CITY OF THE MICROCHIPS
- May 18, 1998
Mark Brown isn’t one to let opportunity pass him by. When the former purchasing manager for a semiconductor contracting company learned that Austin-Reed was opening an office in the Richmond area, he quit his job in Dallas, joined the company as regional branch manager and headed north.
“This, for me, is an exciting place to be,” Brown says. “Y’all have three world-class semiconductor facilities being built within two years within 90 miles of Richmond. ... The economic impact is going to be significant.” Austin-Reed, based in Austin, Texas, supplies specialized tubing for semiconductor manufacturers.
Brown simply followed the call of the chips—a phenomenon that happens whenever the semiconductor industry sets up shop in a region. That’s been the case since Motorola announced plans to build a $3 billion semiconductor fabrication plant in Goochland County west of Richmond. Soon after Motorola’s announcement, chip manufacturer White Oak Semiconductor unveiled plans for a $1.5 billion plant in Henrico County east of Richmond. The facility is a joint venture between Motorola and Siemens AG. The third plant that Brown refers to is Dominion Semiconductor, a joint venture between IBM and Toshiba in Manassas, 90 miles north of the city.
Dominion and White Oak are gearing up for full production, while Motorola is just breaking ground. There are 50 new semiconductor-related suppliers and vendors in the area. Their impact on the region and the state will be enormous, but semiconductor manufacturing isn’t the only high-tech bright spot for the Richmond area. The Virginia Biotechnology Research Park, which is affiliated with Virginia Commonwealth University, is completing its third building downtown. Viasystems Technologies is making printed circuit boards in eastern Henrico, and three Hewlett-Packard facilities in Henrico and Chesterfield counties are packaging and distributing printer cartridges and assembling printers.
These new businesses—including Motorola’s proposed plant—account for $6.3 billion of investment since 1990, and that doesn’t include rumblings of a third major fabrication plant that insiders say is on the way.
Industry leaders are predicting that the greater Richmond area will become the East Coast concentration that the semiconductor industry has been anticipating. The semiconductor industry tends to cluster, says Greg Wingfield, president of the Greater Richmond Partnership, an economic development group that represents the city of Richmond and the counties of Henrico, Chesterfield and Hanover. Richmond probably won’t rival Silicon Valley, but the region’s silicon success might eventually approach that of Phoenix, Ariz., or Austin, Texas.
“There are some big, heavy hitters coming to town,” Brown says. “You’re looking at 10 years of unparalleled prosperity for this region.”
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You tend to see the same faces in the semiconductor business, no matter the location, Brown says. Semiconductor facilities like to have suppliers nearby because it minimizes down time in an industry where chips become obsolete in a matter of months. Austin-Reed was the first supplier to move to the area.
Brown says his company located in Henrico County because of the reception he got from county officials. They are aggressive and easy to work with, he says. They want to “turn this area of the East Coast into a hotbed of pharmaceutical and semiconductor development.”
Henrico officials immersed themselves in the semiconductor industry, learning lingo, work processes and how the business operates in general, says Toney Hall, director of marketing for the Henrico County Economic Development Authority. The education seems to have paid off.
Henrico has attracted 25 to 30 of the suppliers and vendors of the semiconductor plants, he says. “We wanted to get a lot of the equipment suppliers because they also create a lot of job opportunities. They add to our microelectronic infrastructure.”
Applied Materials, one of Henrico’s newest residents, opened a Richmond office in February. The $4 billion, Fortune 500 company is the world’s biggest manufacturer of the machines that make computer chips. It employs 15,000 people in 13 countries. The company’s Henrico presence represents 120 jobs and a $6 million investment. The company also has a 23-person operation in Manassas to support Dominion Semiconductor.
The Henrico office will be a sales and service facility that will store about $5 million in spare parts for the machines, says Steve Taylor, the company’s corporate affairs manager for North America. Applied Materials’ northern Henrico location provides quick access to both White Oak and Motorola. Company officials were looking for a site that was roughly halfway between the two plants. “When the machines go down, they don’t want to wait for delivery,” Taylor says. “Every hour counts.”
So far, Applied Materials is the biggest of the industry suppliers to hit town. “We always have a lot of people on site to maintain machines, fix machines and basically be available for anything that our customers need,” Taylor says. “Our unofficial motto is: How high?”
Applied Materials also was in on the beginning of Austin’s boom, Taylor says. In less than a decade he has seen the college town grow into a silicon city. High-wage employees bought homes and boosted the retail base and the service sector. Microchip managers joined civic boards and threw their support behind the arts community. In addition to high-tech expertise and equipment, the semiconductor plants generated greater demand for everything from office supplies to hotel rooms. “It’s like throwing a stone into the pond,” Taylor says. “Ripples spread through the economy.”
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The semiconductor industry may represent the biggest economic splash Richmond has ever seen, but these high-tech newcomers are swimming in a deep and diverse pond.
The Richmond area has a strong economic mix—everything from finance, transportation and manufacturing to government, education and professional services. This diversity has helped the region absorb losses in shrinking industries such as tobacco and banking. The largest private employer is still Philip Morris USA, but jobs at the cigarette plant have been decreasing gradually. Financial services is still a huge employment sector in Richmond, but First Union’s acquisition of Signet Banking and Wachovia’s purchase of Central Fidelity Banks signal a major decline in the city’s status as a banking center.
The biggest stabilizing force in the region’s economy is government jobs. One in five employees in the area work for government agencies. The region also is home to 17 Fortune 1,000 headquarters. This concentration has spawned an impressive professional services sector that consists of nationally recognized advertising agencies, several major law firms plus large regional offices of Big Six accounting firms.
While the semiconductor manufacturers are the biggest fish caught so far, other large businesses have recently moved to the area. The Pittston Co., a diversified mining company, moved its headquarters from Connecticut to Richmond in 1996. And last year GE Capital Financial Assurance Holdings, which had acquired two local life insurance companies, brought its headquarters to town.
Meanwhile, several large home-grown companies—such as Owens & Minor, Media General and The Martin Agency—have invested millions of dollars in new headquarters. On the pharmaceutical front, Whitehall-Robins Healthcare, the consumer health division of American Home Products, is working on a $34 million expansion of its research and development facility in the city. “The quality of life issue was important” in the decision to expand in Richmond, says spokeswoman Carol D. Ornbush. The company also liked the educational environment of the region, she says.
More than 50 percent of the region’s 122,000 elementary and secondary students will go on to four-year colleges. And another 30 percent will pursue some other form of higher education.
Richmond’s universities and community colleges—which already offer a wide variety of courses—are fine-tuning their curricula to support the semiconductor industry. (See story.) Virginia Commonwealth University, for example, has a new engineering school, and the community colleges—John Tyler and J. Sargeant Reynolds—are offering courses that are specifically designed to train workers for semiconductor jobs.
The excitement over semiconductors even extends into Richmond’s rural counties, particularly Charles City and New Kent. The White Oak plant is in eastern Henrico, just a few miles from either of these localities. Even before White Oak’s announcement put them on the map, both of these counties were benefiting from economic diversification.
Charles City attracted a regional sanitary landfill in 1990, and last year New Kent welcomed Colonial Downs, Virginia’s only pari-mutuel horse track.
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Even with all its economic diversity, the Richmond region has its share of problems. Questions of race, poverty, politics and history often stand in the way of progress.
At the center is Richmond, capital of the commonwealth and former capital of the Confederacy. Sometimes called “the city of the monuments,” Richmond made national news as it debated where to erect a statue of Arthur Ashe, the first black tennis player to win Wimbledon. The statue ended up on Monument Avenue, a beautiful boulevard that is famous for its statues of Confederate leaders. Black residents wondered aloud, not if the Ashe statue would be defaced, but how long it would take. As of April, that hadn’t happened. But a statue of Robert E. Lee was sprayed with graffiti in February by some who called it “a monument to racism.”
Local leaders often point to regional cooperation among the city and the counties. Yet there has been bickering between the city and the counties over everything from education and transportation to sports facilities and water supplies.
Downtown Richmond is beginning to rebound from several years of gradual decline (see story), but there are a dozen neighborhoods between the inner city and the outer suburbs that suffer from poverty, drugs and violent crime.
Overall, the greater Richmond region lacks a unifying image. It is not the Big Apple, the Windy City or even the Research Triangle. When the Greater Richmond Partnership conducted a nationwide survey of business executives to learn what image they had of the city, too many surveys came back blank. So the partnership created an image campaign around this slogan: “Greater Richmond Virginia since 1607; The New World Symbol For Business.”
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If the Greater Richmond Partnership has its way, Richmond’s unifying goal will be to build a world-class economy. And becoming an East Coast cluster for semiconductor manufacturing may be the best opportunity to get the job done.
Wingfield says the partnership is currently working with 300 companies that are interested in putting their business somewhere in the region. More than half of those were manufacturers, and many were microchip- related.
About 18 months ago, the partnership hired Oregon-based Industrial Design Corp., an architectural and engineering consulting firm, to find the region’s best remaining sites for semiconductor manufacturing. With 2,400 acres, White Oak Technical Park, home of White Oak Semiconductor, still has room for another fabricator. Hanover County has the 350-acre Brooks site, which is now primarily farmland, and Chesterfield has the 1,600-acre Meadowville Technology Park.
Economic development officials work in strict confidence to keep the specifics of potential deals under wraps, but it’s no secret that Meadowville is the odds-on favorite to land the next microchip manufacturer.
Richmond’s emergence as the “city of the microchips” boils down to three critical factors: location, location, location. According to the Greater Richmond Partnership, three-fourths of the nation’s population is within a day’s drive. Interstates 95 and 64 converge in Richmond, taking goods north and south along the East Coast, west to the Ohio Valley and east to the Port of Hampton Roads. Interstate 85 branches away from I-95 at Petersburg, connecting Richmond to Charlotte, Atlanta and the rest of the Southeast.
The region’s system of expressways is among the best in the country. Interstate 295 rings the city on three sides. Interstate 195 and the Downtown Expressway provide excellent access to the financial district, while Chippenham Parkway and the Powhite Expressway handle the daily commuter surge from booming Chesterfield County. The region is trying to stay ahead of growth by building Interstate 895, a southside shortcut to Richmond International Airport, and Route 288, an expressway that will complete the loop around Richmond. Route 288 would open up pastoral Powhatan County for greater residential and commercial growth, and it is a critical link to the proposed Motorola plant in Goochland County.
No one hates bottlenecks more than semiconductor manufacturers, and Richmond has relatively few for a city its size. Industrial Design Corp. also cited favorable taxes and utilities as factors that put the greater Richmond area fifth among 25 sites in terms of attractiveness to the semiconductor industry. “That gave us a lot of credence to be able to go out and market the area,” Wingfield says.
Another nice endorsement came from Fortune magazine, which recently named Richmond one of the nation’s 10 most-improved business environments. “It’s one of the strongest times I’ve seen in the local economy,” says Henrico’s Hall. “We’ve always had a high performance. But things are going really well right now.”
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Economic development officials won’t talk, but at least one industry insider confirms that Chesterfield County is negotiating with another microchip manufacturer.
Motorola looked at the county’s Meadowville site before it made the decision to build in Goochland. Back then the area was zoned to accommodate industrial development for semiconductors, but the company was concerned that the site didn’t have roads, water and sewer, says Jim Dunn, Chesterfield’s assistant director of economic development.
In February, however, the county sealed an exclusive deal with the current landowners to buy and market up to 1,100 acres. The county, which agreed to spend $10.8 million on site improvements, bought some adjoining acreage, got it zoned and did design work for an interchange with I-295.
“We’re continually supplying information on this site in all kinds of ways and forms to potential prospects that would be viable candidates from around the world,” Dunn says.
The county is competing with sites in England, Scotland and Singapore, he says. “So we’re certainly spending a lot of money in just positioning this park. We have a pretty active worldwide campaign.”
Five years ago county officials would have been overjoyed to attract any type of major manufacturer to this site, but the bar has been raised by Motorola and White Oak. Everyone in the region knows that a third semiconductor fabrication facility could cement Richmond’s position as the East Coast cluster for microchip manufacturing.