Chip foundry grid core is preparing for IPO and plans to raise $1 billion

On October 5, global foundries, the world's third largest chip foundry, is preparing for an initial public offering (IPO) in the United States, with a planned financing of $1 billion and a valuation of about $25 billion. Meanwhile, the Abu Dhabi owned company is increasing its investment in the United States lattice core plans to be listed on NASDAQ with "GFS" as the code. Morgan Stanley, Bank of America Securities, JPMorgan Chase, Citigroup and Credit Suisse will be the lead underwriters of the IPO in its prospectus submitted to the US Securities and Exchange Commission (SEC), lattice core said that Abu Dhabi sovereign wealth fund Mubadala was ready to list lattice core on NASDAQ and "continue to have considerable control after this offering". Mubadala currently holds 100% of the shares of grid core according to people familiar with the matter, the initial goal of lattice core was to go public in late 2022 or early 2023, but finally decided to advance the schedule to take advantage of the current IPO boom lattice core's decision to IPO is a clear sign that in the current chip boom, the company is not eager to accept the merger intention with Intel or other potential buyers. Previously, it was reported that Intel was considering acquiring lattice core, but had not made a formal offer. It is reported that lattice core is worried that such cooperation will upset some of its main customers, who are competitors of Intel lattice core ranks third in the semiconductor manufacturing market, second only to TSMC and Samsung Electronics. The company has three plants in the United States, two in New York and one in Burlington, Vermont. In addition, lattice core has factories in Germany and Singapore respectively. However, its plant in East Fishkill, New York was acquired by on semiconductor in 2019 and will be transferred from lattice core next year in April this year, lattice core moved its headquarters from Santa Clara, California to Malta, New York, where its most advanced facilities are located. Tom Caulfield, CEO of lattice core, is a native New Yorker. He said that the company plans to invest $1.4 billion in the chip factory in 2021, and the investment may double next year lattice core was established in 2008 when a department of Mubadala acquired AMD's manufacturing business in Dresden, Germany. Lattice core's largest customers include chip manufacturers Qualcomm, Broadcom, Samsung and AMD. The top 10 customers contribute nearly three-quarters of its revenue lattice core produces chips designed by customers for contactless payment, battery power management, touch screen driver and many other purposes. Intel announced in March that it plans to compete in these markets and produce chips for other companies. To this end, it is expected to invest $20 billion in building new factories in the United States

with the novel coronavirus pneumonia outbreak in 2020, demand for electronic products such as laptops, monitors and computer games has surged, which has led to a shortage of chips and highlighted the need for more capacity. Consumers also buy more electric vehicles, which further aggravates the pressure on the chip supply chain cell core revenue has been declining since 2018, but its growth has rebounded in the past 12 months with the surge in global demand for chips. In its prospectus, lattice core said: "although the imbalance between supply and demand is expected to improve in the medium term, the semiconductor industry will need to significantly increase investment to keep up with demand, and the total industry revenue is expected to double in the next eight to ten years." lattice core's revenue decreased by 17% to $4.85 billion last year, but the company stressed that there are two main reasons for the decline. Firstly, lattice core divested a business that brought revenue of US $391 million in 2019; Secondly, the company changed the terms of contracts signed with most customers and changed the way and time of revenue recognition in the first half of 2021, the revenue of lattice core increased by 13% year-on-year, slightly higher than US $3 billion. Lattice core plans to build a second plant near its headquarters in Malta, New York, and spend $1 billion to increase production operating a foundry is essentially a business with low profit margin. The costs of employing labor, operating a factory and purchasing equipment and raw materials are high. In the first half of this year, the gross profit margin of lattice core was close to 11%, reversing the negative profit margin in the same period last year. The company's net loss for the first six months of this year narrowed from $534 million to $301 million although lattice core is headquartered in the United States, it is considered a "foreign company" because Mubadala has its registered office in the Cayman Islands. This means that lattice core is not bound by some NASDAQ rules applicable to U.S. companies, such as allowing independent directors to occupy most of the board seats and seeking shareholders' approval of some equity compensation agreements lattice core has not yet finalized whether it will really raise US $1 billion, nor has it explained how much capital Mubadala will control after listing. However, regardless of the shareholding level, investors must bear the risk of buying the company's shares Gexin said in the risk factors of the prospectus: "after this offering, Mubadala will continue to have substantial control, which may limit the ability of shareholders to affect key transactions, including the change of control, and then affect the current market price of common shares." (small)

2023-03-22 10:04:45

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