Why this chip maker’s New York IPO has left a bad taste in the mouth for Chengdu’s local government
- The US-based chip maker set aside a provision of US$34 million in June to settle the potential compensation
- GlobalFoundries said in its prospectus that the Chengdu factory halted operations due to ‘a variety of factors, including unanticipated market conditions’
The local government in Chengdu, capital of southwestern Sichuan province, is seeking compensation for losses from a failed chip making joint venture, according to the initial public offering prospectus of GlobalFoundries, which is seeking a listing in New York.
The US-based chip maker states it set aside a provision of US$34 million in June to settle the potential compensation, and is in talks with the Chengdu government to settle the claim, according to the prospectus. This is the first time the dispute has been disclosed.
“On April 26, 2021, we received a claim from Chengdu requesting that we share in Chengdu’s alleged losses … we are engaged in negotiations to settle the claim and we recorded a provision of US$34 million in June 2021,” the company said.
For GlobalFoundries, the failed joint venture in China is no longer a key part of its business.
“As the only scaled pure-play foundry with a global footprint that is not based in China or Taiwan, we help customers mitigate geopolitical risk and provide greater supply chain certainty,” the company says in its prospectus.