Editor’s note: This story was updated at 8:08 p.m.
[E]SSEX JUNCTION — GlobalFoundries completed its acquisition of International Business Machines’ semiconductor plants in Vermont and upstate New York on Wednesday. The companies announced the plan in October, and federal regulators cleared the deal Tuesday.
IBM paid $1.5 billion in cash to GlobalFoundries in exchange for $200 million in the California company’s assets and a 10-year contract for GlobalFoundries to be IBM’s exclusive provider of semiconductor chips. The tiny wafers are sold to intermediary companies and are eventually built into electronic devices such as cellphones and tablets.
Janette Bombardier (from left), senior location executive for the Burlington region, Mike Cadigan, former general manager of IBM microelectronics, and Brian Harrison, GlobalFoundries’ senior vice president of integration and factory management, speak at news conference Wednesday in Essex Junction. Photo by Sam Heller/VTDiggerBusiness leaders in Vermont said Wednesday that IBM had been saying publicly for a long time that it wanted get out of the business of manufacturing hardware, including semiconductors, and move toward building software. Political leaders said they feared the company would shutter its Essex Junction plant and bring the local economy down with it.
But Mike Cadigan, who was the general manager of IBM microelectronics and now serves as the head of the project management group for GlobalFoundries, said the new company plans to spend big money to stay and grow in the industry.
“Fundamental to GlobalFoundries, if you’re going to be in the semiconductor business, you’re going to be making major investments in technology,” Cadigan said. “The advancement needed to advance those nodes is in the billions of dollars. I think that the overall commitment by GlobalFoundries is we will be an industry leader.
“If you’re in this business, it’s a high-stakes game,” Cadigan said. “You invest because you have confidence in your people and you have confidence in your applications and how they’ll pick up in the marketplace. Certainly we are extremely, extremely positive.”
The company now has about 16,000 patents because of the acquisition, according to a news release. All of IBM’s employees in Essex Junction and East Fishkill, New York, were offered either new jobs with IBM or equivalent jobs with GlobalFoundries, according to Janette Bombardier, senior location executive for the Burlington region.
IBM had about 4,000 employees in Essex Junction when the company announced the sale, down from about 8,000 when it hit its peak in the 1990s. About 3,000 of those former IBM workers started new jobs with GlobalFoundries on Wednesday.
Several hundred other workers stayed on the campus to work for IBM. The non-semiconductor operations are now essentially renting from GlobalFoundries on the Essex Junction campus.
The employees’ wages stayed the same as they were under IBM, Bombardier said. Fringe benefits for workers are substantially similar, she said, and the company will match up to half of a worker’s 6 percent contribution to a 401(k) retirement plan.
Earl Mongeon served as vice president of Alliance@IBM, a group of IBM employees that sought to unionize when the company made changes to its employee pension plan in 1999. Mongeon retired Tuesday from IBM with full benefits and started a new job Wednesday with GlobalFoundries.
“The morale has taken a beating in the past three years here,” Mongeon said. “It was pretty depressing not knowing how long they would be here or how long they’d be around. We have a facility that’s probably been neglected for 10 years now. IBM just wasn’t investing.
“Even before today (GlobalFoundries) were investing in new equipment,” Mongeon said. “They were trying to improve the maintenance of some of the old equipment that we have. So far to me it’s been a pretty positive thing. Most of the employees I’ve talked to (have) kind of a wait-and-see attitude.”
IBM’s Essex Junction facility now belongs to GlobalFoundries. Photo by Sam Heller/VTDiggerBrian Harrison, GlobalFoundries’ senior vice president of integration and factory management, said the company has invested $15 billion in its so-called Northeast Tech Corridor, which will now include “Fab 9” in Essex Junction and “Fab 10” in Fishkill, referring to fabrication plants. About $10 billion went to an existing plant in Malta, New York.
Harrison said GlobalFoundries has about 250 customers that are intermediary companies that build the chips into larger products, and sell them to end-users who make products like cellphones. GlobalFoundries’ internal contracts forbid them from naming customers to the news media, he said, but the “who’s who of the end users” rely on the company’s chips.
Frank Cioffi, executive director for the Greater Burlington Industrial Corp., estimated that about 10,000 families in and around Chittenden County have incomes that depend either directly or indirectly on Vermont’s IBM — now GlobalFoundries — plant.
“We really see this deal as the best possible outcome of what could have occurred,” Cioffi said. “What IBM found in GlobalFoundries was a partner with very significant financial resources and a very firm commitment to move forward and with aspiration of being number one in the industry.”
Gov. Peter Shumlin said in a statement that “questions about the future of the IBM facility have caused anxiety for employees, state officials, community members, and many others” for years.
“Today we know that a stable and thriving workforce will remain right here in Vermont,” Shumlin said. “I am extremely encouraged that GlobalFoundries has committed to continuing to support and invest in cutting edge technology and the quality workforce we have in Vermont.”
Tom Torti, president of the Lake Champlain Regional Chamber of Commerce, said the business community has seen a deal on the horizon since IBM invested in New York in the 1990s instead of Vermont.
“We’ve talked to the community a lot about life after IBM … and there’s no way you replace that number of jobs, and there’s no way you bring in jobs that pay at that level in this day and age, Torti said. “This is the best outcome that could have happened.”
“It ensures that all of the businesses that live downstream of IBM-Global can continue, and that’s everything from the dry cleaner, to the bakery shop, to lawyers, to you name it,” he said.
Pat Moulton, secretary of the Agency of Commerce and Community Development, said there are no immediate plans to give GlobalFoundries money from the Enterprise Fund, a $2.5 million cash incentive that was once earmarked for IBM.
Moulton said conversations about how Vermont can help the company develop its workforce through relationships with local colleges will start now.
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