THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, August 9, 1995 TAG: 9508090393
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD AND MYLENE MANGALINDAN, STAFF WRITERS
LENGTH: Long : 136 lines
Furthering economic developers' boasts about the state becoming the nation's next big high-tech hot spot, IBM Corp. and Japan's Toshiba Corp. said Tuesday that they will spend as much as $4 billion over the next 10 years for a semiconductor-manufacturing plant in Northern Virginia.
It could be the largest total economic investment in Virginia's history, state officials said.
The computer-chip factory, which the companies said could eventually employ up to 4,000 people in Manassas, is the second semiconductor plant announced in Virginia this year.
In April, Motorola Inc. said it will spend up to $3 billion on a chip plant in the Richmond area that could someday employ 5,000.
Economic developers and semiconductor-industry representatives said the two plants combined will vault Virginia into the top five chip-making states - and position it to recruit potentially tens of thousands of related jobs in the fast-growing industry. Only three other $1 billion-plus chip plants have been announced in the rest of the United States this year.
``That's `B' as in big,'' Gov. George F. Allen crowed at a news conference heralding the IBM-Toshiba decision. ``This confirms Virginia's emergence as the new technology center of the eastern United States.''
The IBM-Toshiba plant ensures that ``Virginia will be one of the key players in making the product that will serve as the engines forwhat will be the world's biggest industry by the early part of the 21st Century,'' said Kevin Brett, a spokesman for the Semiconductor Industry Association in San Jose, Calif. ``You can't overestimate the impact of these announcements on the economy in the state.''
With the latest investment, there should be enough of a critical mass in chip manufacturing in Virginia that dozens or even hundreds of suppliers to chip makers will set up shop in the state, said Chris Greenfield, spokesman for Mountain View, Calif.-based Semiconductor Equipment and Materials International.
Austin, Texas, which is overtaking California's Silicon Valley as the nation's leader in chip production, should serve as an example of what to expect in Virginia, Greenfield said. Applied Materials Inc., a maker of chip-production equipment, recently opened a plant in the Texas capital employing more than 2,000 people. Much of the plant's equipment is sold to big Austin-area chip makers like Texas Instruments Inc. and Advanced Micro Devices Inc.
``If you want to get the business, you're going to have to be there on your customers' doorsteps,'' Greenfield explained. ``I think you're going to get quite a bit of runoff investments from those plants.''
How far the spinoff from the new chip plants will extend beyond the Northern Virginia-Richmond corridor - and whether the impact will be measurable in Hampton Roads - remains to be seen.
Economists said industries ranging from retailing to tourism should benefit statewide, however, as the plants' high-paid workers spread their paychecks throughout Virginia's economy. State officials estimate the average salary for plant employees will exceed $35,000 a year.
Virginia educational institutions that shift their curricula to tailor to the needs of the emerging industry will also benefit. To help land Motorola, Virginia Commonwealth University in Richmond agreed to establish an engineering school.
Henry McGee, the university's associate provost for engineering, predicted ``a very powerful, uplifting effect throughout the entire commonwealth,'' from the semiconductor factories. ``The opportunities for our young people in terms of high-tech employment have just gone through the roof.''
The state's courting of IBM and Toshiba started about six months ago - when the two companies, through a consultant, approached the state anonymously to view possible sites for a manufacturing plant, said Robert T. Skunda, state secretary of commerce and trade.
Motorola's earlier decision to locate in Virginia played a crucial role, he said.
``Virginia has not, until recently, had the reputation or been acknowledged as a technology state. Motorola did a lot to change the impression that Virginia could not compete and attract high technology.''
To lure IBM and Toshiba, the state offered a $48.2 million package of incentives. Similar to the $85.6 million Motorola incentive package, the IBM-Toshiba incentives consist of a one-time performance-based grant linked to certain goals, as well as a one-time tax credit intended to create jobs.
The rest of the package involves state commitments to support higher education and research in related fields in Virginia's colleges and universities.
Virginia competed against other states such as New York, Oregon and Arizona, where IBM and Toshiba already have offices or sites that they could have easily retooled, state officials said. The Manassas location, a vacant IBM plant that the company left several years ago, was the only serious Virginia site that the two companies considered, mainly because of the existing infrastructure.
Construction will begin in January on the Manassas plant and production is expected to begin in fall 1997.
IBM and Toshiba are among a number of chip makers worldwide scrambling to meet surging demand for their products. The chips, which function like electronic brains, are used in everything from computers to cars to home appliances.
Just last week, the German industrial giant Siemens AG said it will spend $1.4 billion to build a semiconductor plant near Newcastle, England. It promised up to 2,000 jobs.
Mitsubishi Electric Corp. also said last week that it will invest $1.1 billion to build a production line for chips at one of its Japanese plants.
Meanwhile, South Korea's Samsung Corp. is scouting for a site in the United States for a $1 billion chip factory. Texas and Oregon are reported to be at the top of Samsung's list of potential sites.
Industry spokesman Brett said even more plants will be needed to meet chip demand projected by his group to more than double in the next four years to worldwide sales of $233 billion.
He said the IBM-Toshiba plant will make a particular type of chip - known as advanced memory - for which demand is growing fastest of all. Worldwide sales for that type of chip, used to store data in electronic devices, are projected by the Semiconductor Industry Association to triple by 1998.
Virginia's Skunda said landing the IBM-Toshiba plant - and Motorola's - was critical to the state's economic prosperity.
``If Virginia were to miss this wave, we might be in a difficult position to regain ground against states trying to secure them,'' he said. ``We're really trying to establish momentum so that we won't need inducements or incentives to get the companies or support industries.'' ILLUSTRATION: Staff Map
GRAPHIC
[For a copy of the graphics, see microfilm for this date.]
ECONOMIC BREAKDOWN OF THE VENTURE
SOURCE: State of Virginia
CHIP INDUSTRY
LARGEST PLANT INVESTMENTS
SOURCE: Semiconductor Industry Association
LARGEST PLANT INVESTMENTS
SOURCE: News reports
STEP-BY-STEP CONSTRUCTION OF A WAFER
by CNB