GlobalFoundries sold the 300-mm fab for $430 million as the foundry slims down and ON upgrades its analog business.
GlobalFoundries will sell its 300-mm Fab 10 in East Fishkill, New York, to ON Semiconductor for $430 million. The deal is the second and largest of three sales, restructuring the foundry to pursue profits as a provider of specialty processes.
The duo will take until 2022 to transition a variety of GF’s processes and customers out of the former IBM fab. ON is expected to retain the roughly 1,300 people at the fab as it ramps up power and other semiconductor processes there in a transition expected to be completed in December 2022.
The deal is the largest step to date in GF’s decision in August 2018 to pivot away from pursuing leading-edge process technology. It also underscores the increasingly competitive nature of the business of making semiconductors.
For ON, the deal marks a low-cost route to its first 300-mm fab as well as access to GF’s 45-nm and 65-nm processes to compete with ON’s analog rivals. ON expects to use the fab to make its mid- and high-voltage power MOSFETs, trench IGBTs, analog, and bipolar CMOS/DMOS (BCD) components for a variety of automotive, data center, and industrial markets.
In January, GF sold its 200-mm Fab 3E in Singapore to Taiwan’s Vanguard for $236 million. It is close to announcing a third and final sale — probably a process-technology transfer — as part of the restructuring under the new CEO.
“We still have something in our portfolio that doesn’t make sense for us as a foundry … We are closing in on a great partner, so we don’t compete with our customers,” said Tom Caulfield, who took over as chief executive at GF in March 2018.
The deal, coming soon, will be smaller than the Fab 10 sale in dollars and people. “Everything after that is off to the races; we will be finished re-positioning the company and going on the offensive,” Caulfield said.
Going forward, GF is consolidating its business into three large 300-mm fabs — its Fab 1 in Dresden, Fab 7 in Singapore, and Fab 8 in Malta, New York. Only half of the Dresden floor space has tools installed, and with its decision to exit the 7-nm business last year, Malta has 40% of its floor space available.
“We can grow 1.4× from our expected 2019 revenues without putting a shovel in the ground,” said Caulfield.
GF expects to reap about $600 million in free cash flow this year on about $6 billion in revenues after spending an estimated $1.4 billion in capex and R&D. “This is our 10th year and the first year that we are free-cash-flow–positive,” Caulfield said.
Just when the privately held GF gets out of the red is unclear. “We still have a big depreciation overhang, but for a growing company, the best measure of success is positive cash flow,” he said. “We are an EBITDA business, managing free cash flow until further notice.”
GF will focus on enriching existing processes with new features. For example, it has started production of its 22FDX process in Dresden and will be in production with embedded MRAM in the process next year.
Analysts gave the deal mixed reviews.
The deal is a win-win, said Handel Jones of International Business Strategies. ON gets a trained workforce and discounted 300-mm fab, where it could build its products at the equivalent of 60,000 wafers per month. GF could not produce more than 12,000 wafers/month of its more complex designs there, Jones said.
“This could be a move to simplify things if GF’s parent wanted to sell the company to TSMC, UMC, etc.,” said Bill McClean, president of IC Insights. “I have always believed that owning the IBM fabs would make it nearly impossible to sell GF to a foreign entity, especially these days.”
ON sees six-year transition with East Fishkill fab
GlobalFoundries will help ON transition from 200-mm to 300-mm designs and license to ON its 45-nm and 65-nm processes. The capabilities could give ON a big leg up against its rivals.
The 212,000-square-foot clean room and 70,000-square-foot back end at East Fishkill gives ON headroom to expand sales by $2.2 billion per year. However, it expects to take up to six years to fully use the plant.
Beyond the $430 million purchase price, ON expects to spend about $270 million on gear and R&D transitioning the fab to its products. By contrast, building a new 200-mm fab would have cost up to $1.7 billion. The $430 million price tag is one-third of what ON would have spent building its own 300-mm fab, it estimated.
Today, ON makes a significant minority of its products — such as image sensors — at 300-mm foundries. Like many of its analog rivals, it makes most of its products internally, using specialty processes in its own fabs, most of them on 200-mm wafers and some older 150-mm wafers.
The deal will shift the former IBM fab to significantly simpler products. For example, under GF, the average number of mask steps per product is now 41. It is expected to be about six to seven mask steps for ON’s products.
Under the deal, GF will start making wafers for ON next year as the two transition the fab. ON will supply GF with wafers until 2025 if needed as part of the transition. The deal comes less than a month after ON acquired high-end Wi-Fi specialist Quantenna.
IBM’s former jewel, a diamond in the rough in China
When it was commissioned, the East Fishkill fab was one of the early 300-mm facilities, a crown jewel for IBM. Today, the facility, capable of churning out 12,000 wafers/month, is dwarfed by so-called gigafabs that make a return on investment through much higher wafer volumes.
GF bought the fab as part of a broader deal with IBM finalized in 2015. Even under IBM, the fab became bogged down delivering a fragmented set of processes for IBM and its ASIC customers.
Fab 10 currently runs a specialty 14-nm process with silicon-on-insulator for embedded DRAM to make IBM’s POWER processors. It also runs 45-nm and 32-nm nodes for ASIC customers, an emerging process for silicon photonics components, and two specialty processes for RF chips — 45RFSOI and 8SW.
The fab was originally built to make 90-nm chips. “IBM made what it needed and looked for [external] markets [to fill the fab],” said Caulfield, who joined GF when it bought the fab and later brought up GF’s Malta plant. “It became a one-stop shop for all sorts of technologies.”
“I made my career bringing that fab up,” he said. “It’s a testament to how fast the technology moves. This facility and team keep finding ways to add value.”
The 45RFSOI processes will shift to GF’s Singapore plant. The 8SW and silicon photonics nodes will move to Malta.
Meanwhile, Caulfield has another big item on his to-do list — finding a second partner to get off the ground is China joint venture in Chengdu. A shell has already been built in a deal announced in early 2017, but no tools have been installed.
“We’re still looking for the right partnership model for demand certainty with participation of a customer,” Caulfield said. “There’s no sense facilitating a facility no one will use.”
“The days of a field of dreams — ‘build it and they will come’ — has fallen by the wayside,” he said. “We’re confident we’ll get the right partner — it’s just a matter of time.”