July 15, 2008

A Sweet IBM Deal

By James M. Odato, Times Union, Albany, N.Y.

Jul. 15--ALBANY -- IBM, with the help of state taxpayers, will pour more than $1.6 billion into expanding the company's chip manufacturing and research operations. The effort is expected to create at least 325 new jobs at the University at Albany's nanotechnology center and another 675 at a separate facility upstate, Paterson administration officials said Monday.

IBM will invest $1.5 billion and the state will provide $140 million in what one state official, who declined to be named, said was the biggest return on investment ever for a New York economic development incentive package.

The money will be used to expand IBM's chip manufacturing and keep its research efforts in New York state.

The agreement to be announced today also will maintain 6,600 existing IBM jobs in East Fishkill, even as the company eliminates jobs elsewhere.

Most of the money, including $65 million from the state, will be used to expand IBM's East Fishkill chip-making and research facility, which employs 1,400 people. The state also will invest $25 million in IBM's already well-endowed research operations at UAlbany's College of Nanoscale Science and Engineering. IBM will spend another $375 million at its UAlbany facility.

The initial $90 million in state funds will come from this year's budget.

Despite the state's precarious financial condition, Paterson agreed to insert another $50 million in the 2009-2010 budget toward development of a packaging plant -- a component of chip manufacturing process -- somewhere upstate for IBM. The Capital Region is a potential site.

The packaging plant would employ 675 people, about 50 of whom would be assigned to UAlbany's nanotechnology operation, on top of the 325 jobs that will emerge from the first phase of the deal.

The investment and job creation would begin by 2009 and be completed by 2011. It comes with a pledge from IBM that it will not cut jobs in New York this year. It announced hundreds of layoffs in Vermont and Canada in recent months.

Paterson will disclose details of the agreement this morning at the University at Albany's College of Nanoscale Science and Engineering. John E. Kelly III, senior vice president and director of IBM Research, is expected to join the governor, although IBM officials declined to discuss the deal Monday. Assembly Speaker Sheldon Silver, a major booster of the nanotechnology operations at UAlbany, and Senate Majority Leader Dean Skelos, who has made upstate's economy a priority, are expected to speak.

"We worked closely with the governor and the Senate to make it happen," said Daniel Weiller, a spokesman for Silver.

Sen. Joseph L. Bruno, was described by Paterson's aides as a catalyst for the IBM deal. He has been attempting to get the packaging plant built at the East Campus of UAlbany, which has been growing as a biomedical research center in his district.

State officials said the deal could lead to additional investment, including federal funding for chip research, in New York.

IBM and the state have partnered on hundreds of millions of dollars in high-tech expansion over the years.

The Pataki administration and IBM teamed up in 2000 on a $2.5 billion project that created the East Fishkill chip plant. That deal involved more than $500 million in state commitments, most of it -- $475 million -- from Empire Zone tax relief in East Fishkill.

Also, IBM agreed in 2001 to invest $100 million in the Center of Excellence in Nanoelectronics and Nanotechnology at UAlbany, with the state adding another $50 million.

The state and private industry have steered billions of dollars into the nanotechnology operation at UAlbany during the past decade.

Alain Kaloyeros, senior vice president and CEO of the College of Nanoscale Science and Engineering at UAlbany, declined to comment on the latest investment.

Nanotechnology defines a field of science where processes are measured in billionths of a meter.

Expansion of such technology research has put the Capital Region on the world map, leading to additional investments.

For instance International Sematech, a consortium of semiconductor manufacturers, said last year that it would expand at UAlbany instead of in its home state of Texas, pledging $410 million in investment and getting $300 million in a matching commitment from the state for its local research operation. Sematech plans 450 jobs.

Advanced Micro Devices Inc. in 2006 said it planned to build a $3.2 billion chip manufacturing plant in Saratoga County after it negotiated a record-setting $1.3 billion incentive package from the state. It is supposed to invest about $2 billion and create 1,200 new jobs at the proposed factory. It faces a July 2009 deadline to commit to the project.


--April 2001: Center of Excellence in Nanoelectronics and Nanotechnology announced with $150 million in funding.

--July 2002: $405 million International Sematech North program announced.

--November 2002: Tokyo Electron Ltd. $300 million research center announced.

--January 2005: ASML establishes $400 million research center at UAlbany.

--May 2005: $500 million Center for Semiconductor Research announced.

--May 2007: International Sematech says it will move headquarters here from Austin.

--July 2008: IBM announces plan to expand research at UAlbany.


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