Updated Version 2 - Japan will invest up to $21 billion in two US chip factories operated by GlobalFoundries.

Update stock price information in paragraph 2

Stephen Nellis/Makiko Yamazaki/David Shepardson

Reuters New York, October 14 - GlobalFoundries announced on Wednesday that Japan will invest up to $21 billion in two chip factories in New York State. These plants will be jointly owned by the US government and Japanese investors and operated by GlobalFoundries (GFS.O).

The company, headquartered in Malta, New York, saw its stock price rise more than 4% in early trading. So far this year, its share price has increased by over 33% cumulatively.

This move is part of Japan's contribution to a $550 billion investment agreement with the United States. The deal, led by President Donald Trump (link), was reached last year. In exchange, the US will reduce (link) tariffs on Japanese automobiles and other imported goods from at least 25% down to 15%.

GlobalFoundries stated that the US will hold equity in the new chip plants, but all investment funds will be provided by Japan.

This company, controlled by the Abu Dhabi sovereign wealth fund Mubadala Investment Co, will profit through construction, plant operations, and licensing its chip manufacturing technology.

GlobalFoundries CEO Tim Breen told Reuters that under another agreement, the US government will hold a 4% stake in GlobalFoundries, bringing its total shareholding in the chip maker to about 7%.

Breen said that GlobalFoundries will handle customer relationships, with initial clients at the New York factories including Japan's Renesas Electronics (6723.T) and iPhone manufacturer Apple (AAPL.O).

“We will definitely prioritize customers from the United States and Japan,” he said. “Eventually, I expect companies from outside the US and Japan will also become buyers, but clearly, now that the announcement has been made, we will have a process in place to ultimately determine which customers get how much capacity and during which time periods.”

So far, Japan has announced two rounds of projects under this investment plan, totaling more than $100 billion.

According to the agreement with the US, Trump will select the projects funded by Japan. The available free cash flow generated from the investment will be split equally between the two countries (link) until a specific allocation plan is reached, after which 90% will flow to the United States.

Breen from GlobalFoundries said that at least part of Japan’s capital investment will flow back to suppliers of chip manufacturing equipment such as Tokyo Electron 8035.T, as well as other Japanese companies that co-lead supply chains with US competitors.

“Obviously, we are very eager for Japanese equipment suppliers to participate,” Breen said. “We will keep an open mind, but certainly conduct deep cooperation with Japan’s industrial ecosystem, since they possess outstanding technology.”

(To assist non-native English speakers, Reuters automatically translates its reports into several other languages. Because automated translation may be inaccurate or lack necessary context, Reuters does not guarantee the accuracy of automated translation texts, which are provided solely for readers' convenience. Reuters is not liable for any damages or losses arising from use of the automated translation feature.)