GlobalFoundries: Solid Ground, Not Loose Sand

The recent news regarding Dubai’s ominous financial situation may have caused some uncertainty and confusion about the impact on GlobalFoundries. It is well known that a significant portion of GlobalFoundries is funded by ATIC (Advanced Technology Investment Company) of Abu Dhabi. ATIC’s sole shareholder is the Government of the Emirate of Abu Dhabi.

Dubai is one of the seven members of the United Arab Emirates, just as Abu Dhabi. Abu Dhabi is the largest city in terms of land area and maintains the largest oil and gas reserves. Abu Dhabi is also considered the strongest member in terms of financial stability. Dubai is the largest city measured in terms of population but is now finding itself in a financial crisis. In its attempt to diversify its economy away from its heavy dependence on oil reserves, the Dubai government invested heavily in real estate projects, construction and tourism. The value of their debt obligations is estimated to be in the range of $60-$80 billion. Abu Dhabi has indicated an intent to assist in the bail out of Dubai. Some may think that any assistance Abu Dhabi provides could put ATIC at some risk, however, to put the whole thing in perspective, Dubai’s debt is in the $60-$80 billion range while the U.S. government financial bailout was in the $900 billion range, quite a difference.

Semico believes any Dubai bailout will not have a direct detrimental impact on GlobalFoundries’ business strategy. A more worrisome event would be any destabilization in the Middle East interrupting worldwide oil supply.