IBM Sells Chipmaking Division

thetrailboss · Oct 20, 2014

Vermont's Essex Plant and New York's Fishkill Plant are part of the deal. IBM is PAYING Global Foundries to BUY the division.

http://www.nytimes.com/2014/10/21/b...eports-weak-earnings.html?ref=technology&_r=0

http://www.bloomberg.com/news/2014-...lfoundries-1-5-billion-to-take-chip-unit.html

Vermont officialdom is trying to spin this as a good development and that jobs will remain in Vermont. But GF has just opened a large facility in NY, has secured big tax breaks from NY, and really is interested in IBM's patents and personnel. It would appear that the writing is on the wall.

mister moose · Oct 20, 2014

They are also going to teach their facilities in Germany and Singapore to make Essex Junction production. More handwriting.

Puck it · Oct 20, 2014

Essex is old tech. It should be shutting soon anyways. And they are not up to speed on current tech, first hand experience.

Geoff · Oct 20, 2014

I've been predicting the closure of the Essex Junction plant for years. I've used several devices that used to be fab'd there that were pushed offshore. Vermont has done a lot of arm twisting over the last decade+ to make sure IBM didn't close the plant. The new owners are 100% owned by Abu Dhabi. You're not going to be able to twist arms there. Best case, they keep a couple hundred engineers and related support staff after they shut down the fab lines. You really want to keep those chip developers to support their designs. Many of them won't want to leave Burlington and would swap employers to move to their city of choice rather than where the new overlords want to transfer them to. I'm not sure how many designers are at that plant. For the chips I used, the designers were in Research Triangle Park.

If the plant closes, this will be catastrophic to Chittenden county. It simply can't recover from the loss of 5000 tech jobs. The other major employers are UVM and the hospital. Both rely on a big chunk of state assistance. When you remove 5000 tech jobs and the usual 10x multiplier to the local economy for those jobs, it creates an enormous state tax revenue shortfall that will be tough to make up. It will also likely crash the housing market in Chittenden County. If you're contemplating retiring to Burlington to have skiing an hour away and the lake right there for the summer, there might be some real housing bargains soon as Burlington does a Cleveland.

deadheadskier · Oct 20, 2014

Likely to be catastrophic for sure. Education, Healthcare and Financial services can only sustain so much in the Burlington area. Foreclosure market will likely be busy.

thetrailboss · Oct 21, 2014

deadheadskier said:
Likely to be catastrophic for sure. Education, Healthcare and Financial services can only sustain so much in the Burlington area. Foreclosure market will likely be busy.

It's kind of funny (and sad) that folks in Burlington think they are (or will be) a high tech economy/destination. I think I just heard that Google just passed over BTV for its high-speed fiber network for Stowe (probably because Google execs ski there).

BTV has a fraction of what is in the 128 belt and probably the same for Utah. I went to a big Utah business lunch today where they recognized the 100 fastest growing Utah companies. Night and day compared to VT. Utah is home to Novell, Adobe, Domo, Backcountry.com, 1-800-contacts, eBay/PayPal, and tons of smaller startups. Median age at today's event: I'd say 30ish. Speakers said they can raise money to expand and find a supportive state government. One said she loved that she had support from the community so that her company could grow creating jobs, opportunity, helping the community, and helping make better schools, etc. Meanwhile Vermont candidates are campaigning on taxing the "top", soda, plastic bags, and anything else to try to pay for the programs they need to address the state's rising poverty/drug/crime problem. I think I know what I'd prefer....

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deadheadskier · Oct 22, 2014

VT does okay with certain company start ups from a lifestyle ideal. You get talented individuals that graduate from UVM, St. Michael's, Champlain, etc. (or even drop outs) and they come up with IDX, Ben & Jerry's, Green Mountain Coffee, Burton, etc.

You still have some decent companies in Burlington that would normally choose to relocate. Seventh Generation is a great employer in Burlington that's wed to the area and willing to accept the tax environment. I've got a few friends who do really well working for dealer.com.

General Dynamics is probably still a decent employer in the area.

All of these are several hundred employee companies vs. the several thousand that IBM is/was.

Burlington is one of the most incredibly compelling quality of life destinations in the country with the lake and the mountains. Portland, ME is the same with it's ocean and access to the outdoors. Both areas struggle landing community defining employers.

From a community planning perspective, I would think they should both try and model themselves after a place like Seattle.

Actually even on a smaller scale, those areas should look at what's worked for Portsmouth, NH with the Pease Tradeport. Pease Air Force Base closed in 1991 and people thought it would be coffin nails for the local economy. Today, the former base now has 7K mostly well paying hi - tech jobs. I bet all the tech companies in Pease bring way more to the local economy here on the seacoast, than IBM does in Essex.

What does Pease and NH offer to bring companies to the NH seacoast that VT won't do in Chittenden County? You've got the educated workers right there to retain.

Geoff · Oct 23, 2014

deadheadskier said:
What does Pease and NH offer to bring companies to the NH seacoast that VT won't do in Chittenden County? You've got the educated workers right there to retain.

Where do I start?

No personal income tax
No sales tax
Much lower business costs for health insurance, unemployment insurance, and workmans comp
Much lower corporate income taxes
Much lower property taxes. The Vermont Act 68 school tax alone is 1.77% and then tack on the muni taxes.
Much better access to an enormous well-trained labor force
A world class airport is 55 miles away with hourly bus service and a free bus lot

How about Act 250 hurdles to actually build commercial structures? New Hampshire has nothing like that.

No 7 figure salary corporate exec is going to want to pay Vermont personal income taxes. Vermont basically has pretty much no rich people who declare the state as their residence. Why would you?

The NH Seacoast isn't just Pease. It's also an executive and professional bedroom town for metro-North Boston. When I spent my decade there, I commuted to Salem, NH for most of it. I know lots of people who commute down to the 128 and I-495 tech belts.

Chittenden County has a population of 159,000. IBM Essex Junction employs 5,000+. The usual local economy multiplier for tech jobs is 10x but let's call it 5x. It's going to be disastrous if it does close.

thetrailboss · Oct 26, 2014

deadheadskier said:
VT does okay with certain company start ups from a lifestyle ideal. You get talented individuals that graduate from UVM, St. Michael's, Champlain, etc. (or even drop outs) and they come up with IDX, Ben & Jerry's, Green Mountain Coffee, Burton, etc.

You still have some decent companies in Burlington that would normally choose to relocate. Seventh Generation is a great employer in Burlington that's wed to the area and willing to accept the tax environment. I've got a few friends who do really well working for dealer.com.

General Dynamics is probably still a decent employer in the area.

All of these are several hundred employee companies vs. the several thousand that IBM is/was.

Burlington is one of the most incredibly compelling quality of life destinations in the country with the lake and the mountains. Portland, ME is the same with it's ocean and access to the outdoors. Both areas struggle landing community defining employers.

From a community planning perspective, I would think they should both try and model themselves after a place like Seattle.

Actually even on a smaller scale, those areas should look at what's worked for Portsmouth, NH with the Pease Tradeport. Pease Air Force Base closed in 1991 and people thought it would be coffin nails for the local economy. Today, the former base now has 7K mostly well paying hi - tech jobs. I bet all the tech companies in Pease bring way more to the local economy here on the seacoast, than IBM does in Essex.

What does Pease and NH offer to bring companies to the NH seacoast that VT won't do in Chittenden County? You've got the educated workers right there to retain.

I get what you're saying and agree to some extent but the big thing is that "quality of life" and pretty landscape means nothing if people can't afford to live there. There have been many good startups in VT for sure, but the business environment pretty much assures that they are sold and uprooted before they get to be big time.

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jack97 · Oct 26, 2014

thetrailboss said:
There have been many good startups in VT for sure, but the business environment pretty much assures that they are sold and uprooted before they get to be big time.

Sometimes a startup is formed for the sole purpose of being bought. Lot's of variables come into play but if you look at the financials, the key players, the venture capitalist and the product offering one can get an idea of the "exit" strategy.

In addition, the state's taxation comes into play on whether its a good business environment for being bought out. Back 10 to 20 years ago, Mass VC would favor investment in CA startups rather than companies in their own state due to tax reasons alone.

BTW, in terms of the essex foundry, that's a tuff business to be in right now. You can get obsoleted within 5-7 years with other foundries are coming on line with favorable cost. Over at Hudson MA, they are shutting down the old DEC/Intel foundry. IIRC they made the first pentiums for Intel motherboards.

bigbog · Oct 26, 2014

An issue for communities away from the company-laden cities is diversity of jobskills for the skilled workforce, with efficient transportation to/from worksite(s).
NH's economic environment, as listed, is so attractive for companies to prosper in...as well as pretty nice quality of living, once you get away from your small cities and mid-town congestion of larger towns. Southern to mid-NH...along with southern ME, is as flexible as one can get for working & living.
There are plenty of highly successful people living in VT and ME as the quality of life is so much better the further you get from the urban congestion of the Boston-Providence-Southern NH, but they made their wealth in the larger cities.

[QUOTE-jack97;666666]
BTW, in terms of the essex foundry, that's a tuff business to be in right now. You can get obsoleted within 5-7 years with other foundries are coming on line with favorable cost. Over at Hudson MA, they are shutting down the old DEC/Intel foundry. IIRC they made the first pentiums for Intel motherboards...[/QUOTE]

Shows that insight to the future doesn't come with bought degrees.....there were guys @DEC, in the 80s, with great ideas of development in the web, Olsen put a few of em' in the back corner of bldgs in Chelmsford..with instructions to "Cut the Networking Crap"...

Puck it · Oct 26, 2014

jack97 said:
BTW, in terms of the essex foundry, that's a tuff business to be in right now. You can get obsoleted within 5-7 years with other foundries are coming on line with favorable cost. Over at Hudson MA, they are shutting down the old DEC/Intel foundry. IIRC they made the first pentiums for Intel motherboards.

BTW
Essex is old technology in chip processing large line widths that are being obsoleted and moving to newer lines that becoming cheaper and more efficient. This is the norm in the fab business as is the case in Hudson. The fab has run its useful life. There are some situation where older will stay operating like analog or power devices but neither these make those.

Also, Hudson did not make the first Pentiums all logic devices for Intel are developed in Oregon at the D Fabs then they are moved to production Fabs. They made older logic device in Hudson.

jack97 · Oct 26, 2014

Puck it said:
Also, Hudson did not make the first Pentiums all logic devices for Intel are developed in Oregon at the D Fabs then they are moved to production Fabs. They made older logic device in Hudson.

Yep, you're right, Hudson never fab the Pentiums for Intel but it fab either the predecessors or less powerful cpus. I was going by memory and speculation, DEC and Intel were playing tit for tat about patent infringements between the Alpha and Pentium. And some speculated that Intel would turn it into Pentium line when they bought that fab.

I think the main point is a foundry nowadays can be relocated to any state or country because the intellectual property needed can be easily transported to the facilities by buying that knowledge or leveraging it from past experience. The state of the art has made foundries at the same level as any other factory.

Puck it · Oct 26, 2014

jack97 said:
Yep, you're right, Hudson never fab the Pentiums for Intel but it fab either the predecessors or less powerful cpus. I was going by memory and speculation, DEC and Intel were playing tit for tat about patent infringements between the Alpha and Pentium. And some speculated that Intel would turn it into Pentium line when they bought that fab.

I think the main point is a foundry nowadays can be relocated to any state or country because the intellectual property needed can be easily transported to the facilities by buying that knowledge or leveraging it from past experience. The state of the art has made foundries at the same level as any other factory.

If you are talking about existing foundry Fabs. It is not really easy to transfer a process from one fab to another if the tool set is different. It can be down but takes time and money. A new fab costs well over $1B to outfit.

jack97 · Oct 26, 2014

Puck it said:
If you are talking about existing foundry Fabs. It is not really easy to transfer a process from one fab to another if the tool set is different. It can be down but takes time and money. A new fab costs well over $1B to outfit.

Agree. However, the industry has a surplus of engineers and they can be hired to minimize that impact. The other is that there has been a successful push for "fabless" designs, meaning the IC can be targeted for a wide range fabs.

Puck it · Oct 26, 2014

jack97 said:
Agree. However, the industry has a surplus of engineers and they can be hired to minimize that impact. The other is that there has been a successful push for "fabless" designs, meaning the IC can be targeted for a wide range fabs.

Not really a surplus of qualified engineers. The surplus are mostly NCG's and no experience. Yes that is the foundry model. But to transfer a process is big deal.

AdironRider · Nov 4, 2014

thetrailboss said:
It's kind of funny (and sad) that folks in Burlington think they are (or will be) a high tech economy/destination. I think I just heard that Google just passed over BTV for its high-speed fiber network for Stowe (probably because Google execs ski there).

BTV has a fraction of what is in the 128 belt and probably the same for Utah. I went to a big Utah business lunch today where they recognized the 100 fastest growing Utah companies. Night and day compared to VT. Utah is home to Novell, Adobe, Domo, Backcountry.com, 1-800-contacts, eBay/PayPal, and tons of smaller startups. Median age at today's event: I'd say 30ish. Speakers said they can raise money to expand and find a supportive state government. One said she loved that she had support from the community so that her company could grow creating jobs, opportunity, helping the community, and helping make better schools, etc. Meanwhile Vermont candidates are campaigning on taxing the "top", soda, plastic bags, and anything else to try to pay for the programs they need to address the state's rising poverty/drug/crime problem. I think I know what I'd prefer....

Sent from my iPhone using AlpineZone

Doesn't hurt that UT has access to I 70 AND 80 east to west, and I 15 north to south.

Hence the location of bc.com and 1800 contacts. Those places live and die based on cheap and easy shipping.

So not quite apples to apples but no major company is going to post up a hundred miles from any major shipping artery.

thetrailboss · Nov 4, 2014

AdironRider said:
Doesn't hurt that UT has access to I 70 AND 80 east to west, and I 15 north to south.

Hence the location of bc.com and 1800 contacts. Those places live and die based on cheap and easy shipping.

So not quite apples to apples but no major company is going to post up a hundred miles from any major shipping artery.

Well SLC has a major airport. That's the big thing.

Vt has I89, I91, and I93.

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Geoff · Nov 4, 2014

Puck it said:
Not really a surplus of qualified engineers. The surplus are mostly NCG's and no experience. Yes that is the foundry model. But to transfer a process is big deal.

I designed the IBM Rainier network processor into a product. That was fab'd in Essex Junction but the engineers who designed the chip were in RTP. IBM sold that business unit to Hifn. Some of the engineers in RTP went to the new company. FAB moved to Asia and was up and running in about a month. There's nothing I know of that IBM is doing in Essex Junction that is particularly unique.

Nick · Nov 5, 2014

That's a bummer. Are they producing older style chips in Essex, like Puck it mentioned?

The rural areas are tough. I do however wonder if increases in WFH capabilities at jobs (my job, for example, lets me WFH 2 - 3 days per week) means commute or location don't matter as much, if at all. The ability to earn a good salary and live somewhere that might not have local jobs in that tier can only be good for everyone right.

IBM Sells Chipmaking Division

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