High technology and taxes are way of life at Micron

by Joan Hennessy
Virginia Business
November 2005

Deep inside a Manassas building is a bright white room where air circulates through filtered panels in the ceiling and evenly-spaced holes in the floor. The temperature here is a constant 70 degrees and the humidity an unchanging 50 percent. Workers at Micron Technology are clad head to toe in white smocking, a narrow opening revealing their eyes.

Fewer particles float through the air in this room than in a hospital’s surgical suite, a Micron spokesman brags. Indeed, Micron makes DRAM semiconductor chips on 300-millimeter wafers at a facility straight out of science fiction.

As far as Virginia is concerned, however, the economic impact of the sprawling, 123-acre campus is very real.

The plant has paid $20 million in local taxes since 2002. That doesn’t count employee payroll taxes — $7.5 million — since 2002. There could be more to come: Within that long, white room, there’s space to expand.

The tech manufacturer’s impact extends beyond its property lines, however. For one thing, two Micron suppliers have moved to Prince William County, says Kevin Kelley, chairman of the board for the Prince William County/Greater Manassas Chamber of Com-merce. For another, the presence of Micron is useful when recruiting tech firms to the area, he says. “They [other tech firms] know it’s a place where they can relocate and have the amenities a community has to offer: strong education, housing, work force, that sort of thing.”

On a daily basis, the employees are part of the area. “I see Micron employees with their badges having lunch during the day,” Kelley says. “They buy dinner after work, and the city gets a meals tax.”

Like other tech firms, however, Micron’s history has been affeted by its industy’s volatile cycles. The chart of its stock prices resembles the silhouette of a roller coaster. Micron purchased the plant from Toshiba in April 2002 for $294 million in cash and stock. At the time, news reports listed the plant as having 1,700 employees. Toshiba moved some of those employees before the acquisition, says Dan Francisco, a Micron spokesman in Boise, Idaho. When the firm moved in, it took on 1,000 former Toshiba employees. Then, after a downturn in 2003, Micron laid off approximately 550 workers. But Michelle Merrill, a spokeswoman for Micron in Manassas, says the plant now employs approximately 1,200 workers. An additional 300 contractors or vendors work on the site.

Those employees run the gamut from people with engineering and graduate degrees, to workers with two-year community college diplomas, to high school graduates looking for solid jobs. While some of those employees are Virginians, Merrill says Micron recruits from outside the commonwealth as well. “We’ve had them [engineers] come from our Boise [Idaho] site. We’ve had them come from other locations within our company. We’ve had them come from Japan and from Italy.”

In an attempt to encourage students with an interest in technology, the firm’s foundation awards scholarships to Virginia high school and college students studying math, science or engineering. Employees returning to school part time get tuition aid. “You can move up and have a family wage,” House says.

For the tech firm’s own survival, it has diversified. Along with DRAM (Dynamic Random Access Memory — the memory found in computers) manufactured in Virginia, Micron manufactures NAND Flash
(memory used in notebook computers, cell phones, digital cameras and some automotive equipment) and CMOS image sensors (used in cell phones, digital cameras and some automotive equipment) at other facilities around the world.

The diversification has paid off. In the fourth quarter of this year, the firm reported a 15 percent increase in DRAM sales, a 40 percent increase in sales of CMOS image sensors and NAND Flash memory sales that were five times higher than in the third quarter. For the 2005 fiscal year, Micron reported a net income of $188 million or 29 cents per diluted share, on net sales of $4.88 billion.

Micron has received performance-based state grants to help it grow. “The one we executed was an $18.5 million performance grant,” House says. When Micron bought the plant from Toshiba, the grant was already in place. “We’re currently receiving those incentives. The state’s goal is to help job creation,” he says.

That incentive agreement actually dates to 1995, when the factory was called Dominion Semiconductor, a joint venture by Toshiba and IBM, says Christie Collins, spokeswoman for the Virginia Economic Development Partnership. The firm committed to a $1.2 billion investment and 1,200 new jobs.

In order for Micron to hire more employees, the firm also must have state-of-the-art machinery, according to House. And property taxes do not reward investment.

“For us to stay ahead of the curve … we spend hundreds of millions in tool replacement,” he says. Property tax structures don’t reward that investment. “You’re taxed on what you buy.”

House wouldn’t say what initiatives he’ll support involving tax structure. Micron, based in Boise, Idaho, also is pressuring officials in that state for business incentives such as tax breaks, according to an Associated Press report.

From the perspective of manufacturers, no state is perfect. Northern Virginia, with its proximity to Washington, D.C., has its drawbacks. “It’s a more expensive area. The cost of living here is high. We’re not blind to that,” says Merrill, the Micron spokeswoman.

But Micron plans to stay put. The Manassas plant, says Merrill, is a “showcase facility.”