McQuiston: IBM in VT

Mar 14, 2014

The other day, I was talking with a recently retired engineer from IBM. He had worked at the Essex Junction plant for the better part of his career and was happy he didn’t have to worry about the seemingly constant chatter about the future of the Vermont plant and, indeed, the future of IBM itself. In contrast to current IBM employees, he didn’t seem very concerned. Granted he’s retired, but still…

In the run-up to the recent round of layoffs, which occurred in late February and cost about 140 Vermont jobs and thousands around the globe, there had been lots of speculation about what would become of the plant. This round of layoffs, like the one last June, had been widely expected. In less than a year, IBM has cut more than 500 jobs in Vermont.

The Vermont plant produces 200 millimeter wafers. The IBM plant down in East Fishkill, New York, makes 300 millimeter wafers. A new chip-making plant near Albany owned by GlobalFoundaries also produces 300 millimeter wafers. These things look like over-sized DVDs – and m any tiny chips are produced on each wafer.

The Vermont and East Fishkill plant s are both part of IBM’s Systems & Technology Group. IBM has made no secret that it’s trying to sell the STG, or at least divest the manufacturing part of it, including the Vermont plant.

IBM, which has already set aside one billion dollars for restructuring in this fiscal year, must do something bold to shake off its recent mediocre financial performance. Revenues are down and its stock price is languishing.

IBM wants to sell its legacy hardware divisions in whole or in part, but it has yet to find a buyer for its chip plants.

The Vermont plant still has value. It’s paid for and efficient. While it’s impossible to know exactly what IBM produces where, producing analog chips is clearly a focus at the Vermont plant. Analogs are much smaller than the digital chips and there’s a large market for this type of chip – that’s used to process speech, music and video.

The Vermont plant also does Department of Defense work, which is both a blessing and a curse. It’s a blessing in that there’s always work and that work, by law, has to be done in the US by American companies. The curse is that there aren’t really any obvious domestic buyers. Even California-based GlobalFoundries is owned by the Emirate of Abu Dhabi.

But if a new owner is found, my friend said the plant could run for a good five or ten years more .

That means, even with a buyer, we’d probably have to go through all this again in another 10 years, but I think we’d all take it.