GlobalFoundries Purchase Of IBM Essex Prompts Security Review

Nov 2, 2014

The sale of IBM’s chip making division, including the company’s Essex plant is being scrutinized by federal officials. 

The review is standard where there is foreign ownership of a company that has defense industry contracts. 

IBM has earned a Trusted Foundry designation from the Department of Defense as a secure source of products used in defense and intelligence applications. 

Retired U.S. Army Brigadier General John Adams, who has researched and written about vulnerabilities in the defense supply chain, says Big Blue’s sale of its chip making operations to GlobalFoundries, which is based in California but owned by the Emirate of Abu Dhabi, raises questions about the security of an important source of components.

“I spoke to somebody that’s inside the Defense Department acquisition system and I know there’s a lot of concern about this,” says Adams.

"I spoke to somebody that's inside the Defense Department acquisition system and I know there's a lot of concern about this" - Retired Army Brigadier General John Adams

The Treasury Department’s Committee on Foreign Investment and the Department of Defense will review the sale.

Adams says they’ll consider the strength of U.S.-Abu Dhabi relations, look at where else GlobalFoundries does business and examine whether the company could experience any financial problems in the future.

While IBM is in the Trusted Foundry program, Adams says GlobalFoundries is not.

“The concern is that if we’re going to remove a certain portion of the semiconductors that go to the Defense Department from the Trusted Foundry program, what does that do for our ability to supply semiconductors to our defense system,” he says.

Adams says there’s nothing to prevent GlobalFoundries for applying to the Trusted Foundry program, nor is the idea to discourage foreign ownership and investment. 

He says historically the government has attached certain conditions to a sale, rather than block a transaction.

A spokesman for GlobalFoundries says the company has gone through the process before and expects the review and the purchase will both be completed sometime next year.