Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, August 9, 1995 TAG: 9508090085
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Bloomberg Business News
DATELINE: MANASSAS LENGTH: Medium
Toshiba and IBM will equally share the cost of the plant's construction, which will begin in January 1996 at an IBM site at Manassas in Northern Virginia.
``It's really a change from where [IBM was] a couple years ago,'' said analyst Gary Helmig of SoundView Financial, noting that IBM has closed several buildings in the past several years, including one at that site. ``This shows that they are getting more confident about demand.''
Peter Athanas, an assistant professor of computer engineering at Virginia Tech, said no major companies in Western Virginia are likely to benefit directly from the IBM-Toshiba deal.
None of the computer engineering researchers at Tech will be directly affected by the new plant either, Athanas said.
But the announcement of the new plant, which would do research on the making of chips and the design of circuits similar to that being carried out at Tech, is welcome, he said.
The announcement follows plans by No. 1 chipmaker Intel Corp., Micron Technology Inc. and Texas Instruments Inc. to expand capacity amid soaring demand. Memory chips have been in short supply for more than two years, and some analysts expect that to continue through next year.
IBM said earlier this year that it would spend $600 million on plant expansions in its semiconductor business. Helmig said the Toshiba venture is in addition to that plan. He also said he expects another similar announcement from IBM in the next several weeks.
Under the deal, Toshiba gains access to IBM's manufacturing know-how and expertise in the U.S.United States as well as its first manufacturing site overseas, offering protection from currency fluctuations.
``Toshiba's operations will be strengthened by a presence in the world's largest market,'' said Masanobu Ohyama, Toshiba executive vice president.
The move is the latest in a series of international alliances in the semiconductor industry. Companies are seeking to meet demand that is projected to increase 40 percent this year. They also are attempting to defray the mounting cost of churning out the complex, thumbnail-size chips.
Toshiba also has a joint venture in Japan with IBM to make liquid crystal display screens.
IBM has two other joint-venture memory facilities, in East Fishkill, New York, and in Sindelfingen, Germany. In 1994, IBM's revenue from sales of computer chips to other companies more than doubled to $1.7 billion from $700 million in 1993.
Worldwide semiconductor sales will rise to $142.3 billion this year, with the market reaching $233 billion by 1998, according to the Semiconductor Industry Association, a U.S. industry group.
Toshiba and IBM expect to begin producing 30,000 units a month of 64-megabit dynamic random access memory (DRAM) chips in late 1997, with production of more powerful 256-megabit chips to start in 2000. The chips are used to store data in electronic devices.
The chips to be made are the first fruits of an alliance between Siemens AG, Toshiba and IBM that was announced in 1992 to develop the advanced memory chips.
About 700 jobs will be created initially, the majority hired in the United States. Toshiba will send about 30 or 40 engineers to the plant. Output from the plant will be used in the two companies' products and also sold on the open market.
The plant is also a victory for Virginia in the competition among U.S. state governments to attract high-tech enterprises.
Virginia is ``the new technology center on the eastern United States,'' said Virginia Gov. George Allen. A statement by Allen said the total investment by IBM and Toshiba could be the largest in Virginia's history.
The IBM-Toshiba joint venture ``will go a long way towards reaching our economic development goals: quality jobs, significant tax base enhancement, a major boost for many of our existing businesses,'' said Manassas Mayor Robert Browne.
Virginia offered the companies a $48.2 million incentive package that includes a $38.4 million performance-based grant, a $3.83 million tax credit, $2 million for college courses focusing on semiconductor manufacturing and $4 million for employee training. Virginia expects to gain $477.5 million in tax revenue over the next 20 years from the new plant, whose incentive package assumes its 4,000 workers will be hired in 10 years.
Staff writer Greg Edwards contributed to this story.
by CNB