Perry antes up to keep Sematech in Texas

$40 million grant is first step in more state support for research consortium

About the company:

International Sematech

What it does: A chip manufacturing research consortium, Sematech works on perfecting equipment and processes needed for next-generation chip manufacturing. It also helps leading industry players come to a consensus on "technical road maps."

Headquarters: 2706 Montopolis Drive, Austin

Branch location: Albany, N.Y.

Austin employment: 500 people

Annual budget: More than $150 million

Member companies: Advanced Micro Devices Inc.; Agere Systems Inc.; Hewlett-Packard Co.; IBM Corp.; Infineon A.G.; Intel Corp.; Motorola Inc.; Philips Semiconductors; Taiwan Semiconductor Manufacturing Co.; Texas Instruments Inc.

By Kirk Ladendorf
Tuesday, March 30, 2004

Austin's International Sematech research consortium was one high-tech trophy that Gov. Rick Perry didn't want to lose.

That's why the governor traveled across Austin to Sematech's campus on Montopolis Drive on Monday to announce that the 17-year-old chip research organization will receive $40 million from the Texas Enterprise Fund so that it will continue doing the bulk of its advanced research in Texas.

The money will pay for the creation of an Advanced Materials Research Center that will involve scientists at Sematech and the University of Texas.

Perry said he wasn't about to let another state lure away Sematech, the chip industry's best-known collaborative research effort. New York Gov. George Pataki tried to do just that in 2001 to build up his state's research efforts.

Sematech moved a few dozen jobs to Albany last year, but it agreed to stay in Austin after Perry committed to help.

"We simply couldn't let it slip through our hands," Perry said Monday. "We could not let this extraordinary company that was being courted aggressively by a number of other states, we could not let them leave the state of Texas."

The $40 million cash grant is just the start of what the governor has pledged for Sematech. He has promised to help raise $200 million over several years from a variety of sources, including federal and local government funds and possibly private donations.

The support of the Texas congressional delegation will be crucial, the governor said, in raising much of that money.

The second installment of the state's support could come from a $40 million loan. The loan was mentioned Monday by Lt. Gov. David Dewhurst, but Austin lawyer Pike Powers says the details have yet to be worked out.

"This is a work in progress," said Powers, who has spearheaded the effort to keep Sematech in Texas and headed a governor's working group devoted to that effort.

Sematech also will help shape state policy on advanced technology. Key Sematech staffers are expected to work closely with the governor's Office of Economic Development to identify new technologies the state should be pursuing.

Texas faces intense competition from other states, including New York, as it tries to win new high-tech investment and jobs and to retain critical research assets such as Sematech.

New York, for instance, has pledged $1 billion to bolster that state's universities as they work on a variety of technologies. Pataki has worked closely with IBM Corp. to position his state as the best location for new chip manufacturing and research projects. IBM, with heavy state assistance, built its newest chip factory in the Hudson Valley, between Albany and New York City.

Keeping and enhancing Sematech, Perry said, helps keep Texas at the forefront of the crucially important chip industry and provides an important path toward development and commercialization of future, related technologies.

The new state grant money will pay for theAdvanced Materials Research Center, which will involve a close partnership between scientists at Sematech and the University of Texas. Over time, researchers at other Texas universities will become involved. They will develop and help commercialize research tied to chip manufacturing and, eventually, research in new fields such as nanotechnology and biotechnology.

Sematech is keeping its 500-person research organization in Austin, but it does not have immediate expansion plans. Instead, it expects to see its research efforts help generate new companies and jobs in Texas over the next decade or longer.

"There is no question that Texas has been good to us," but finding more money was important, said Sematech President Michael Polcari. "Without the support and the leverage provided by the state's leadership in establishing the Enterprise Fund and the AMRC, we at Sematech would have had to weigh our other options."

For Sematech, which is faced with skyrocketing research costs that overtax its $168 million annual budget, state government assistance is a good way to extend its work. The research organization also expects to get $160 million from New York for moving part of its advanced lithography program from Austin to the State University of New York at Albany.

Perry says Sematech is a good example of how the year-old $295 million Enterprise Fund helps the state's economy.

"Sematech would be in New York now if not for the Enterprise Fund," Perry said, "and Vought Aircraft would be in Nashville. That would be a net huge loss for the state of Texas."

Vought Aircraft Industries announced last month that it will build a new manufacturing plant in North Texas that will eventually employ 3,000 people. The Enterprise Fund is providing $35 million.; 445-3622