Less than four years after GlobalFoundries assumed ownership of IBM’s East Fishkill plant, the site will have a new owner.

ON Semiconductor, a technology company that supplies semiconductor products, is purchasing the East Fishkill site in a $430 million deal that comes with a $720 million investment into the site over the next 10 years.

The company intends to hire most of the employees that directly support manufacturing operations at the site — at least 950 workers — officials said, as the plant will become ON Semiconductor’s first that can produce a 300-millimeter wafer.

The transaction was hailed as a positive for the region by local officials and at least one industry expert, who said the deal may indicate ON Semiconductor will stay in Dutchess County for an extended period of time.

While GlobalFoundries in recent years has reduced its workforce, ON Semiconductor has been taking steps to grow its business through acquisitions such as the East Fishkill purchase announced Monday.

As ON Semiconductor is a publicly traded company, Dutchess County Assistant Executive Ron Hicks pointed out it would not be able to abruptly close its operations as a private company like GlobalFoundries could.

“One of the things about ON Semiconductor is that they are driving energy efficient innovations, which I believe and I think a lot of people believe, are growth industries,” he said.

The transition period of the deal will stretch to the end of 2022, the companies said in a joint release.

GlobalFoundries has around 1,300 employees based in Fishkill, a site known in the company as Fab 10, according to company spokesperson Erica McGill. Those who do not directly support Fab 10 will be offered a position at another company location, including its Fab 8 site in Malta, McGill said.

Around 150 new jobs would also be created, according to a release from Gov. Andrew Cuomo’s office.

The East Fishkill site produces computer chips and semiconductors of varying sizes, including the 300 mm, or 12-inch, wafers ON Semiconductor is interested in producing. Wafers are silicon disks that include chips and are used to build semiconductors.

The site will begin producing 300 mm wafers for ON Semiconductor next year. As part of the agreement, the company will also receive the rights to GlobalFoundries’ technology license.

"This provides a world class, experienced 300 mm manufacturing and development team to enable conversion of ON Semiconductor wafer processes from 200 mm to 300 mm," according to the release.

ON Semiconductor paid $100 million at the agreement signing with GlobalFoundries, and will pay a remaining $330 million by the end of 2022, when it takes full control of the plant. Until then, GlobalFoundries will produce 300 mm wafers for On Semiconductor.

McGill said the "transaction helps retain the talent, investments and partnerships that keep New York at the forefront of advanced silicon development and manufacturing."

Empire State Development is providing up to $17.5 million in grants for ON Semiconductor's purchase of the East Fishkill plant, and $22.5 million in tax credits through the Excelsior Jobs Program over 10 years, according to the Governor's office. The Excelsior credits would be earned through the company’s “investment, new hiring and research and development,” at the Dutchess site.

In a statement, Howard Zemsky, president and CEO at Empire State Development, noted the transaction "will keep high paying manufacturing jobs in New York State and support the company’s plan for future growth and development."

Bernard Gutmann, executive vice president and chief financial officer for ON Semiconductor, said GlobalFoundries will begin to move its own 300 mm production beginning in 2020, and is “expected to exit East Fishkill by no later than 2025.”

Gutmann said ON Semiconductor “will manufacture wafers for GlobalFoundries for as long as 2025.”

Len Jelinek, an analyst specializing in semiconductor manufacturing with IHS Markit, said the acquisition would have little immediate impact, with ON Semiconductor essentially acting as a customer for GlobalFoundries during the transition

However, the acquisition puts ON Semiconductor in a position to compete with semiconductor manufacturers including Infineon and Texas Instruments, making the plant a valuable asset and benefiting the region.

“In the long term, this will be good for the facility,” Jelinek said. “ON is a proven and opportunity-driven company with a track record for internal expansion.”

ON Semiconductor is a "supplier of semiconductor-based solutions," according to its release, which helps "help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications."

Based in Phoenix, ON Semiconductor employs 36,000 people throughout its network in North America, Europe and the Asia Pacific regions. It has manufacturing hubs in 10 countries and design centers in 19 countries, according to its website.

The Fortune 500 company was founded in 1999 as a spin-off business from Motorola. It reported $5.8 billion of revenue for 2018, in such areas as computing, networking, automotive, LED lighting and military.

And, its acquisition Monday was not even its biggest in the last month. In late March, ON Semiconductor announced it would purchase Quantenna Communications, a wireless chipmaker, for $1.07 billion.

Dutchess County Executive Marc Molinaro said the East Fishkill site can be where ON Semiconductor continues its innovations “for automotive electrification, 5G mobile networks, alternative energy and more.”

GlobalFoundries officially took over the East Fishkill site on July 1, 2015. At the time, there were about 2,000 employees at the East Fishkill site. That number was down to around 1,500 last June, according to Journal archives, and has continued to shrink.

The company in June announced plans to cut about 5% of its workforce of 18,000 worldwide.

Jelinek said he doubted ON Semiconductor would move out of Dutchess as quickly as GlobalFoundries.

GlobalFoundries' decision to open in East Fishkill reflected an expansionist mode under former CEO Sanjay Jha, he said, while its current CEO Thomas Caulfield has focused on optimization.

“They’re not trying to dramatically increase their capacities,” Jelinek said.

With ON’s focus on growth an expansion, the East Fishkill plant provides the company with the opportunity to grow.

“And the site would be ON Semiconductors’ most advanced facility, and their only fully automated plant,” Jelinek said.

IBM established its East Fishkill site in 1962 and, for decades, the company’s success or failure played a large role in the Dutchess County economy on the whole.

In October 2014, when IBM agreed to pay GlobalFoundries $1.5 billion to assume ownership of its plants in East Fishkill and Burlington, Vermont, IBM was the still the largest employer in the county.

“We’ve had an entire economy and infrastructure built around one substantial employer,” Molinaro said. “It’s taken a number of years to transform the economic development effort to further diversify. This is a positive step toward insuring longer-term use at that facility, jobs for people who need them and continued support for what is an innovation revolution, growing jobs in the county for the past 18 months.”

The former IBM East Fishkill site itself has transformed in recent years, as well. Sloop Brewing Company, Beacon-based syrup producer More Good and food manufacturer Crepini are among those who have moved into the site, after National Resources acquired 300 acres of it to create its iPark 84 development.

But while its footprint in East Fishkill is now in the past, Hicks said the company still has an impact in Dutchess.

“A lot of people talk about IBM in the past tense,” Hicks said. “We still have one of the most relevant sites in the world for IBM with 4,000 people working here and the main frame is driving IBM’s revenue.”

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved