IBM

Are reports of IBM sale 'greatly exaggerated?'

Dan D'Ambrosio
Burlington Free Press
Semiconductors are fabricated on silicon wafers, shown here by a production worker in IBM Burlington's Essex Junction facility.

ESSEX JUNCTION – If the blog posts, rumors and anonymously attributed news reports are true, Vermonters will learn in the next week or two that IBM has walked away from its semiconductor business, including the factory in Essex Junction. The new owner is said to be GlobalFoundries, the 19th largest semiconductor business in the world.

We will learn, if those reports are accurate, that IBM paid GlobalFoundries some $2 billion to take a money-losing Microelectronics Division off its hands — a mind-bending proposition if ever there were one. Reports say this is a done deal.

FOR MORE IBM NEWS: www.pojonews.co/ibm

The top management and engineers in Essex Junction, however, told a markedly different story during an unprecedented six-hour tour of their facility and discussion with the Burlington Free Press earlier this month.

They said IBM Burlington, as they refer to the business, is vibrant and vital. The Essex Junction "fab," as semiconductor fabricators are known, has innovated new specialty chips for the mobile market that has the facility scrambling to keep up with worldwide demand.

Their fab, the managers and engineers said, is riding the crest of a wave — call it a tsunami — that has erupted from an explosion of consumer sales, primarily in cellphones, with no end in sight.

Tech blogger Daniel Nenni of SemiWiki.com was the first to say IBM and GlobalFoundries had reached a deal for IBM's Microelectronics Divison. That report followed earlier stories from Bloomberg News and others that the deal — first characterized as a sale, then as a pay-off — had collapsed.

Chief Technical Executive Stephen Luce said IBM invests tens of millions of dollars annually in its fab in Essex Junction.

Local speculation — fueled by GlobalFoundries' employment ads, job fairs and, most recently, the establishment of a recruiting office in Williston — has the Vermont fab continuing to operate only as long as it takes to fulfill existing contracts.

This story line has GlobalFoundries interested primarily in luring IBM's prodigious engineering and manufacturing talent to its own $10 billion Fab 8 in Malta, N.Y., built in 2009. GlobalFoundries is thought to be uninterested in maintaining IBM's antiquated fab in Essex Junction.

IBM Burlington management countered that the fab is anything but antiquated. Director Janette Bombardier, who took over responsibility for the fab in 2010, is frustrated by what she calls the "wrong perceptions" of the situation in Essex Junction.

"Let's talk about the reality of what's going on here," Bombardier said. "You don't even need to jump to a conclusion. The story is the technology, the leadership, and the vitality in a place that's been here since 1957."

Going inside

Sitting across the table in a small conference room at IBM headquarters in Essex Junction, senior technical staff member Mark Jaffe pulled a cellphone out of his pocket.

"It's hard to buy a smartphone that doesn't have IBM content in it today," Jaffe said. "I have a Samsung Galaxy S4. I think this has nine chips that we make in it."

If somebody cracked open Jaffe's smartphone, there would be no chips bearing the IBM logo. That's by design. IBM sells to suppliers who sell to manufacturers including Apple Inc. and Samsung Group. IBM has no plans to launch its equivalent of the "Intel Inside" campaign.

"Intel made a decision they wanted to be a consumer company, even though nobody buys an Intel," said Jim Keller, communications director for IBM's Systems and Technology Group, which includes the Microelectronics Division. "We're not in the consumer business, really anywhere in IBM. We have connections to the consumer business, but we're business-to-business."

Touring IBM Burlington's fab is an other-worldly experience that begins with an elaborate gowning from head to toe in a white clean-room suit that slips over street clothes.

The process, in rooms with long rows of metal benches and hanging suits, begins with the head, where a mask and bonnet covers everything but the eyes. Next come the white overalls that zip up the front, and floppy, thin boots that pull up past the ankles. The final touch is a pair of transparent plastic gloves.

These precautions are necessary because any sort of contamination from microscopic particles can mean the death of a microchip. A human hair measures 30 microns. The clean room controls to 0.16 microns and is many times cleaner than any emergency room, said Rob Vatter, who oversees thermal processes involved in preparing the silicon wafers used to make chips.

Suiting up for a tour of IBM Burlington’s fab in Essex Junction ends by pulling on special boots to complete the "bunny suit" everyone must wear inside the clean room.

"Cleanliness is king. Automation is king," he said, speaking through his clean-room mask. "If it's not clean, you're not making wafers."

There is no normal ceiling in the fab, but rather an array of filters that process the air flowing through the building at a uniform rate of 1.5 million cubic feet per minute. Vatter explained that every step of the process he oversees is recorded and monitored.

Workers in IBM Burlington’s fab must wear protective suits at all times to guard against contaminating microchips during the production process.

"There are several hundred process steps," he said. "We have to make sure something bad doesn't happen in Step 2, and then we waste the next 300 steps."

The fab covers about 500,000 square feet in two buildings joined into one, with a maze of long, narrow hallways connecting "aisles" of tools, as IBMers refer to the space-age-looking machinery that goes into the making of semiconductors. Each aisle is named after towns and places in Vermont, with a street sign hanging above the entrance to the aisle.

The signs are a homey touch in what otherwise borders on an alien environment, with white-suited figures trooping up and down the hallways, gleaming stainless-steel tools festooned with a complex array of tubes and bolts and gauges, and relentless, repetitive robot arms picking wafer after wafer from slotted racks behind glass windows and dipping them in one of the thousands of chemicals used in the process of making semiconductors.

The sophisticated tools used to fabricate semiconductors in IBM Burlington’s factory in Essex Junction operate around the clock.

The wafers are untouched by human hands — even human hands encased in plastic gloves. The robot arms operate at only 10 percent of the speed they are capable of, so there is no chance of flinging wafers around the fab.

Behind the aisles, where the front ends of the tools are available to workers, are the walled-off "cores," where the tour did not go — the back end supplying gases and chemicals for the tools.

"What we need for the process to work," explained Tim Baechle, responsible for installing new equipment in the fab.

There are some 1,250 tools backed by 100 cores in the Essex Junction fab.

"We can get to every valve in the building for flexibility and the ability to service them," Baechle said.

At the reactive ion etch station, where material is strategically removed from the wafers as part of the semiconductor process, Senior Engineer Christa Willets brought up an image of a particle of contamination on a computer screen. It's a carbon-based defect, Willets said, but may not be a "killer fault." It looked like a piece of dust, highly magnified, near one of the lines formed on the semiconductor.

"We do elemental analysis," Willets said. "It helps in troubleshooting where it's coming from. It's a neverending battle. We spend more than 50 percent of our time worrying about defects."

Stopping by the ongoing installation of two new tools, Tim Baechle said the fab constantly is changing its mix of tools, with 10-20 new or upgraded tools in the past year alone. Once a tool is installed, Baechle said, the testing can take months before it's ready to use.

Behind a door in the core, workers from PC Construction, which contracts with IBM Burlington to do installations, were bending electrical conduit. They're in clean-room suits too, and there's an entire protocol for wiping down and preparing all the materials used in the installation, Baechle said.

A production worker at IBM Burlington’s fab in Essex Junction reviews the steps of microchip production during a recent tour of the facility.

At the end of the tour, back in the gleaming dressing rooms, the "bunny suit," as the protective overalls are known, is removed in exact reverse order: The boots come off first, the gloves coming last, deposited into an array of bins. The return to the less-than-pristine environment of IBM Burlington's corporate offices is welcome.

Boom and bust

IBM Burlington has infamously had its share of "resource actions," or job reductions, over its long history. The first reductions since the plant opened in 1957 came after 37 years, in 1994, when 300 employees lost their jobs.

The fab peaked at about 8,500 workers in 2001, but subsequent layoffs reduced that count to an estimated 4,000 employees today. IBM stopped releasing job numbers for Essex Junction in 2009. The most recent round of job cuts came at the end of February, when about 140 workers lost their jobs.

Last June, IBM Burlington let go 419 workers, drawing a strong reaction from Gov. Peter Shumlin when the Armonk, N.Y.-based corporation was typically reluctant to say just how many jobs had been cut. Shumlin urged IBM to "tear off the Band-Aid" and release the number, which the company eventually did.

During the Free Press' recent tour of the fab, Senior Location Executive Janette Bombardier and her team focused on the fact that IBM Burlington has hung out a "Hiring" sign at the entrance to the facility.

Bombardier said she is trying to hire just shy of 100 workers, 70 of whom would be production workers. She said IBM Burlington constantly is hiring, because workers come and go, but 100 is a "much bigger number than we normally go after at one time."

It is the fab's success in the cellphone market that is driving that hiring. Sue Bombardier — a senior level executive and chemical engineer who is unrelated to Janette Bombardier — gives an idea of the extent of IBM Burlington's penetration of the cellphone market when she explains the fab has nearly 1,000 active part numbers.

"A part number would be this chip going to that client, that chip going to a different client — that would be two part numbers," Bombardier said, "and I'm telling you we have close to 1,000. So our client base and their use of our technologies and chips is extensive."

With 7.05 billion people in the world, and 6.5 billion active cell phones, the demand for the industry-leading Essex Junction-made chips has "just become enormous," said Mark Jaffe, a member of the senior technical staff.

Chief Technical Executive Stephen Luce points out that the cellphone market is global.

"If we think myopically of North America, almost everybody has a smartphone now, so how much more can it grow?" Luce said. "But the market isn't North America — it's the globe. On the globe, there's a lot of people who don't yet have smartphones who would like to have one."

IBM Burlington's success has caught the attention of the semiconductor world, Jaffe said.

"We now have a few competitors in the same space who are trying to catch up to us, but we are the leader worldwide in the production of these chips," he said.

Semiconductors are assembled into components for a wide variety of devices.

Winning with legacy technology

To understand how IBM Burlington came to dominate certain cellphone chips requires at least some immersion in the technical details of the fab's achievement in cellphone architecture. Essex Junction engineers are focused on two technologies, one for power amplification and the other for switching among the multiple radio frequencies used in the smartest smartphones.

Let's start with power amplification. Senior technical staff member Alvin Joseph, an expert in the silicon germanium chips IBM invented nearly 30 years ago, leads IBM Burlington's efforts in this area.

Both silicon and germanium are basic elements, found in the periodic table of elements. Silicon has famously formed the foundation for the entire semiconductor industry, sliced into the round wafers that are used to build up the circuits, transistors and other parts that go into semiconductors.

By wedding germanium to silicon, partly as a result of an accident in the lab, IBM created a far more efficient semiconductor than silicon alone, with tremendously fast transistors, perfectly suited to communications chips. Even better, silicon germanium was a fraction of the cost of another alloy, gallium arsenide, which was the leading material for communications chips.

Joseph and his team capitalized on the properties of silicon germanium to create a superior power amplification technology, essential to the operation of a cell phone by boosting signals for Wi-Fi operation. While the size of individual wires and transistors, measured in nanometers, or billionths of a meter, often is cited as the benchmark of advanced technology in the semiconductor business, Joseph said that in power amplification, size doesn't matter.

"We use today a 350 nanometer technology, which is a legacy technology in this fab," Joseph said. "The leading edge would be 14 nanometers."

Power amplification requires high-voltage transistors that the chips with the smallest features would be unable to handle, Joseph said.

Joseph's team is developing a next-generation technology that will measure 180 nanometers, which Joseph described as the "sweet spot" of the Essex Junction fab, set up for 200mm wafers, equivalent to about 8 inches in diameter.

"You can get a lot of power out of these devices using the capability in this 200mm fabricator," Joseph said.

Size doesn't matter

One of the commonly accepted measures of progress in the semiconductor business is wafer diameter, which now is limited to 300mm, or about 12 inches. The push is on to go to a 450mm wafer, which would be about 18 inches in diameter — hence the perception that IBM Burlington's fab is obsolete, because it is stuck with 200mm wafers. Tooling up for bigger wafers would be prohibitively expensive.

When mass-producing chips in the billions for something like a CPU in a laptop, wafer size matters, because the more chips that fit on a single wafer, the more cost-efficient the process is going to be. But when the goal is innovating new approaches to semiconductor design — as it is at IBM Burlington — those efficiencies become irrelevant, Chief Technical Executive Stephen Luce said.

"There's a high-level impression in the semiconductor world that the only way to be relevant is for things to get smaller, equipment to get more expensive, and have new factories," Luce said. "That's actually not the full market.

"There's a portion of the semiconductor market where geometries are more stable, and what they need is a team to innovate new features," he continued. "The advantage of that approach, and that's what we're doing, is you can keep most of the equipment the same, continue to use a factory that's been around a lot of years, and yet stay relevant."

Luce said IBM Burlington changed its approach to the fab in a "very big way," favoring innovation over scaling, starting in about 2005.

"At this point, we are almost entirely out of the businesses that scale, and we're into things that require innovation on these very unique structures and features," Luce said.

Superior silicon switches

The second pillar of IBM Burlington's success in the mobile market is its switching technology, known as RFSOI, or radio frequency, silicon on insulator, developed by Mark Jaffe and his team. Cellphones rely on the spectrum of radio frequencies, divided into bands of electromagnetic waves, to communicate and transmit data. Modern cellphones, Jaffe said, will have at least 10 to 15 bands.

"You can only hook one of those at a time to a cellphone, so you need these switches," he said. "There's nothing physically moving, so they're electronic switches, but they'll switch between the different filters or the different amplifiers and hook the correct one up to the antenna."

Historically, Jaffe explained, these switches were made using the more expensive gallium arsenide, which still has some advantages over silicon, especially for communications technology. Everyone was interested in making effective silicon switches, but it was IBM Burlington that figured it out, beginning in about 2006.

"We were able to make switches in silicon that were technically superior to the gallium arsenide switch, so they were not only cheaper and had better levels of integration, but they were superior in their radio frequency performance," Jaffe said. "The first qualification was in 2008 here in Burlington."

One measure of IBM Burlington's success with its power amplification and switching chips is wafer count. Jaffe said that when the silicon switches were being developed, the thinking internally was the worldwide market might require 60 wafers a day to satisfy. IBM Burlington hoped to capture half of that market, or 30 wafers a day.

"Now we're selling over 1,000 wafers a day, and we could be selling more if we had more capacity," Jaffe said. "The demand has been incredible."

Investing millions

To try to meet the demand for its RFSOI chips, IBM Burlington has contracted with Altis Semiconductor in Paris, France, which makes about one-third of the silicon switches IBM Burlington sells, with the remaining two-thirds made in Essex Junction.

The Essex Junction fab also is installing new tools to increase production. During this month's Burlington Free Press tour, two new tools were being installed to clean and perform other functions on the silicon wafers that are transported from tool to tool in black plastic boxes that run along an overhead conveyor system.

Mark Jaffe said IBM Burlington engineers probably started a dozen projects during the past dozen years, "and we have two really great success stories to show for it" — the power amplification and the RF switching chips.

"If you only try two things, chances are you won't hit on either one of them, and you go

out of business," Jaffe said. "You've got to continually be innovating, searching out new markets. I've been here 25 years, and it's constantly changing."

Chief Technical Executive Stephen Luce believes IBM Burlington will be able to ride its two success stories into the foreseeable future.

"This drive for more data, more bandwidth, is still very early, it has a long ways to go," Luce said. "Our customers are still pulling for technology. We want to stay very focused on that, because I think we can keep bringing new things to the market for quite some time."

Or will they? And if they do, will it be as IBM Burlington?

It's difficult to square the picture of success painted by the management team in Essex Junction with the persistent reports that IBM just wants to be rid of its fabs. Bloomberg News reported IBM's chip business loses about $1.5 billion a year, citing "a person familiar with the matter."

Luce counters that IBM is investing tens of millions of dollars every year in the Essex Junction fab, both in new equipment and in development costs.

"I don't think the corporation would do that just for fun," he said.

The Burlington Free Press is a sister paper of the Poughkeepsie Journal.