target high-end demand for advanced CPU-style chips, rather than move into the market for simpler chips. The kind of chips that power laptops and corporate servers are much different to the things you might find in a camera or an MP3 player, and the simpler ones have become seriously commoditized. It is now pretty much the exclusive domain of massive foundry companies like Taiwan Semiconductor, who work on a scale that Globalfoundries is unlikely to ever compete with.

So it appears that Globalfoundries will avoid that game altogether, and stick to what it knows best. The problem? Not many companies outside of the PC business need chips as advanced as the ones made by Globalfoundries or Intel - Mr Grose said he could think of "a handful" that might be interested.

But that number will increase as devices get smarter - we're already seeing the line between computers and mobile phones get blurry, and there is a clear trend toward smart "boxes" that link things like televisions to the internet to deliver video or gaming.

Universal wireless internet through mobile networks means we can expect more of the same in cars, public transport, outdoor advertising etc. Cloud computing and high speed internet means more of the heavy lifting can be done in the cloud rather than in local machines, but you'll still need some pretty smart little chips somewhere to manage all that information flying around.

We'll be speaking to people from AMD, Globalfoundries and the Abu Dhabi investment vehicles behind the new venture in the coming weeks, so watch this space for more on the UAE's biggest ever technology deal.