GlobalFoundries to close its Chengdu, China factory

GlobalFoundries has confirmed it’s ceased operations at a joint venture factory in Chengdu, China. The closing of GlobalFoundries’ China-based facility comes just three years after the company announced its intentions to manufacture chips in mainland China.

The South China Morning Post reported the company told employees in a May 14 notice that come mid-June, the company would pay only 70% of Chengdu’s minimum monthly wage, which is about 1,246 yuan ($175.38). The memo also noted the company would negotiate severance packages with team members.

“The plan is being carried out on the basis of open and transparent communications with the employees and they have been offered various options to choose from based on their personal situations,” a company statement to the South China Morning Post read.

The confirmed closure comes just two years after speculation related to the Chengdu factory began to grow. While China was sure to roll out the red carpet when it announced the partnership and local media was quick to hail it as “a miracle,” the project never truly got off the ground.

At the start of the joint venture, GlobalFoundries anticipated it would manufacture 300mm wafers at the nearly 700,000-square-foot facility. Unfortunately, however, production was never started.

For many industry analysts, the demise of the GlobalFoundries’ Chengdu facility can be attributed to poor planning and misunderstandings between the two partners.

“There was little detailed research and planning before the project was launched. As far as the Chengdu government is concerned, it lacks a sufficient understanding of GlobalFoundries, its decision-making mechanism and economic strengths, and it did not get strong support from the central government,” Gu Wenjun, a chief analyst at the Shanghai-based semiconductor research firm ICwise, told the South China Morning Post.

GlobalFoundries has confirmed it’ll continue to expand its sales within China.