Fab 8.2 promises to transform the region, boosting business growth
MALTA – In early May 2007, nearly 900 people packed into a ballroom in Saratoga City Center for one of the most anticipated business meetings of the years.
Saratoga Economic Development Corp., the nonprofit that owns the Luther Forest Technology Campus in Malta, was having its annual dinner.
But tonight wasn’t going to be your usual chamber chicken dinner. It was special.
Nearly 12 months earlier, Governor George Pataki and Senate Majority Leader Joe Bruno had drawn one of the biggest surprises about economic development in the state’s history, convincing the Advanced Micro chipmaker computer devices to build a $ 3.2 billion factory in upstate New York.
The rest of the world, as well as many in the Capital Region, could not believe it.
And so a large number of business people, political leaders – and local journalists – could not wait to attend the SEDC luncheon on the night of May 3, 2007, to hear immediately from US officials. AMD on their plans to build what was then referred to as Fab 4X, which employs 1,200 people.
At the time, the fab, short for the manufacturing plant, was not a done deal.
Although the Legislature had promised AMD $ 1.2 billion in incentives in its 2006 state budget – including $ 650 million it had never heard of in cash – AMD had insisted it needed two years to decide whether to build the facility or not.
In early 2007, it was not a fact that AMD would ever build a Fab 4X. In fact, the company was losing so much money at the time that many doubted the factory would ever perform.
But that trouble disappeared in May at the SEDC dinner when AMD manufacturing leader Terry Caudell got up to talk about the company’s plans for Luther Forest.
Near the end of his presentation, Caudell showed a slide as a result of Fab 4X. His presentation alone showed not just one chip factory, but up to three fabs, built in stages.
Harvested by surprise, the crowd burst with dandruff. The Times Union announced the three fabs on its front page the next morning.
But AMD officials pushed back to what they insisted was simply a tease to please the dinner crowd, worried that expectations would be set too high.
“Even the first one in Luther Forest is still on the drawing board,” Travis Bullard, the AMD spokesman at the time, insisted with a Times Union reporter the next morning, expressing d his regret. “Nothing is defined.”
It turns out Bullard doesn’t have to worry. AMD ended up turning its manufacturing operations into a new company called GlobalFoundries that received billions of dollars in funding from the Abu Dhabi government, which was diversifying its oil-based economy with long bets. -long on technology, healthcare and real estate.
In fact, GlobalFoundries has broken expectations for its Luther Forest factory, now called Fab 8, which ended up being much larger than originally expected and employing more than 3,000 workers – more than double the number of jobs required. under its agreement with the state.
Funding for the future
The numbers are staggering. GlobalFoundries has spent $ 15 billion on its Fab 8 campus since it first landed in 2008, and its gross annual wages is nearly $ 400 million, many of which go back to the local economy, supporting both businesses. as well as large corporations and make the economy of Saratoga County one of the fastest growing in the state.
At the height of the construction and expansion of Fab 8 in 2014 and 2015, GlobalFoundries was spending $ 4 million a day paying contractors. The average full-time salary at the plant is nearly $ 100,000 a year.
So what about the three fabs that were planned back in 2007? Well GlobalFoundries has already doubled its original commitment at Luther Forest with several expansions.
Earlier this year GlobalFoundries announced it would spend $ 1 billion to expand its manufacturing capacity in the existing clean room of Fab 8. Like other fabs chip, Fab 8 actually processes silicone wafers of 12 inches on which individual chips are printed.
And GlobalFoundries CEO Tom Caulfield said in July that the company will move forward with what is known as Fab 8.2, the second fab, in the coming years. The project could cost more than $ 10 billion.
Don’t take your expectations too high yet. GlobalFoundries will only move forward if they can guarantee another round of government incentives – this time it would mean both state and federal subsidies.
But U.S. Senate Majority Leader Chuck Schumer has almost promised that aid as part of a $ 52 billion computer chip manufacturing fund that is pushed by the Senate and expected it will eventually be approved by the House and by President Joe Biden.
With Democrats in control of both Congress and the White House, Schumer’s chip funding bill, which provides up to $ 2 billion in federal incentives for each new fab, is almost certain to be accomplished. . That led to companies like GlobalFoundries, as well as Intel, Samsung and Taiwan Semiconductor Manufacturing Co. begin to find potential sites in New York and elsewhere.
GlobalFoundries has already secured an option to acquire additional land in Luther Forest to make room to build a Fab 8.2, although company officials are being tight about when construction begins and how much it will actually cost the new factory.
“GlobalFoundries is in the process of conducting a feasibility study to determine our cost, construction schedule and additional wafer production capacity,” said Peter Benyon, general manager of Fab 8 to the Times Union. “We are not ready to comment on a specific timetable without first completing our study.”
What GlobalFoundries is telling people is that it will not move forward with Fab 8.2 unless it can secure state and federal aid for the project – a package that is likely to exceed $ 2 billion or more and could also involve some form of financial commitments major customers such as car manufacturers.
“It costs billions to build a semiconductor manufacturing facility, which is why financial support from public-private partnerships, customer engagement and both federal and state governments is key to timing and success. of our expansion, “Benyon added.
To be ready
While Benyon’s comments may seem less than inspiring to local retailers, suppliers of factories and construction and engineering firms are looking to capitalize on another round of billion-dollar investments. on the Malta campus of GlobalFoundries, the business region of the Capital Region is not just sitting around and waiting for GlobalFoundries to call.
They are preparing now to increase now and then be ready when the time comes.
“A number of contractors are already talking to GlobalFoundries about what they are doing and trying to prepare for the job,” said Michael Relyea, a lawyer in the practice of government affairs at Shenker Russo & Clark in Albany. conducts operations at Luther Forest. “It’s a big job so there needs to be some planning all the way down the supply chain to align materials, equipment and workforce.”
Much of the $ 15 billion cost of a new fab chip is the manufacturing equipment, or tool as it is called in the industry, that processes the silicone wafers on which computer chips are made.
It takes weeks for the chips to be completed through a complex process that includes the layer-by-layer deposition of metals and other materials on silicone wafers and their exposure to ultraviolet light and special chemicals and water. to create billions of transistors that leave. electrons around the chips to process information and instructions that make up the brain of computers and other electronic devices such as smart phones.
Many of the largest tool makers have set up offices near Fab 8 to assist with the installation and service of the hundreds of tools located in the factory’s clean room.
But with Fab 8.2 on the way to Luther Forest, coupled with the $ 1 billion expansion of the original Fab 8, many of those companies are likely looking to expand their local offices and perhaps find more robust operations. such as assembly and research in the region instead of rented office space used for sales and service employees.
Chip tools cost tens of millions of dollars each – lithography machines that cut designs on wafers can cost more than $ 100 million per piece, so companies that make them – like Materials Applied, ASML and Tokyo Electron – are almost as important as companies like GlobalFoundries which operates the factory itself.
“That’s one of the missing pieces of the puzzle,” said Timothy Dunn, a former Pataki administration official who lives in Malta and now operates his own marketing and consulting company that represented clients. of semiconductors. “There will be an opportunity there (for local businesses) to work more aggressively with those companies.”
Of course there are concerns as there are in all segments of the economy about the global supply chain and distribution networks that have been disrupted by the COVID-19 pandemic.
If companies like GlobalFoundries build new fabs, will there be the tools, gases, chemicals and infrastructure needed to run the factories? The only thing that chip companies hate is uncertainty or disruption. This is because it costs a lot to build and run a fab. When things are going well, and orders come in, making chips is similar to printing money.
But if there’s a problem, like a power outage, a lack of key materials or a tool goes down, a fab starts pouring money – many of them. Millions of dollars a day even for the slightest delay or blip.
Of course, it’s not just tool makers who benefit from a fab chip. Even small or medium-sized businesses that may have no direct expertise in chip design or even technology benefit when building a new fab.
“The fun part is that we’ve been through it before,” said Todd Shimkus, president of the Saratoga County Chamber of Commerce.
Shimkus points to Curtis Lumber, who is based at Ballston Spa not far from Fab 8.
During the construction of the Fab 8, Curtis Lumber supplied the plywood that would be used to cover the concrete after it was poured. Shimkus says the amount sold to Fab 8 contractors was “a huge number,” and a similar sale would be expected next time.
“Curtis Lumber expects to benefit substantially from the second construction project,” Shimkus said.
Fab 8 has also had a dramatic impact on the hospitality industry in Saratoga County, which previously served tourists and visitors to the Saratoga Racecourse and cultural destinations such as SPAC and Saratoga Spa State Park.
When GlobalFoundries began building Luther Forest in 2008, there was a sudden influx of construction workers from outside the area – hundreds of whom need a place to live. This has led to the construction of many extended stay hotels that have focused on business clients rather than seasonal tourists.
That market is expected to benefit again and could lead to additional extended-stay hotels being built in the surrounding area, leading to a whole new wave of business opportunities.
“We just didn’t have the same business book we had (before),” Shimkus said. “That was reversed when GlobalFoundries came to town.”