GlobalFoundries In Malta New York: Unexpected Link In Global Supply Chains

As you drive through the farmland of the Hudson River Valley in upstate New York, the last thing you expect is to find a factory that is a key link in many global supply chains. Yet GlobalFoundries’ Fab 8 in Malta, NY is testimony to the complexity of the network that many firms employ to deliver all kinds of products to consumers’ doorsteps.

Fab 8, which is one of GlobalFoundries’ most advanced semiconductor fabrication facilities, represents almost $15 billion in investments made over the last decade. Close to $4.5 billion of that was in construction costs for the half-million square foot cleanroom and supporting infrastructure, and $10 billion for the advanced tools needed to make leading edge semiconductor devices. Fab 8 is among the most advanced non-captive semiconductor foundries in the United States, a facility that exclusively produces semiconductor devices for “fabless” design companies like Qualcomm, AMD, or NXP Semiconductors. Samsung also has a foundry in Austin, Texas, but all of the other leading edge U.S. fabs belong to Intel, who has them in Hillsboro, Oregon, Chandler, Arizona, and Rio Rancho, New Mexico (though New Mexico might no longer be considered leading edge).

The fab itself is impressive. While it is not nearly as large as TSMC’s Fab 12 in Hsinchu, Taiwan (or its Fab 14, 15, and 18 for that matter), there are still around a thousand tools on the floor laid out in a unique expression of the company’s workflow strategy. As with other fabs of this class, the highly automated 300 mm wafer handling and real-time dispatching system ensure that very few people actually are physically in the cleanroom. Most are sitting in front of computer display screens outside, monitoring or controlling things remotely.

Our tour guides were from the factory automation engineering team, and they were role models for the types of high-tech jobs that a facility like this creates. Both had associate’s degrees, and as they explained their automation and work-in-process handling strategies, one couldn’t fail to be impressed with the depth and sophistication of their engineering skills. Fab 8 has brought approximately 3,000 jobs to this predominantly agricultural region. It is a fitting complement to the historically important General Electric Research Labs. One of the first industrial research laboratories founded in Schenectady 120 years ago, less than 20 miles away. GE Research did pioneering work on vacuum tubes, for those of us old enough to remember what those were.

There was a lot of hand-wringing in industry circles and in Washington when GlobalFoundries dropped out of the race to produce the most advanced semiconductor devices at 7 nanometers and smaller. Our fab visit gave us a fresh perspective on this issue. To put it succinctly, $15 billion of capital investment does not give you enough scale to compete at the most advanced semiconductor nodes. You would actually need several times that amount to first install the capacity, and then generate revenue sufficient to earn a return on such a huge investment. That’s a crapshoot on a par with putting people into space. Maybe that’s why government programs like Made in China 2025 are looming larger in this sector – the investment needs are almost out of reach unless you are number one in the space, or you are willing or able to receive subsidies.

GlobalFoundries was originally a spin-off of AMD’s manufacturing operations. The company acquired the former Chartered Semiconductor in Singapore, and IBM’s semiconductor operations in Burlington, Vermont, and East Fishkill, New York, though it recently sold the latter to ON Semiconductor. For years, AMD was a key customer and partner, and GlobalFoundries’s 14 nm process was (and continues to be) key to many of AMD core products like its Radeon graphics processor.

Much has been made of AMD’s recent success in competing with Intel. Credit for some of that success was attributed to a decision to pivot its manufacturing from GlobalFoundries to Taiwan Semiconductor Manufacturing Company (TSMC), for which it reportedly paid a $325 million break-up fee to exit its exclusive supplier agreement with GlobalFoundries. That report made it sound like a hostage deal, but the real problem was different – GlobalFoundries could not make the economics for investing in the most advanced processes work, so AMD really didn’t have much choice. There was nowhere else for it to go to.

IBM used to have its own captive semiconductor manufacturing as well. Its priority then was to maintain process technology leadership to ensure that chips it produced for its mainframes would have an advantage in the marketplace. But it didn’t have the production scale necessary to justify continuing investments, so ultimately it sold its operations to GlobalFoundries. Actually, it gave GlobalFoundries a long-term contract to take over its fabs and manufacture for it. I thought IBM, a pioneer in semiconductors with inventions like the one-transistor dynamic random access memory (DRAM) design, silicon-germanium/strained silicon, and copper chip interconnects among countless other important inventions, leaving the semiconductor business was a national tragedy for the U.S. One has to wonder if Intel is about to face the same dilemma with its own captive manufacturing. There have been reports that it is considering outsourcing to TSMC as well. Such a loss of U.S. leadership there would be another national tragedy.

The products on display in the Fab 8 lobby were a testimony to the key role the facility plays in many global supply chains. From graphics processors used in my preferred video editing platform to radio chips used in smartphones, likely the majority of the output of the facility was exported to Asia for assembly into electronic devices. As we were talking with our host, the U.S. Fabs manager for the company, he challenged us to find a smartphone assembled anywhere that didn’t have multiple silicon chips fabricated by the company. That means a surprising number of global supply chains wind their way through the wooded hills of Malta, New York.