McQuiston: Global Foundries Investment

Nov 10, 2015

GlobalFoundries has invested $55 million into its Essex Junction plant to make another 5 million chips a day. Those semiconductors mostly will go into cell phones and tablets used worldwide. In fact, they'll be put into nearly every smart phone. Depending on the make and model, 5-12 Vermont chips are used in every device.

With the investment in hardware, the Vermont fab will increase total output by 15 percent to 10 billion chips a year. Yes, that's billion with a B.

In Vermont, GlobalFoundries develops and manufactures semiconductor wafers that are 8 inches in diameter - about the size of a personal pan pizza, if the pan were super super thin. The wafers themselves hold 20,000 nearly microscopic cell phone chips.

As impressive as the announcement itself was, the timing was fascinating. The decision to upgrade the Vermont plant was made when the plant was still owned by IBM, but after IBM decided to sell its semiconductor division to GlobalFoundries, so the new company was onboard with the investment.

The announcement also comes on the heels of GlobalFoundries using buyouts and even some layoffs in its North American operation to balance its workforce with its business needs. GlobalFoundries also has plants in East Fishkill, NY (also bought from IBM) and a new one in Malta, near Saratoga Springs.

The upstate New York press has reported that along with the buyouts, about 150 workers were laid off there. In Vermont, there were 100 buyouts and what executives said was "very few" layoffs. One local report had the layoffs as only a dozen here.

The Vermont plant has 3,000 employees. The two New York plants have about 5,000 combined.

A year or so from now things could get very dicey on the New York side because the IBM deal with New York State, which was tied-in to tens of millions of dollars in state incentives, required IBM, and now GlobalFoundries, to retain 3,100 employees, but only through 2016.

The world semiconductor business is a blood sport. Vermont is in a sweet spot right now because it makes mobile device chips and the global hunger for more and better smart phones will only grow. Because of the age and financial structure of the Vermont plant, it's the perfect place to make these relatively inexpensive chips.

But as local executives observe, their competitors are in Asia, where manufacturing, especially because of wages, is cheaper. There are no guarantees. Contracts come and go. Innovation and efficiency will be the keys to the Vermont plant thriving.