GlobalFoundries Stresses Commitment To IBM Essex Plant

Nov 12, 2014

When GlobalFoundries takes over IBM’s semiconductor plant in Essex Junction, employees there will become part of a young company that has grown rapidly in the five years since it was established.

The IBM facilities in Vermont and East Fishkill, New York will join a worldwide network of eight GlobalFoundries fabrication plants, or "fabs," that currently employ more than 13,000 people.

The Malta, New York Fab 8 plant is the newest GlobalFoundries fab, with 2,500 workers and plans to expand by another 500 employees in the near future.

Tom Caulfield is the plant’s general manager and a senior vice president at GlobalFoundries.

"We didn't buy these assets to say, 'we’re going to shut them down'. We bought them to run them and make them profitable." - GlobalFoundries Senior Vice President Tom Caulfield

Speaking before an open house this week at the Fab 8 plant, Caulfield sought to dispel concerns that there would be any significant changes in Essex in the next four or five years, following a series of layoffs by IBM.

Caulfield said to look beyond the next few years  would simply be speculation.

He explained that acquiring IBM’s Essex plant gives GlobalFoundries expertise, intellectual property and products it doesn’t currently have.

“We didn’t buy these assets to say, ‘We’re going to shut them down’. We bought them to run them and make them profitable. Our business model is to have economic scale,” he said.

The word "buy" may be a misnomer in this case. In the deal announced last month, IBM has agreed to pay GlobalFoundries $1.5 billion to take the plants.

Caulfield says GlobalFoundries’ size as a semiconductor manufacturer gives it an economy of scale and an ability to meet demand that IBM couldn’t accomplish with its more limited chip production capacity.  

“One of the biggest drawbacks that the Burlington team had, is they had more demand than capacity,” said Caulfield. “Now we can build some of that not only in Burlington but in our other factories as well.” 

Asked about the possibility of moving the higher paying engineering and research and development jobs from Essex Junction, Caulfield said that wouldn’t be prudent or useful.

He cautioned that it’s too early to answer many questions about the future of the plant, including what the state can do. 

GlobalFoundries officials say New York State has invested $1.5 billion in grants and tax credits in the Malta plant. Vermont has a tax credit program and a $4.5 million Vermont Enterprise Incentive Fund, which are tiny in comparison.

“Five million or four million is better than zero if it helps move the ball forward,”said Caulfield, explaining that the Essex Junction facility is less expensive to operate that the plant in Malta.

Roger Kay, a tech industry analyst whose clients include IBM and GlobalFoundries customers, says only a handful of companies are making semiconductors today and investments by the Emirate of Abu Dhabi have enabled the company to grow.

Kay believes the Essex plant will benefit from that growth.

“IBM has been looking for an exit for years from that business: ‘This is an albatross, we don’t want it, we want to get out.' That’s not a good atmosphere,” says Kay.

“GlobalFoundries thinks ‘we want it, we want to make use of it, we think we can turn it around and make money with it.' That’s a lot more positive message. The locals should be somewhat reassured by the messages coming out of GlobalFoundries,” he said.  

The transfer of IBM’s microchip manufacturing plants to GlobalFoundries is expected to take place next year, following approval by the federal government.