IBM Moves Power Systems Factories from Ireland to China and Singapore

October 25, 2010 Timothy Prickett Morgan

The inevitable shift of electronics manufacturing to Asia continued apace last week as IBM began the final phase out of its Power Systems manufacturing in Ireland.

According to a report in the Irish Times last Thursday, Big Blue is set to move the server manufacturing that it was doing in its factory in Mulhuddart, west of the capitol city of Dublin, to a factory in Shenzhen, China. IBM has been making Power-based servers (including the Smart Cube appliances) in China for some time, but entry and midrange Power Systems machines for the European, African, and Asian markets came out of the factory outside of Dublin.

The entry and midrange Power machinery for the Americas region is made in IBM’s Rochester, Minnesota, facility, while the high-end Power boxes, System z mainframes, and high-end System x and BladeCenter servers are made in its Poughkeepsie, New York, factory.

The cessation of manufacturing of entry and midrange Power Systems in the Dublin facility means the loss of 190 manufacturing jobs at the IBM plant, according to the Times, and IBM told the paper that the move would put IBM closer to its growth markets and suppliers, “providing greater operational efficiency and cost savings.” IBM expects to cease making Power-based servers in the Dublin factory in February, with operations likely done in March. (European labor laws are tough, so you cannot just stop on a dime like you can elsewhere in the world.)

The Dublin facility used to make high-end Power and System z machines, but earlier this year, those operations were shifted to a brand spanking new $90 million factory, which opened in May. That Singapore factory also absorbed the manufacturing of IBM’s disk arrays and various tape storage products for the EMEA and Asia/Pacific regions. The shift of high-end Power and mainframe manufacturing from Ireland to Singapore cost the Emerald Isle another couple hundred jobs, but to be fair, Big Blue opened up a Smarter Planet research center in Dublin in March to cover its assets with the Irish government, adding 200 jobs, and in June boosted its software labs in Dublin, Galway, and Cork with another 100 jobs.

I have said this for a while, and I will say it again. I will not be at all surprised when IBM sells off all of its Power Systems manufacturing to a third party, as it quietly did with its entry and midrange System x business many, many years ago to Sanmina-SCI. (It wasn’t even called System x back then.) IBM was a genius of electromechanical design, but has never been a high-volume or low-cost manufacturer. And to put it bluntly, so few of the components that go into a Power Systems box these days are actually made by IBM, so the difference is nadda. IBM makes the Power Systems chips and related chipsets and does system assembly. That’s about it. The value is in the software, not the hardware, as far as the profit line is concerned.

Of course, I would argue–and maybe Oracle co-founder and chief executive officer, Larry Ellison, would, too–that knowing how to build integrated systems requires expertise on components as well as systems design expertise and assembly prowess. That’s how you extract the most money from the stack. So maybe IBM won’t be so quick to let go. I have my doubts, though. The top brass at IBM are obsessed with software and services at a time when Apple and Intel show that you can extract a lot of profits from hardware.

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