This article was updated on July 20, 2021 to reflect GLOBALFOUNDRIES CEO Thomas Caulfield's rebuttal to the Intel acquisition rumor. Click here to jump to new information.

Intel's new CEO, Pat Gelsinger, has been touring Europe to talk about Intel's manufacturing plans and has also spoken with French President Macron and Italian Prime Minister Mario Draghi about big spending in the EU. However, there are rumors that another deal is in the works for the x86 chipmaker, as reports suggest that Intel may acquire GlobalFoundries, a "specialty foundry" that was once AMD's manufacturing arm.

According to a person familiar with the matter who spoke to the Wall Street Journal, Intel is exploring the possibility of acquiring GlobalFoundries for as much as $30 billion in order to expand its manufacturing capacity worldwide. [GlobalFoundries operates six chip fabrication plants (four 300mm and two 200mm), with the most advanced process nodes being 14/12nm. This puts the company behind TSMC, Samsung, and Intel, all of which are developing 7nm and beyond processes.GlobalFoundries used to actively develop 7nm process nodes to compete with these companies at the leading edge, but in 2018 it decided to stop further development The company decided to stop further development in 2018.

This is why this particular rumor has now been brought to our attention. Intel, if successful in its acquisition, would buy the chip manufacturing company responsible for the production of the processors currently used in AMD Ryzen chips.

To better understand this development, one must first learn about GlobalFoundries' genuinely fascinating history.

GlobalFoundries first became an independent company after a deal between AMD and an investment firm with ties to the Crown Prince of Abu Dhabi to acquire the former's manufacturing arm; AMD was struggling at the time, partly due to pressure from Intel, and its CEO, determined that a fabless approach would result in significant cost savings in the long run, and that much-needed cash would flow into the business immediately.

According to Hector Ruiz, AMD's CEO at the time, the deal was first finalized through a dinner meeting with the Formula 1 team Ferrari. But that is a story for another time.

The important thing to note is that GlobalFoundries exists, AMD is fabless from there, and both companies will sign a wafer supply agreement (WSA) to ensure a harmonious supplier-customer relationship for years to come.

In effect, the agreement binds AMD to buying most of its chips from GlobalFoundries and discourages it from sourcing chips from other sources through various means. GlobalFoundries' decision to discontinue development of the 7nm process node will begin to unravel its WSA.

One major amendment to the WSA allowed AMD to source chips from other foundries for 7nm and beyond, but continued to lend its red team to GlobalFoundries for 12/14nm and higher nodes.

And earlier this year, AMD was released from this obligation; AMD can now procure chips from other foundries as it wishes, but under a key provision of the WSA, it must purchase at least $1.6 billion worth of chips from the fab by 2024, or else have to pay a fine to GlobalFoundries.

This is a lot of chips, but AMD currently uses one GlobalFoundries chiplet in its Zen 2 or later processors; AMD's Ryzen and Epyc processors' processing cores (CCDs) are manufactured on TSMC's 7nm process. The I/O die (cIOD) is still manufactured by GlobalFoundries.

In short, if Intel succeeds in acquiring GlobalFoundries, Intel will be responsible for WSA, to which AMD is indebted. However, since business-to-business deals take years to reach a final agreement, it must be said that even if Intel acquires GlobalFoundries, there will not be much time left in AMD's WSA agreement to effectively end all obligations to GlobalFoundries by 2024 It must be said.

Is there a legitimate reason to acquire GLOBALFOUNDRIES, if not to put AMD in Intel's pocket?

Yes, contract manufacturing.

Intel currently produces CPUs in its own fabs (mostly, anyway). But with its own contract foundry business, the company aims to go head-to-head with TSMC and Samsung, the world's largest chipmakers. This dramatic shakeup will see the company take on contracts to produce chips for other companies as well as its own.

But Intel needs more factories to do so, hence its expansion into the EU and further investment in its global factory network.

There is just one problem. As Gelsinger said in May, "It takes a couple of years to build up production capacity. One way to expand capacity without manufacturing in-house is to buy someone else's factory, which is why GLOBALFOUNDRIES appeared to be the most likely candidate.

However, GlobalFoundries' CEO has other ideas.

Thomas Caulfield, CEO of GlobalFoundries, kicked off rumors of an Intel acquisition yesterday on CNBC (via Seeking Alpha)

"There's nothing to that story," Caulfield said.

While it is by no means certain what is going on behind the scenes, GlobalFoundries has kicked the rumor to the curb.

Caulfield also expects demand and need for foundry businesses like his own to increase in the near future, and does not expect demand to return to peaks and troughs.

"The reason I am confident that production capacity will not explode and create the old cyclicality of this industry is very simple," says Caulfield. 'This industry has to double over the next eight years.'