Chip Wars, Part II?

July 18, 2003

State Partnership with Texas Instrument Yields $3B Investment

From the outsider's perspective, it could be analogous to a world wrestling prize fight, except the punches and stakes are real. Two big, proud states wrestling for dominance in one lucrative industry — semiconductors.

For those keeping score, the venerable leader for a long time was Austin, Texas, with the university, Sematech, Dell Corp., and other industries. Austin boomed right along with the IT sector's explosion.

One year ago this week, upstart Albany, NY, caught everyone's attention with the surprise announcement of capturing Sematech North. The high-profile, big-price tag announcement, coupled with a more comprehensive tech-based economic development strategy put central New York on the map for many (see a 7/19/02 Digest article for the details: http://www.ssti.org/Digest/2002/071902.htm).

Folks in Texas certainly took notice and have roared back with two recent announcements of their own. The main headquarters of Sematech is staying put, thanks in part to a $40 million injection of funds from the state's new Texas Enterprise Fund. The issue was so important to the state that Governor Rick Perry asked for Sematech's funds in his State of the State address on Feb. 1, "An additional $40 million "would allow Texas to compete to retain Sematech, which is being lured by New York. Sematech has proposed building a wafer manufacturing facility that would attract related businesses to the area." Gov. Perry got his money and Sematech announced it would remain in Texas.

But Texas wasn't done.

Two weeks ago, Texas Instruments, Inc. (TI) announced it had selected Richardson, Texas, as the site for a $3 billion semiconductor manufacturing plant. The facility will build the world's most advanced semiconductors on 300-millimeter (12-inch diameter) silicon wafers, the second TI plant with such capability. When fully operational, the facility is expected to directly employ up to 1,000 people.

The selection of Texas as the location for the plant is the result of collaboration between TI, the State of Texas, the University of Texas System and several local governmental and economic development entities. And, like Albany's announcement, this one will catch many in the economic development field by surprise. The Dallas Morning News reports the secret negotiations were given the code name "Project Emmitt," after Dallas Cowboys star Emmitt Smith.

Strengthening and expanding the engineering and research capacity at the University of Texas at Dallas (UTD) was a critical element in the deal, TI reports. TI officials worked closely with policymakers, who earmarked millions in new funding for the Erik Jonsson School of Engineering and Computer Science at UTD — named for one of TI's founders. More than $300 million in new funding from a combination of private and public sources will be directed to the Jonsson School as a result of TI selecting Texas for its next manufacturing site. Included is $50 million from the new Texas Enterprise Fund as part of the State's economic development package for TI.

Gov. Perry hailed the selection of the site.

"This is the largest modern day private-sector economic development project ever undertaken in the State of Texas," said Governor Perry. "The thousands of jobs it eventually will create are exactly what we expect from the Texas Enterprise Fund and our other economic development efforts."

The Dallas Morning News reports the university will use a portion of the funds "to build a 200,000 sq. ft. engineering lab, to hire 40 faculty members and to recruit 400 full-time graduate research students."  A July 1 Chronicle of Higher Education article says $75 million will be used for endowing faculty chairs, student fellowships and assistanceships. The Chronicle identifies other components of the incentive package to build the school's research capacity to include $65 million from the University of Texas System and $85 million from the Texas Permanent School Fund. A total of $100 million is anticipated to be raised from private, corporate and other sources.

More information on the TI announcement is available at: http://www.ti.com/corp/docs/press/company/2003/c03029.shtml

New York