GlobalFoundries Expands Renesas Partnership Amid Persistent Utilization and Margin Pressures

What happened

GlobalFoundries and Renesas announced a multi-billion-dollar partnership expansion to accelerate U.S. semiconductor manufacturing, targeting chips for smart vehicles and next-generation industrial systems. This move comes as GFS grapples with underutilized fabs, highlighted by a 77% shipment utilization in 2024 and a $935 million impairment at its Malta facility, reflecting weak demand and mix issues. The partnership appears strategically aimed at securing more anchor demand for its CHIPS-backed U.S. capacity, which is critical given ongoing smartphone segment declines accounting for over 40% of revenue. While automotive revenue has grown to nearly $1.5 billion in 2025, it remains insufficient to offset broader weaknesses without significant improvements in utilization and margins. Thus, this announcement reinforces GFS's focus on growth areas but does little to address the core financial challenges documented in the DeepValue report.

Implication

For investors, this collaboration could help fill capacity at GFS's U.S. fabs, potentially aiding utilization recovery and aligning with government subsidy goals. However, it fails to mitigate headwinds from Chinese mature-node overcapacity and persistent smartphone softness, which continue to cap revenue growth and margin expansion. The multi-billion-dollar scale suggests committed orders, but lack of detailed pricing and timing obscures the immediate financial impact, leaving room for execution risks. Given GFS's elevated EV/EBITDA multiple of 17x and history of impairment charges, any delays or shortfalls in this partnership could exacerbate downside risks. Therefore, while sentiment may improve, investors should await concrete evidence of sustained utilization above 80% and EBITDA margins stabilizing in the mid-20s before reconsidering the cautious stance.

Thesis delta

The Renesas partnership aligns with GFS's strategic emphasis on automotive and industrial markets, as highlighted in the report's bull scenario driven by auto demand. However, it does not materially shift the base case thesis that GFS is overvalued at current prices, given ongoing underutilization, margin compression, and smartphone weakness. Investors should view this as an incremental step rather than a catalyst for re-rating, maintaining the 'POTENTIAL SELL' rating until financial metrics show consistent improvement.