Group aims high for tech

Stacey Higginbotham
Austin Business Journal Staff
May 5, 2003

A locally led economic development initiative hopes to create 852,000 new jobs in Texas over the next 12 years and, in the process, retain Austin's status in the semiconductor industry.

The Texas Technology Initiative is comprised of a shifting array of business leaders around the state. It is led by Pike Powers, partner-in-charge of the Austin office of law firm Fulbright & Jaworski LLP and renown locally for his leadership in bringing Sematech and the Microelectronics and Computer Technology Corp. here in the 1980s.

TTI has been in existence less than a year. Its immediate agenda is to ensure the International Sematech chip research consortium stays in Austin and doesn't move to New York. Longer term, it plans to work on ensuring Texas is on the leading edge of semiconductor technology in general.

That will require more than just retaining chip manufacturing jobs, according to TTI leaders. Without the next generation of chip manufacturing jobs, the state could lose the next wave of high tech business -- nanotechnology, biotechnology and chips known as microelectromechanical systems, or MEMS. Those are industries that could supply hundreds of thousands of well-paying jobs.

Powers describes the initiative as a statewide effort involving players from a variety of industries and cities, including business leaders, university officials and chambers of commerce.

"The point of our strategy is to wake up, rally the troops and bring people together," Powers says.

Otherwise, he says the state's economy is in danger of falling behind and losing its prominence when it comes to advanced technologies.

The goals are ambitious and far flung. They include:

  • Creating an Advanced Materials Research Center to coordinate research between Sematech and the state's universities.
  • Landing a plant that makes 300mm chips, the up-and-coming technology in the semiconductor business. Central Texas doesn't have any such plants, only older plants.
  • Shifting the state's economic development authority to the Governor's Office. Now, it rests with the Texas Department of Economic Development. But that is changing legislatively.

Senate Bill 1771, which would establish the Advanced Materials Research Center, has been passed by a Senate committee and was expected to be considered May 2 or 5 by the full Senate. The bill would form a fund that would funnel $200 million over the next five years to the center.

In Gov. Rick Perry's State of the State address this year, he called for a $40 million state allocation for Sematech. That money would be the first installment of the $200 million, if SB 1771 makes it through the Legislature.

The second element being reviewed by lawmakers is Senate Bill 275, which would abolish the Department of Economic Development and its nine-member board, and bring economic development into the Governor's Office. The bill has passed the Senate and is awaiting action in the House. House Bill 1233 is its counterpart.

That bill calls on the Governor's Office to attract advanced technology industries related to semiconductors, information technology, MEMS, manufactured energy systems, nanotechnology and biotechnology. Part of the bill requires the Governor's Office to "engage in outreach" to Sematech.

The third component the TTI work requires more time, federal involvement and possibly a private company volunteering to help set up a fab in Texas. The 300mm plant would be a foundry, which produces chips for other companies.

Although Powers declines to comment on specifics for securing a foundry for Texas, he points out the federal government might be interested in establishing a secure supply of semiconductors for the military.

There have been debates at the federal level on the issue of whether so many chip foundries overseas might threaten national security.

The issue also goes to the general populace's pockets.

A recent report by Waco-based economic research firm The Perryman Group Inc. states Texas lost more than $20 billion annually because 30,000 jobs in the electronics industry evaporated in the past few years. Those 30,000 jobs translated to $6.5 billion in lost personal income and $2.5 billion in retail sales.

The report attributes the job losses to the general economic decline as well as the dive in the semiconductor industry. But it states a general upturn might not boost the Texas economy because of the state's lack of newer chip plants and new technology.

Seven chip plants have closed in the Austin area over the past few years, leaving only six in Central Texas. However one of those fabs, run by Samsung Austin Semiconductor LLP, is set to undergo a $500 million expansion beginning in May. An announcement of the expansion was scheduled for May 2.

Despite that good news, the concern is that semiconductor industry and emerging industries dependent on it will just pass by Central Texas without next-generation 300mm technology.

Mark Melliar-Smith, a venture partner with Austin venture firm Austin Ventures LP and former president and CEO of Sematech, says building a 300mm fab in Texas is crucial.

"Our high tech manufacturing has begun to fray at the edge, to get a little gray around the temples. The recent announcement by Samsung is a great shot in the arm," Melliar-Smith says. "But parochially speaking, the location of a fab here would be good for Austin and good for whoever [built the foundry] here."

The Perryman report also examines what will happen to the state's economy if the Texas Technology Initiatives gets everything it's seeking.

The Advanced Materials Research Center would generate $477 million in total expenditures and 4,600 jobs, plus $169 million in annual personal income, $245 million in annual gross state product and $12.7 million in annual revenue, according to the report.

Bringing a 300mm plant to Texas would produce about $8 billion in total construction and outfitting expenditures, and would create 37,700 permanent jobs after it is built. For the first 10 years of operation, the plant would spur $1.7 billion in personal income and $700 million in retail sales each year, the report states.

If all aspects of the Texas Technology Initiative go through, the state should see total expenditures of $131 billion, plus $39 billion in personal income and $15 billion in retail sales annually, and creation of 852,531 jobs.

However, Texas faces formidable opposition. For instance, the State of New York touts a $1 billion economic development fund devoted to technology.

Anne Englander, a Sematech spokeswoman, says the consortium is gratified by the governor's response to its needs for improved university research opportunities and thinks the Texas Technology Initiative is good for the state, especially given the connection it makes between research and development and manufacturing.

"The industry is looking for faster, better, cheaper, and it's always important to see if you can find a novel research idea to pull them through," Englander says. "I know the thought is research and development links closely with manufacturing, and if manufacturing leaves, then R&D might follow."

Email STACEY HIGGINBOTHAM at (shigginbotham@bizjournals.com).

© 2003 American City Business Journals Inc.