Business & Economy

GlobalFoundries division sale leads to layoffs of 78

Dignitaries attend a celebration in August 2017 at GlobalFoundries in Essex Junction. File photo by Mark Johnson/VTDigger

Dozens of former GlobalFoundries workers lost their jobs this week after a division of the company was sold.

The California company Marvell Technology Group Ltd. laid off 78 employees after taking full ownership of a GlobalFoundries division on Nov. 6.

Marvell said Nov. 7 in an unsigned email that the joining of the two companies had made some positions redundant “and have resulted in the elimination of a small percentage of positions worldwide.” SevenDays first reported the news on Wednesday. The state Department of Labor later confirmed the total number of layoffs.

Marvell had announced in May that it would buy GlobalFoundries’ Avera Semiconductor subsidiary for $650 million.

“This is a Marvell move; this is not a GlobalFoundries move,” said Laurie Kelly, vice president of global communications for the company in Malta, New York.

GlobalFoundries, which makes microchips for cellphones and other electronic devices, purchased the Essex Junction site from IBM in 2015. In June 2018, the company announced plans to begin a worldwide reduction in force of 5%, including at the Essex Junction site, which then had 2,500 employees.

GlobalFoundries now has 2,300 employees, said Kelly, making it one of Vermont’s largest employers. GlobalFoundries also has U.S. operations in Austin, Texas; East Fishkill and Malta, New York; and San Diego and Santa Clara, California. Kelly said this is the first year in a decade that the company will have a positive cash flow. The Marvell transaction is not the only reason, she noted.

“As a business, we’re doing quite well,” Kelly said.

Most of what goes on at semiconductor companies is related to the global industry overall, said Jeff Couture, the executive director of the Vermont Technology Alliance.

“It has more to do with the global semiconductor industry than it does to do with activity in any particular state, including Vermont,” said Couture, who this week was fielding calls about dozens of layoffs at the Essex Junction semiconductor maker.

The GlobalFoundries job cuts follow on the heels of other high-profile Chittenden County high-tech companies that have laid off workers.

In the last several days, the software companies Social Sentinel, and the former also announced job cuts -- timing that Couture called coincidental -- and the GlobalFoundries layoffs came up at Gov. Phil Scott’s weekly press conference Thursday.

"These are 78 people who had their livelihood taken from them,” said Michael Harrington, the deputy commissioner at the Vermont Department of Labor. 

"They don't always think about the impact they have on the state they're in ... or the local county,” Harrington said.

Whenever there are job cuts, Couture said he gets calls from journalists who are wondering if the company is going to close its Vermont plant altogether.

“People sort of jump to conclusions,” Couture said. “I was with IBM for years, and anytime there is positive news of hiring, there’s an assumption that the sky is the limit. If there are cutbacks, it must mean they are going out of business.”

But in the case of GlobalFoundries, he said, “it’s hard to predict where it’s going to go.

“Cutting staff is typically what happens when major companies take over others,” he said.

Microchips are manufactured at the plant in Essex Junction when it was IBM. Photo by Nat Rudarakanchana/VTDigger

Tom Torti, president of the Lake Champlain Chamber of Commerce, said he had no doubts the company planned to remain in place. 

“I’ve had conversations with the leadership of Global as late as two weeks ago and they were not talking about leaving at all,” he said. 

Semiconductors are a commodity product, and most of them are made in Taiwan. About 50% of the market share is held by Taiwan Semiconductor Manufacturing Co. or TSMC, according to the industry publication Trendforce. GlobalFoundries is the third-largest semiconductor company globally after TSMC and Samsung, but holds only 8.4% of the market share, said Trendforce, which estimated the company’s annual revenues as $1.2 billion. 

Like other commodity industries, semiconductors are subject to cyclical forces, with booms and busts. At the end of 2018, semiconductors entered one of those busts, said industry analyst Jim Handy, who works for a firm called Objective Analysis in Santa Clara, California.

“Whenever one of those bust cycles happens, the players start to look all around at their business and say, ‘Is this the best use of my resources?’” said Handy. “I am guessing GlobalFoundries did that and said, “The Essex Junction plant isn’t our most profitable, and therefore we’ll sell of a part of it.”

When Marvell bought the Avera division, Handy said, “the first step to make it more profitable is to cull out employees who are not essential to operations, so that’s where the layoffs probably have come from.”

Trendforce predicted that the privately held GlobalFoundries would see its revenues decline 18% this year over last.

“The forecasts are all over the place,” said Handy.

For all these reasons, there aren’t a lot of things Vermont can do to make sure the remaining GlobalFoundries jobs are safe. The company has an agreement with Green Mountain Power through September 2022 that provides it with stable and below-market power prices, and Gov. Phil Scott said at his news conference Thursday that the state wants to do everything it can to keep the company in place. 

Meanwhile, with an unemployment rate hovering around 2%, many of the technology workers who have lost their jobs over the past several days will have somewhere to go, Couture said, noting that there are 150 openings listed on the career section of the Technology Alliance website.

“I think there are some opportunities despite the negative news of people losing their jobs,” Couture said. 

Xander Landen contributed reporting.

Correction: This story initially incorrectly stated GlobalFoundries laid off the workers. The headline and story has been updated to reflect that in fact Marvell Technology Group laid off the workers.

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