By Stephen Nellis, David Shepardson and Makiko Yamazaki
NEW YORK/WASHINGTON, Oct 14 (Reuters) - Japan will invest about $21 billion to build up to two chip factories in New York State that will be jointly owned by the US government and Japanese interests and operated by GlobalFoundries, the company said on Wednesday.
The initiative is part of a Trump administration deal struck last year for Japan to invest $550 billion in the US in return for the US lowering tariffs on Japanese cars and other imports
from at least 25% to 15%.
Shares of Malta, New York-based GlobalFoundries, which is majority-owned by Abu Dhabi's sovereign wealth fund Mubadala Investment Co, rose more than 4% in afternoon trading. They have gained more than 39% this year.
Construction of the first factory is scheduled to begin this year with chip production expected in 2029. GlobalFoundries executives said the partners will decide whether to build the second factory before the end of 2028.
The first factory is expected to add annual US manufacturing capacity for about 900,000 300mm wafers when fully operational, ranking it among the larger US semiconductor manufacturing facilities, and create more than 1,000 factory jobs in New York.
The US government previously held a 3% stake in GlobalFoundries. GlobalFoundries CEO Tim Breen told Reuters that will rise to 7%. Japan will provide all of the investment capital under the deal.
US President Donald Trump said on Truth Social the US government, which provided $1.63 billion in grants to the company, values the 7% stake in the company at more than $2 billion.
"We are the first administration ever to turn grants into money for America," Trump said.
Breen told Reuters initial customers for the New York factories include Japan's Renesas Electronics and iPhone maker Apple.
On a conference call with investors, executives said the new deal will generate fees for the company for at least 20 years. This revenue is expected to be $50 million next year, when the company will earn fees for managing construction of the first factory.
GlobalFoundries will shift $955 million previously awarded by the US government to accelerate investments in silicon photonics, silicon-germanium chip material and advanced packaging at its existing chip factories in Malta, New York, and Burlington, Vermont.
GlobalFoundries' Breen said that at least some of the capital investment by Japan will flow back to chip-manufacturing toolmakers such as Tokyo Electron and other Japanese firms that along with US rivals dominate the supply chain.
"Obviously, we have a strong interest in the Japanese equipment suppliers to be part of it," Breen said. "We will be very open-minded, but we'll definitely engage very much with the Japanese ecosystem because they have great technologies."
Japan has so far announced two batches of projects worth over $100 billion combined under the overall investment scheme.
Under the arrangement with the US, Trump selects projects to be funded by Japan. Available free cash flows from investments will be split evenly between the two countries until a specific allocation is reached, after which 90% will go to the US.
(Reporting by Stephen Nellis in New York, David Shepardson in Washington and Makiko Yamazaki in Tokyo; Editing by Jamie Freed and Cynthia Osterman)
