Malta

GlobalFoundries is laying off hundreds of workers at its Fab 8 computer chip factory in Malta this week as part of a dramatic shift in strategy away from cutting-edge chips and the research needed to perfect them.

The company says it is freezing its program to make next-generation chips using 7 nanometer architecture, an expensive undertaking that has required billions of dollars in capital committed by the company's Abu Dhabi backers over the past two years.

Fab 8 employs roughly 3,400 people and has an annual payroll of $345 million, with the average worker making between $80,000 and $90,000. Employees are recruited from all over the world due to the technical nature of the work.

Company officials wouldn't reveal the exact number of Fab 8 employees who will lose their jobs, although it's expected to trigger disclosure later this week under the state's Worker Adjustment and Retraining Notification law.

The WARN law is triggered for a layoff of 250 people or more, or a layoff of more than one-third of a company's workforce.

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The Fab 8 layoffs come during a difficult time for another local manufacturer, General Electric Co., which announced earlier this month it was cutting 225 union jobs at the company's steam turbine plant in Schenectady following a previous round of 130 layoffs in January.

Going forward, Fab 8 will focus exclusively on its current 14 nanometer chip making process, a move the company says is more in line with its customer needs if not in line with the rest of the semiconductor industry, which has been pushing forward into 7 nanometer chips, with some achieving commercial production this year.

GlobalFoundries, which is a foundry that makes chips for companies that don't have their own factories — so-called "fabless" firms — would appear to be rejecting the idea chip makers must follow Moore's Law to the bitter end.

Moore's Law is the idea that chip makers can keep shrinking chip features successfully every two years providing customers with dramatic leaps in performance that have fueled industry profits for decades.

However, Moore's Law may be pushing up against the laws of physics as transistor sizes get closer to the size of atoms, and the industry has reached a point where the cost of developing smaller transistors may outweigh the benefits.

"The vast majority of today's fabless customers are looking to get more value out of each technology generation to leverage the substantial investments required to design into each technology node," GlobalFoundries CEO Thomas Caulfield said in a statement released Monday. "This industry dynamic has resulted in fewer fabless clients designing into the outer limits of Moore's Law."

Just two years ago, GlobalFoundries announced it would spend $2 billion at Fab 8 getting it ready to deploy 7 nanometer production. The upgrade included the purchase of several $200 million extreme ultraviolet lithography machines needed to etch such small design features.

In addition to the impact that the layoffs will have on local families, the change in strategy is likely to also have long-term consequences for the regional economy and the Capital Region's high-tech strategy.

Since its inception as a spin-off of Advanced Micro Devices a decade ago, GlobalFoundries has relied heavily upon a research partnership with IBM at SUNY Polytechnic Institute in Albany.

GlobalFoundries' current research agreement with IBM ends in December, and it is unclear if the two companies will negotiate a new deal or what type of presence GlobalFoundries will maintain at SUNY Poly going forward.

IBM uses the clean rooms at SUNY Poly for what's known as the IBM Research Alliance that has involved various different chip firms over the years working on next-generation chip-making.

Last year a project involving IBM, Samsung and GlobalFoundries created the first-ever chip using 5 nanometer architecture.

GlobalFoundries currently has about 80 scientists at SUNY Poly, many working on 7 nanometer technology and beyond.

"We will continue to actively participate in the Albany-based research alliance for the duration of the current agreement," GlobalFoundries spokesman Steve Grasso said. "Between now and then, we will assess options to continue a presence in Albany, which we would do only if it aligns with our long-term research needs."

That doesn't mean GlobalFoundries is shunning research and development entirely. The company, which is much smaller than the world's largest foundry, Taiwan Semiconductor Manufacturing Co., is just being more responsive to its customers instead of worrying too much about Moore's Law.

"Moore's Law is an economic model, not a technology law," Grasso, the company spokesman said. "What matters to clients is the end result... we plan to continue driving these types of improvements in our technology platforms through other innovations beyond transistor scaling. We remain fully committed to innovation in advanced technology."

Not all of Fab 8's research scientists will be laid off. Many of the company's top technologists will be reassigned to the company's 14 nanometer teams.

Grasso said that GlobalFoundries is considering options for what to do with its extreme ultraviolet lithography machines, which it has planned on using for 7 nanometer chips. The machines, which cost $200 million each, are made by the Dutch company ASML.

"With 7 nanometer development on hold, we will be exploring options with ASML and others for the best use of EUV equipment, including potential sales to other companies," Grasso said.