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Making Chips In The Sticks

News: Analysis & Commentary: CHIPS


Micron Technology Inc. made Idaho famous for chips--and not potato chips. Next, the Boise maker of computer memory chips wants to spread the wealth around. Any day now, the company will announce plans to build a $1.3 billion chipmaking factory--one of the most expensive chip plants ever. Where? In one of three places just as unlikely as Boise: Omaha, Oklahoma City, or the Provo, Utah, area.

Once upon a time, those choices might have arched eyebrows. Not now. In fact, of 10 or more new gigabuck chipmaking plants currently on U.S. drawing boards or nearing completion, nary a one is located in the intellectual capital of U.S. chipmaking--California's Silicon Valley.

And there's plenty of building going on. Planned investments in future chip factories worldwide set a record in 1994 of $80 billion, figures VLSI Research Inc. Indeed, U.S. chipmakers now are both outselling and outinvesting their Japanese rivals. The investment figures are good news for fans of U.S. technology: In semiconductors, capital spending usually translates into market share.

Micron Technology will have to pay a hefty price for plowing so deep in the boondocks. It's a silicon rule of thumb, says VLSI Research President G. Dan Hutcheson, that building a new plant where there are no others will boost costs as much as 50%. That's because of the infrastructure needed to handle large volumes of various superpure materials and chemicals needed to manufacture chips.

That's why most chipmakers are building their new plants in more familiar growth spots--primarily Oregon. Chipmakers have been hiking to the Northwest for years, attracted by cheap power, water, and land--plus, more recently, tax breaks. Intel Corp., which is already Oregon's largest employer, has broken ground near Portland for still another plant--to give birth to the chip that will eventually supplant the successor to its Pentium processor. Korea's Samsung, Japan's Fujitsu, and LSI Logic also are shopping for an Oregon homestead.

To Micron, a maverick obsessed with secrecy, Oregon and California are simply too crowded. High-tech culture may fuel progress with lunchtime gossip and happy-hour technospeak, but "off by itself in Idaho," says George Burns, a principal of Strategic Marketing Associates, Micron has succeeded in making the industry's smallest--and therefore least costly--chip. Given its success so far, says Burns, it's not surprising Micron is looking for "another lonely place to make chips."By Michael J. Parks in Seattle

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