Revenue decline pushes GloFo to start employee buyout

GlobalFoundries has proposed a buyout scheme to members of its U.S. workforce following a downturn in revenues for the foundry industry over the past nine months. Company officials cited an 11 per cent dip industry revenue as a driver for the buyouts and did not disclose company finances. While GF said its 11 per cent figure comes from "a company analysis of industry reports," some find that number to be too steep.

"In the past year, pricing and cost competition in the foundry business has become more intense. A few factors can be attributable to this such as the slowdown for the device and product markets for smartphone, tablet PC and laptop computers," GF officials said. "In an effort to react to achieve a more competitive cost structure, we are offering our US-employees a voluntary separation programme."

"There's clearly some slowing down right now [in terms] of demand, we think it's temporary," said International Business Strategies founder and CEO Handel Jones. "I don't agree with that 11 per cent figure. TSMC did good with its ramp-up of Apple business; the foundry market has had fairly equalled growth this year but if you look at it quarter by quarter, there's some volatility."

The decline in revenue and foundry industry slowing is due to a price reduction in DRAM, where the price per gigabit has doubled; a saturated smartphone market where much of the growth comes from China and the BOM is lower; and a softening automotive market. Initial slowing encourages companies to reduce their prices, Jones said, which forces the market down more. More smartphones will be made this year, but the semiconductor content will be lower.

Additionally, Jones noted, "some acquisitions and mergers will result in higher prices and products. It's not gloom and doom, but it's not a great situation."

TSMC recently reported that its net revenues for August 2015 were down both sequentially and on a YoY basis. Although GlobalFoundries is not a public company and does not offer finance figures, the company may be experiencing the same problems.

GF did not detail the plan or say how many employees it hopes to reduce, which regions will be targeted, or how much money it hopes to save. While the buyouts are available to all GF employees, press speculation points to "legacy IBM employees" acquired in a $1.5 billion deal as targets of the buyouts.

GF initially said it wouldn't cut jobs after acquiring IBM's foundry business, though the company took on 5,000 employees from various IBM foundries in New York and Vermont.

"Most mergers and acquisitions involve a significant headcount reduction," Jones said. "GF took over a large number of people and now, as they've gone through the financial analysis, the revenue growth basically has not justified that headcount."

Although the timeline for GF's new personnel programme is unclear, Jones has high hopes for the foundry and its 22nm FD-SOI rollout. Jones expects 2016 to see a revenue decline while 2017 will be a good year for the foundry industry with a growth in Internet of Things devices, more 4K televisions and the next generation of smartphones.

"5G will come in 2020, but from the infrastructure side we expect some initial demand," he said. "We're seeing the amount of data being generated growing very rapidly, so we think infrastructure will grow significantly."

Jones does not expect 7nm technology to have a large impact on foundry revenues.

- Jessica Lipsky
??EE Times