GlobalFoundries Rumored To Be For Sale

Dec 15, 2015

Earlier this year, the chipmaker GlobalFoundries took over the former IBM plant in Essex Junction. Now there’s talk that GlobalFoundries itself might be sold.

It was sparked by a Bloomberg Business article citing unnamed sources who say there have already been preliminary talks with prospective buyers.

Industry analyst Jim McGregor, who heads TIRIAS Research, believes the rumors are credible. He says there are several good reasons why GlobalFoundries might be sold by the Abu Dhabi-controlled company that owns it.

McGregor says the emirate may be looking for cash to offset lost revenue due to low oil prices.

There may also be the sense that it is not getting the return it needs on its investment in GlobalFoundries.

“You have to look at the business perspective of it. GlobalFoundries has had its ups and downs, according to not only business cycles but some customer wins and losses,”  McGregor says.

He says there’s also been little progress on Abu Dhabi’s long term goal of relocating GlobalFoundries manufacturing operation to the Middle East.

“That’s obviously a challenge in terms of infrastructure and everything else, but I think they’ve also seen that its going to be a challenge in getting the technology transfer approved by the U.S. and European governments,” he notes.

When GlobalFoundries took over the IBM plants, called Fabs, in Essex Junction and East Fishkill, New York, McGregor predicted they could be shut down. He still believes that’s possible.

"I think they've ... seen that its going to be a challenge in getting the technology transfer approved by the U.S. and European governments." - Jim McGregor, TIRIAS Research

“There’s definitely concern about it. I would be more concerned about it if it doesn’t sell,” he says. “If it doesn’t sell and the management decides to cut back in areas, that might be an area to cut back in. Vermont is on the lower end of the technology curve. With that said, I’m told by GlobalFoundries that that Fab is doing very well.”

McGregor says within the industry there’s a very short list of companies in a position to purchase GlobalFoundries. They include Samsung and the Taiwanese company TSMC, which is the largest semiconductor manufacturer in the world.

Not everyone agrees that GlobalFoundries is seriously on the market, however.

“There’s a tremendous amount of investment that’s been made in the company," says Roger Kay, who heads Endpoint Technology Associates, which advises large technology firms. "There are these long term commitments. It would be surprising to me if they changed course suddenly, dramatically like this. My sense is that GlobalFoundries is basically hitting its stride now."

"It would be surprising to me if they changed course suddenly, dramatically like this. My sense is that GlobalFoundries is basically hitting its stride now." - Roger Kay, Endpoint Technology Associates

Kay says Abu Dhabi has considerable financial reserves and that the emirate is banking on oil prices going back up.

Nor does Kay believe there’s anyone in the market to acquire GlobalFoundries.  

“It’s not like folks are out shopping for expensive factories right now, so it’s hard for me to imagine who the buyers might be,” he says.

Kay believes the Essex Junction plant will remain important to GlobalFoundries, and the company will likely invest in it.

“Assuming that GlobalFoundries keeps it, and I don’t see any reason why it wouldn’t, it has to update it. It has to put in newer equipment and bring in newer processes and I suspect it will at some point,” Kay says.

GlobalFoundries has repeatedly said the Essex Junction plant is important to the company and it recently announced a $55 million investment there.