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07/08/08 7:55AM By Timothy McQuiston
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(HOST) Commentator Tim McQuiston says that while IBM employees, and indeed the entire state, shivers every time there's a rumor of a layoff, the company must itself wonder how its valuable Vermont plant fits into its own plans.

(McQUISTON) In the 1990s IBM came to the state of Vermont with the concept for the FAB 2000 facility. That's FAB, short for "fabrication" - but it would be a fabulous upgrade to what was - and frankly still is - the state-of-the-art semiconductor manufacturing plant just over the Winooski River in Essex Junction. Williston wasn't the only site under consideration, of course; but it made sense to have the new facility next to the existing plant. IBM had already built a bridge across the river to expand into Williston with a large laboratory facility. IBM Burlington was one of IBM's crown jewels, producing the latest in high-end computer chips and the patents to go with them. The workforce was without peer in the industry at every level.
Why the plant eventually was built in East Fishkill, NY, instead of Vermont, is something of a riddle, wrapped in bitterness, inside a blame-game.

In any case, the FAB 2000 plant marked a turning point for the Vermont facility, one that recently resulted in the loss of another 180 workers at IBM Burlington. Since the high-water mark of about 8,500 employees in 2001, the Vermont site now employs only about 5,400.

But today, I have the feeling that the building of the FAB 2000 itself was a mistake, regardless of where it came to be located. The Systems and Technology group was the only group at IBM that saw a drop in revenues during the first quarter of 2008 from the first quarter of 2007. Chips have become commodities, like corn and wheat. The super-automated 300 millimeter wafers being made at the FAB have turned out to be a finicky product. The capital cost involved and depreciated has been a huge drag on the expense side for IBM. What seemed like a good idea in the 1990s doesn't seem to be one now.

Meanwhile, the Vermont plant's 200 millimeter foundry is essentially paid off. It is nimble enough to make money on short-run chips, not only for consumer products, but on Department of Defense contracts, for which the work has to be done in the United States.

Foreign chip makers have come into the Vermont plant, presumably to kick the tires and see if it's worth buying. And the Vermont plant still appears to have a lot of value. But the FAB 2000 seems to have become a white elephant for the company.

Still, if IBM had built it here, we'd probably be loving it.

But someone else I know has a different take on the proposed siting of the FAB 2000 in Williston. He says that it would have been out of scale for both Vermont and IBM. What if IBM had two or three times as many Vermont employees as they have now? IBM would be beholden to one small state, and one small state would be beholden to one giant company, whose quarterly profits are more than Vermont's annual budget.
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