Gresham latest move in LSI plan

Electronic News, August 7, 1995 by Crista Hardie

MILPITAS, CALIF.--As expected, LSI Logic has chosen Gresham, Ore., for the site of its major U.S. manufacturing hub, following approval late last week of its proposal to the Multnomah County Commission (EN, Antenna, July 24). LSI said groundbreaking will take place immediately. The initial phase of building will include LSI's first 200-millimeter (eight-inch) wafer fab, which is expected to come on-line in early 1997.

The phase-in of wafer fabs at the Gresham site is the latest step in LSI's plan to expand capacity to meet growing demand from such customers as IBM, Cisco, Cabletron, Bay Networks, Silicon Graphics and Sony. Currently, all of LSI's 0.5-micron product is on allocation, company officials reported (EN, Antenna, June 26).

An LSI spokesman last week said the company has experienced "robust growth," especially in the networking and consumer product sectors. LSI's telecom business, 22 percent of total revenue in 1994, is expected to claim a third of business this year, and consumer products could see an increase from 10 percent last year to 25 percent in 1995. "This year we're on track to surpass $1 billion in revenue for the first time," he said.

For the past year, LSI has been in search of a site for a U.S. manufacturing center to complement its other major manufacturing operations in Tsukuba, Japan. Cy Hannon, LSI's executive VP of worldwide operations, said the company's growth strategy is to continue developing these two manufacturing sites in parallel, in addition to expanding technological capacity at its Milpitas and Santa Clara, Calif. facilities. Earlier this year, the company also entered a $20 million equity-for-capacity deal with Chartered Semiconductor Manufacturing Pte. Ltd. (CSM) in Singapore, which will deliver an undisclosed number of wafers starting in early 1996.

The complex in the Portland metropolitan area will be gradually expanded over the next 15 years, the company said. During that time, LSI estimates that as much as $4 billion could be invested in the 318-acre Gresham site. Mr. Hannon noted, "As demand warrants, we will continue to invest at whatever level is required to keep up. We estimate we can easily accommodate three fabs on the site--probably more."

Early plans for the manufacturing center included as many as six phases of expansion, according to a company spokesman. The initial phase is expected to require an investment of $600 million to $800 million. When fully ramped, the first fab will have the capacity to run approximately 4,000 eight-inch wafers per week at 0.35-micron geometries. A second phase will probably begin by 1998, the spokesman said.

The state of Oregon has long been an attractive location for semiconductor manufacturers, drawing the likes of Hyundai, Intel and Hewlett-Packard. Others like Samsung, NEC, OKI Electric and Toshiba are said to be considering sites in the state. During the past year, announced semiconductor investment in Oregon has totalled $7 billion (EN, July 24). Just a week ago, Fujitsu also chose Gresham as the site of a new $1 billion DRAM fab (EN, July 31)

Chip firms are enticed ostensibly by Oregon's natural resources and promising pool of skilled labor. But perhaps the most attractive feature is Oregon's Strategic Investment Program, a property tax abatement on real estate developments beyond $100 million. Indeed, an LSI Logic spokesman earlier revealed the tax break was "crucial" to the company's decision to build there. Over a 15-year period, LSI will pay only $110 million to $115 million in property tax for the Gresham site, Mr. Hannon said.

"Oregon has the added advantage of being in the same time zone as our headquarters, manufacturing and R&D operations in Silicon Valley," he said, adding that it is also easily accessible from the Japanese site. The Gresham fab center will manufacture application-specific integrated circuits (ASICs) and system-on-a-chip products with major market focus in consumer, digital video and communications sectors, LSI said.