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When I recently highlighted the changes and dynamics at play in the foundry space, I never expected the recent TSMC/SMIC legal spat to result in the exit of SMIC founder Richard Chang and TSMC taking a significant 10% stake in the Chinese foundry. That coupled to the early exit of Hector Ruiz from GlobalFoundries and its ultimate parent, in the name of Abu Dhabi Sate declaring it would have a fab built in the country in the next four years, all points to the foundry fun and games continuing.

The move by TSMC to take shares in SMIC is smart, as this could hamper further consolidation as SMIC was looking well placed to be acquired and my bet was on a merger with GlobalFoundries. Though still possible, any attempts wouldn’t be straight forward and would be quickly flagged to TSMC.

It had also become obvious that GlobalFoundries was gunning after TSMC, not content on passing UMC with the acquisition of Chartered, it is most definitely aiming higher. As noted in the previous blog, the oil money allows ATIC and GlobalFoundries to think big and now very bold!

ATIC’s Chairman and COO of Abu Dhabi government firm Mubadala Development Co, Waleed Al Muhairi  was quoted the other day by Dow Jones as saying the following;

"Make no mistake, we're going head to head with TSMC, so we're going to fight it out, we think the other foundries will disappear over time."

Consolidation is still required IMHO, however TSMC looks more interested in growing its business from new markets such as solid state lighting, after announcing a US$46 million investment to set up a production line and it’s yet to be revealed plans in the photovoltaics market, than pushing for foundry consolidation.

That might change now that it has a 10% stake in SMIC for free, so I am not ruling out further merger activities.