When executives of Southwest Silicon Technologies looked for a site for a silicon wafer remanufacturing facility, they literally could have picked anywhere in the country. They chose Ardmore, Okla.

The company opened its Oklahoma facility in early 2000 with 40 employees in the Interstate Court Industrial Park in Ardmore, and already the company is planning another expansion.

"We chose Ardmore because the city has been very receptive to this type of industry starting up here," said Kelly Burke, president of Southwest Silicon. "We were also attracted to Ardmore because of its accessibility to the Southwest and its proximity to the I-35 corridor.

"We're looking forward to a long and fruitful relationship with the community."

Southwest reclaims about 32,000 silicon wafers a month.

Although computer and semiconductor-related industries have suffered in the first half of 2001 with reduced profits and cutbacks, the long-term view for businesses in these fields remains strong. There will always be demand for the computer chips manufactured by semiconductor companies.

Consumers will purchase cell phones, DVD players, automobiles, electronics, as well as computers, well into the future. The companies that make the best relocation or expansion decisions will have a leg up on the competition.

Computer and semiconductor companies will always look for a few key ingredients in any site location decision: work force - are there talented workers at a reasonable cost?; time - most computer-related projects must be operational in a matter of months, not years; and incentives - computer companies know they are in demand and that communities will sweeten the pot in any deal.

Speed drives the industry

Southwest Silicon was able to open its facility in a matter of months, not years, which is one of the hallmarks of the computer and semiconductor industry.

"Time to market is a major driver in this industry," said Dwayne Wood, director of global client development, microelectronics, for Lockwood Greene, a worldwide site consulting firm. "It used to be a 12- to 24-month process. Now that's been cut in half.

"With manufacturing operations, the capital costs are so high and the life-cycle of a product is so low, the industry in the United States has been confronted with a big issue of going into ventures with other companies."

In order to meet the time constraints of expanding computer or semiconductor companies, some states and regions have done work ahead of time to prepare for them.

In 1997, the state of New York came up with the Semi-NY program, which provides pre-permitted sites to prospective semiconductor companies. In 1998, New York completed an environmental review of Building 323 on IBM's property in East Fishkill, N.Y. The review cleared the way for future semiconductor growth at the site.

Just two years later, in October 2000, IBM announced the largest capital investment in the company's history at the East Fishkill site. IBM is investing $2.5 billion in a new 300mm silicon wafer manufacturing plant.

IBM will employ approximately 1,000 people by 2003. The building is scheduled to open in 2002.

Competing for your business

If you are an executive of a computer or semiconductor-related business, realize that states and communities want your investment, and will likely pay to get it. Jobs in these areas tend to be above local averages, and communities with computer or semiconductor companies are viewed as ahead of the curve.

"All states are targeting these industries," said Lockwood Greene's Wood. "Manufacturers are focusing on incentives, either up-front or later. They are also looking for a pro-business climate, which covers things such as expedited permitting, favorable zoning, those sorts of things."

IBM received a hefty package of incentives from New York as part of the East Fishkill project. The semiconductor facility is located in a New York Empire Zone, which means IBM qualifies for a variety of tax credits over a period of 10 years totaling $475 million.

Big Blue nearly left New York in 1994, but was convinced to stay. Since that time, New York's legislature cut taxes, reduced workers' compensation rates and lessened paperwork for businesses. Those pro-business moves made a difference with IBM.

In Oklahoma, the state is developing a work force for semiconductor companies before those companies locate to the state. In 1997, the Oklahoma Department of Commerce targeted semiconductor companies for attraction.

The Oklahoma Department of Commerce, Department of Education and high schools teamed up to form the Oklahoma Semiconductor/High-Tech Alliance. Beginning their junior year, high school students can receive training for work in the semiconductor industry, with clean-room training in college.

"Oklahoma has made a big attempt, along with a lot of states in the Southeast," said Wood. "Canada is also making aggressive runs at companies."

On the East Coast, Infineon Technologies, formerly White Oak Semiconductor, announced an expansion in Henrico County, Va., that will add 1,100 new jobs. The Germany-based company, which has been in Richmond since 1996, will manufacture 300mm wafers, the first such plant on the East Coast.

The state of Virginia is providing a $3 million grant to improve infrastructure around the site, and the state is also putting $2 million into Virginia's colleges and universities to increase semiconductor training.

"We decided to expand our operations in Virginia because of the ongoing technology and education infrastructure assistance from the state and Henrico County," said Henry Becker, president of Infineon Technologies in Richmond. "Because of our recent success, we were already in the process of hiring 300 new employees. Our partnership with Governor Gilmore and the state made the difference in our final decision."

The right mix

Although nearly every state desires to have computer or semiconductor companies, not all states pass the muster with these businesses. The support infrastructure must be in place to maintain computer and chip manufacturing facilities, which use vast amounts of electricity and water.

"Abundant electricity and water are huge issues," said Wood. "Companies also look for that tie to research universities."

In fact, some companies locate right on a university's doorstep in order to attract the workers they need. Sprint PCS is a good example.

In February, the digital phone company opened an application development solutions center in Nashville, Tenn. Sprint's facility, covering 102,000 square feet over four floors of an office building, is adjacent to Vanderbilt University.

"Vanderbilt is right around the corner, and all told there are 18 colleges and universities in the area," said Thene Sheehy, director of the ADSC. "The Nashville area has a very high number of people who fit what we are looking for."

Since the opening of the facility, Sprint PCS has added about 11 software developers each month, up to a full employment of 400 within three years. The company invested $27 million into the facility.

"Right now, we've got between 30-40 folks," said Sheehy. "We'll be up to 150 by the end of the year."

In California, the state is establishing three major research institutions, two of which will focus on the computer and semiconductor industries.

The California Nanosystems Institute, a venture between UCLA and the University of California-Santa Barbara, will focus on developing miniaturized technology.

A second project, the California Institute for Telecommunications and Information Technology, will zero in on developing wireless Internet products. This is a joint venture between the University of California at Irvine and the University of California-San Diego.

Companies such as IBM, Sun Microsystems, Sony, Cisco and Hewlett-Packard have already contributed to the institutes.

Companies also must be able to attract talent to a particular locale, and keep those employees happy once they sign on. A city with a great quality of life goes a long way in helping those efforts.

"Nashville has a low cost of living, so people can really enjoy life here," said Sheehy of Sprint PCS.

"The airport is also very easy to get in and out of, and it's an easy flight to our headquarters in Kansas City."

Workers at the Nashville facility work on in-house operational software for Sprint PCS, and support the company's IT group in Kansas City. For Sprint PCS, locating in Nashville was also an advantage from an employee retention standpoint.

"Nashville is working hard to raise its technology profile, and with Dell coming here that's certainly true," said Sheehy. "That said, there's not a huge glut of technology companies here, so our employees aren't getting pulled away."

Traditional favorites offer familiarity

According to Wood, the traditional spots for computer and semiconductor companies will remain so for the near future, although companies are looking at other areas as viable options, including sites in the United States and overseas.

"Typically, the Pacific Northwest, Silicon Valley, Arizona, New Mexico, Texas and the Northeast have been the places in the United States," said Wood. "All of these places are tied to, or very close to, universities with a high degree of research capability."

The universities provide the intellectual talent to develop new products, but are also great places to hire skilled workers in the plants themselves.

"These companies tend to also hire engineer specialists for manufacturing," said Wood. "There is a real relationship between the universities and the amount of technical talent."

The traditional hotspots aren't perfect. Some areas now have zero growth, zero development policies, which make it prohibitive for a company to expand quickly. Other areas have an exorbitant cost of living and increasing environmental regulations.

"That's why you get companies looking at other areas," said Wood.

Support companies branch out

One of those areas is Montgomery, Ala. In October 2000, Bell Microproducts, a distributor of computer and semiconductor products, opened a corporate technology center in Montgomery. By 2003, the company will employ 300 people in the city.

"Our objective was to find a site central to our North American businesses," said Donald Bell, president of Bell Microproducts, based in San Jose, Calif. "Availability of a quality work force, proximity to local college and university resources, a competitive business climate and quality of life were all important factors in our decision process."

The company is getting help finding and training workers for its positions in sales, engineering, IT, Web development and computer technicians from the Alabama Industrial Development Training program.

"Locating in Montgomery offers numerous advantages to the company, including the availability of potential employees across a five-county area and the local colleges and universities deliver an abundant talent pool from which to draw," said Bell.

Montgomery is one of several communities in Alabama that is part of the state's Semiconductor Initiative, which is targeted at attracting semiconductor manufacturing companies. The state has prepared sites in several communities that are ready for chip companies to move into.

The locations feature loads of power and water supply, and the permitting can be completed quickly.

While the first half of 2001 may not have been the best of times for computer and semiconductor companies, the future certainly isn't bleak.

"Companies are going to continue to research and develop faster, more powerful chips and components," said Wood. "And there are still plenty of areas that would love to have their business."

Lance Yoder is the managing

editor of Expansion Management Magazi