Maryland never had shot at computer-chip plant

THE BALTIMORE SUN

It's one of the biggest development projects of the year. Or any year.

The $1.2 billion computer-chip plant that IBM and Toshiba plan for Manassas, Va., will be three times the cost of the much-publicized car plant BMW is building in South Carolina.

It will be four times the cost of Mercedes-Benz's sport-vehicle plant in Alabama, twice the cost of the theme park near Manassas that Walt Disney Co. proposed and then scrapped.

It will employ 1,000 initially. Maybe as much as 4,000 someday.

Maryland didn't have a chance at it.

"Love the deal, I will tell you in all candor," said an envious James T. Brady, secretary of Maryland's Department of Business and Economic Development. "This was one we never had a shot at."

He used the case to repeat his frequent calls for broad changes he says will improve Maryland's business climate and increase the chance of landing projects like the one Virginia announced Tuesday.

"This deal is another example that causes me to conclude that we have to fix our tax structure," he said. "We have to create a regulatory environment that is business-friendly. We have to create the capability to produce a very high-quality work force in a technological age."

In IBM/Toshiba's case, however, Virginia had big advantages that went beyond tax rates and environmental regulations.

IBM already owned the Manassas site on which the plant will be built, having vacated it in 1992. IBM officials knew the local work force. They'd used Dulles International Airport, from which the new factory's chips will be shipped.

To speed development, "we wanted a site that has an existing infrastructure" of sewers, roads and utilities, said IBM spokesman Jim Smith. And the partners knew they could count on a generous package of grants and tax credits from the administration of Gov. George F. Allen, who has been vocal about attracting new companies.

It was January when IBM and Toshiba decided to share a factory that would make top-line dynamic random access memory chips, or DRAM chips, used in personal computers, communications devices and other appliances. By March they were negotiating with Virginia officials.

IBM/Toshiba officials wanted a neutral site -- away from IBM's sphere of influence in New York. But they needed to be on the East Coast close to a Fishkill, N.Y., lab, run by IBM, Toshiba and Siemens, that is developing the superpowerful 64-megabit and 256-megabit DRAM chips.

That ruled out a piece of empty land Toshiba owns in Oregon, another budding manufacturing center for semiconductors, said Annette Birkett, spokeswoman for Toshiba.

Virginia came through with a package worth more than $160 million in tax breaks, grants and site improvements. The grants and credits are dependent on job creation, and some wouldn't become effective until five years after the plant opens, said Morgan Stewart, spokesman for Virginia's Department of Economic Development.

"Virginia has targeted a few specific areas for economic development resource commitment, and the largest single area has been information technology," said Michael Conte, director of the Regional Economic Studies Program at the University of Baltimore.

"They're backing it up with a tremendously aggressive program. They're making a tremendous amount of financing available."

The IBM/Toshiba project marks the Richmond-Northern Virginia corridor as an important and growing high-tech and computer nexus. Motorola Inc., another semiconductor maker, said this year it will build a $3 billion chip plant in Goochland County, outside Richmond.

"These could be magnets that will keep and attract talent and keep and attract business," said Charles McMillion, president of MBG Information Services, a business analysis and forecasting firm in Washington.

Neither deal is cemented; neither project has started. But if they happen, computer projects in Virginia could spill jobs into Maryland in the form of suppliers, customers or other spinoffs from the factories, economists said. Maryland could also get some of the construction work.

"I think the spinoff opportunities that come with this are terrific," Mr. Brady said. "We need to position ourself so we are in these games."

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