GM strikes a deal aimed at avoiding future chip shortage disruptions

General Motors has struck a “first-of-its-kind” deal with GlobalFoundries (GF) to lock down its supply of crucial semiconductors, a move aimed at avoiding the disruptions caused by the recent global chip shortage.

Under the agreement, GF will manufacture the chips at its semiconductor facility in upstate New York. The company, which is owned by the United Arab Emirates sovereign wealth fund Mubadala Investment, has said it would invest $1 billion to build a second factory near its Malta, New York, headquarters.

Like all automakers, GM relies on computer chips to power a range of features in its vehicles: everything from automatic seats and infotainment systems to more advanced automated features. The deal with GF will provide a boost to the company, which is still feeling the effects of the chip shortage that plagued the auto industry for years during the pandemic.

A lack of available semiconductors actually caused GM to lose its top sales position to Toyota in 2021. The company also had to cut features from some vehicles, such as wireless chargers and HD radios, due to supply issues.

During the shortage, as factories were idled and vehicle deliveries were delayed, lawmakers in Washington rushed to pass legislation that would boost domestic semiconductor production. In August 2022, President Joe Biden signed the CHIPS and Science Act, a $280 billion package that includes $52 billion in funding to boost US manufacturing.

GM also says it will work with GF to “reduce the number of unique chips needed to power increasingly complex and tech-laden vehicles,” the company said. “With this strategy, chips can be produced in higher volumes and are expected to offer better quality and predictability, maximizing high value content creation for the end customer.”

GM has been scrambling to lock down its EV supply chain in the rush to make more batteries and meet rising customer demand. In addition to chips, the company has sought to secure deals with lithium mining operations to fuel its need for more EV batteries. Recently, GM said it would invest $650 million in Lithium Americas, which grants it exclusive access to the first phase of lithium production out of the Thacker Pass mine in Nevada.