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03:44 PM EDT, 07/11/2022 (MT Newswires) -- GlobalFoundries (GFS) and STMicroelectronics' (STM) announcement Monday that they plan to build a semiconductor plant in Crolles, France, is a positive factor for GlobalFoundries' shares, Wedbush said.
"While concerns around demand (and supply) are the primary factors influencing foundry stocks over the past month, we still see this news as a positive result for [GlobalFoundries]," Wedbush analyst Matt Bryson said in a note on Monday.
The planned plant, which will be adjacent to STMicroelectronics' existing facility in Crolles, is targeted to ramp at full capacity by 2026, with up to 620,000 300mm wafer per year production at full build-out, the companies said.
Bryson said GlobalFoundries' presentation indicates "attractive economics" because capex for the new facility is set at just $5,500/wafer compared with an expected $11,000/wafer for a greenfield expansion project or the about $8,000 the analysts calculate as GlobalFoundries' capital cost per wafer in Singapore.
"In our view, this result implies a significant subsidy from the French government (we'd note the release suggests government support, but does not provide exact figures)," Bryson said.
He added GlobalFoundries is also "signaling the availability of stable low-cost electricity from French nuclear power supply," which together with the subsidy is another key factor in the company's "calculation that payback for the project will be realized in under 5 years."
The analyst also noted the plant is "targeting growth opportunities that fit well" with GlobalFoundries' "unique technology" like auto, Internet of Things and industrial applications and that it appears that major customers "have contracted for portions of the forthcoming capacity."
Wedbush has an outperform rating on GlobalFoundries and a $77 price target.
Price: 31.04, Change: -0.20, Percent Change: -0.66
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